Is it Possible to Change the Domicile of a Colombian Company to a Foreign Country?

The Colombian Superintendence of Corporations recently resolved a query regarding the change of domicile of a company, specifically regarding the process of “cross-border re-domiciliation”. In this regard, it stated that this process consists of a company that is domiciled in a certain country, changing its domicile to another country without undergoing a liquidation process or merging or splitting-up with a foreign company. In accordance, it stated that in Colombia, national companies, those which have their domicile in the country, do not have the possibility of changing their domicile to a foreign country without carrying out any of the aforementioned processes. That is, there is no possibility to carry out a cross-border re-domiciliation. Likewise, it is also not possible for a foreign company to change its domicile to Colombia without liquidating, merging or splitting-up.

Following the above, the Superintendence stated that, according to Colombian legislation, it is only possible to carry out the company’s change of domicile within the national territory. However, bear in mind that this decision to change the company’s domicile requires a by-laws reform so it is necessary for the highest corporate body (shareholders’ assembly or meeting of partners) to meet and approve it. Subsequently, the reform must be registered in the Mercantile Registry. For this, it is enough for the companies to register the corresponding minute in which the approval of the decision to change the domicile of the company is recorded before the Chamber of Commerce of the domicile of origin. Finally, the Chamber of Commerce will be in charge of transferring the inscriptions that are in its files to the Chamber of Commerce of the new domicile.

If you have any questions, please contact us.

Implementation of Equity Impairment and Insolvency Risk Indicators

Recently, the Colombian Superintendence of Corporations referred to the obligation of implementing equity impairment and insolvency risk indicators in the analysis of companies’ financial information. In this regard, it recalled that, in accordance with the provisions of Law 2069 of 2020 and Decree 1378 of 2021, the directors of commercial companies have the obligation to monitor the financial statements, financial information and projections of the company. Likewise, they have the obligation to determine if the indicators established in the aforementioned Decree 1378 on equity impairment and insolvency risks are applicable to the company, in accordance with its business model and the commercial sector in which it develops its corporate purpose. If these indicators are applicable, they are of mandatory implementation and doing so demonstrates proper management by the corporate directors. Therefore, in the event that they are not implemented when there is an obligation to do so, it will be considered a breach of the directors’ duties, who may be liable for damages caused to the company, to partners or to third parties by said breach.

In addition, the superintendence established that, once these indicators are implemented and analyzed, the following conclusions can be reached: (i) that there is no equity impairment or insolvency risk, (ii) that there is both equity impairment and insolvency risk, (iii) that there is equity impairment but no insolvency risk, or (iv) that there is no equity impairment but there is risk of insolvency. Additionally, it specified that the implementation of these indicators is not a simple formality, since the results of the analysis must be shared with the company’s highest corporate body (shareholders’ assembly or meeting of partners). The foregoing, in order to allow it to clearly know the company’s situation and risks and to take the decisions it deems appropriate based on the information provided by the company’s directors.

If you have any questions regarding this matter, please contact us.

Colombian Superintendence of Corporations Issues a Guide on Conflict of Interest

Recently the Colombian Superintendence of Corporations issued a guide about the conflict of interest in which the directors of a company may be involved and the way in which they must act in case this happens. In this regard, the Superintendence recalls that, according to article 22 of Law 222 of 1995, the following are considered directors: (i) the legal representative, (ii) the members of boards of directors, (iii) the liquidator, (iv) the business manager, and (v) those who, in accordance with the bylaws, perform administrative functions. Additionally, the jurisprudence of this superintendence has understood that the alternates of the aforementioned persons when they act in such a capacity due to temporary or definitive absences of the principals, will also be considered directors. Finally, Law 1258 of 2008 establishes that those persons who are not directors of simplified joint-stock companies but who interfere in management, administration or direction activities of the company, must also comply with the directors’ responsibilities and may be subject to the sanctions applicable to them.

Additionally, the superintendence recalls that the directors’ actions must be governed by the principles of good faith, loyalty and diligence of a prudent businessman and explains each of these concepts. It is for this reason that directors must refrain from participating in activities in personal interest or that of third parties that involve competition with the company, as this would imply a conflict of interest. It is understood that there is a conflict of interest when the directors’ neutrality in decision-making processes may be affected because the interests of the company and those of the director or third parties that they may want to favor concur, as happens in the event that they want to do business with themselves or with companies represented or controlled by their relatives.

In accordance with the above, in the event that directors face a situation of conflict of interest or competition with the company, they must obtain an authorization from the highest corporate body to be able to carry out the intended activity, as long as the interests of the company are not harmed. For this, they must convene this corporate body and present all relevant information so that a decision in this regard can be made. Finally, this authority reiterates that in the event that a director does not refrain from participating in the aforementioned situations, interested parties or the Public Ministry may request: (i) the nullification and voiding of the performed acts, (ii) the restitution of matters to their previous state, (iii) sentencing the director to the payment of compensatory damages, and (iv) the imposition of pecuniary fines or penalties such as the inability to perform commercial activities. Additionally, a court of competent jurisdiction may order the aforementioned measures ex officio, that is, without the request of any interested party being required, when it is evident that these acts were carried out in violation of the directors’ obligations.

In case you have doubts regarding this subject, do not hesitate to contact us.

To download the complete guide (in Spanish), you can click here.

Applications for Registration or Transfer of Distinctive Signs of Business Groups

On August 5, 2022, the Colombian Superintendence of Industry and Commerce (SIC) issued Resolution 51804 of 2022, by which it added provisions related to applications for registration and transfer of distinctive signs of entities belonging to the same business group, to its Single Memorandum. In this regard, it establishes that when the authority carries out the examination of trademark registrability, it must take into account whether the precedents that prevent the registration or transfer of said sign belong to the same business group as the applicant, in which case, registration will not be understood as affecting the rights of a third party. (In this regard, bear in mind that there is a business group when: (i) there is a situation of control, that is, the decision-making power of a company depends on the will of another person or persons, and (ii) when there is unity of purpose and direction between members of the business group. Regarding this last requirement, the Colombian Superintendence of Corporations has established that it refers to all companies pursuing the same objective that has been set by the controlling company, without this preventing each of the companies from individually performing their corporate purpose and activities.)

For these cases, the resolution established that applicants have the obligation to inform the superintendence of the business group to which they belong. However, in the event that the applicant is a foreign person, they must provide: (i) a statement signed by the applicant’s legal representative or by any of the legal representatives of the member companies of the business group,  in which the existing unity of purpose and direction is exposed, and (ii) a document issued by the competent authority of the country to which the foreign person belongs, which also specifies the existing unity of purpose and direction among the members of the business group. Finally, it’s important to bear in mind that this resolution will come into force on September 1st of the current year.

In case of doubts, do not hesitate to contact us.

Learn About the New Colombian Regulation on Telework

On July 18, 2022, Decree 1227 of 2022 came into force, which modifies and adds some provisions on teleworking. In this regard, bear in mind that teleworking is a form of work organization that consists of the performance of activities by the worker using Information and Communication Technologies “ICT” as support. Thus, the contact between the worker and the employer occurs through ICT without requiring the physical presence of the worker in a specific place of work. Additionally, there are three types of teleworkers: (i) autonomous, when teleworkers use their own home or a different place agreed upon with the employer and only sporadically go to the company; (ii) mobile, when they do not have an established workplace and use mobile devices to perform their functions; and (iii) supplementary, when depending on the needs of the service, they work two (2) or three (3) days a week at home and the other days they work in the company. With this in mind, below we detail the modifications that you must take into account as an employer if you want to implement this type of employment contract in your company in Colombia:

  1. In the employment contract employers must indicate the necessary conditions for the performance of the functions assigned to the worker, the technological means required, the description of the equipment and computer programs and the responsibilities regarding the custody of work items and restrictions and responsibilities that the breaches of these conditions entail. Additionally, it must indicate the modality of telework that will be performed, the weekly working schedule that teleworkers will have, the security measures that they must know and comply with and the description of the minimum requirements in terms of ergonomics and technology that the workstation must comply with. Finally, the employment contract must indicate the procedure that teleworkers must follow to return the equipment that was delivered to them once the telework or contract ends.
  2. The previous requirement to include in the Internal Work Regulations (RIT, by its Spanish acronym) the special conditions for teleworking to operate and the provisions related to the proper use of equipment, programs and information management applicable to these workers, has been eliminated.
  3. The following obligations are established for employers: (i) affiliate teleworkers to the Labor Risk System and inform the workers’ compensation administrators (ARL, by its Spanish acronym) about the chosen telework modality, the weekly working schedule and the corresponding risk class. Additionally, for supplementary and autonomous teleworking, the chosen workplace for the teleworker to carry out their functions must be reported and for mobile telework, the conditions in which the contracted work will be performed; (ii) in the Annual Work Plan of the Occupational Health and Safety Management System (SG-SST, by its Spanish acronym) all the actions considered necessary to identify and control the dangers and risks of the company’s teleworkers must be implemented; (iii) order periodic medical evaluations that may be performed by telemedicine; (iv) adopt and publish a telework policy in which the terms, characteristics and conditions of teleworking are regulated in accordance with the needs and particularities of the service; and (v) inform the Colombian Ministry of Labor about the number of teleworkers that their company has.
  4. Towards teleworkers, employers have the following obligations: (i) inform them of the communication mechanisms they have to report any updates related to the performance of telework, work accidents and occupational diseases; (ii) provide them with adequate work equipment and tools, ensuring that they receive training and information on the risks arising from their use. However, this does not prevent teleworkers from using their own equipment and work tools; (iii) respect human dignity, the right to privacy and access to information of teleworkers; (iv) guarantee the right to disconnect from work and protect the mental health and emotional balance of teleworkers; (v) train them in advance, virtually or in person, in terms of mental health care, ergonomic or biomechanical risk factors, use and appropriation of ICT and digital security; (vi) inform them about the restrictions on the use of computer equipment and programs, protection of personal data, intellectual property, information security and penalties for non-compliance with these provisions.
  5. The possibility that the parties retain the right to reversibility of teleworking is established. That is, the parties may have the power to request at any time the definitive return of teleworkers to perform their functions in person at the company. However, this will depend on what the parties agree to in the employment contract and the possibilities that the employer has to locate the worker within their company.
  6. This decree states that the parties must seek flexibility regarding the time and mode of performance of the teleworker’s functions, provided that the established weekly working schedule is met. For this, the parties will be able to agree on schemes of compliance and monitoring of functions. However, this flexibility cannot affect the effective rest of teleworkers or their right to disconnect from work.
  7. The possibility that the parties agree that the teleworker use their own work equipment and tools is established. In this case, teleworkers must keep their equipment and tools in good functional condition to fulfill their functions and employers must refrain from subsequently requesting equipment other than those agreed upon. The parties can agree on a compensatory amount for the use of these tools, but it is NOT mandatory.
  8. The parties can agree on a monthly aid to compensate for the teleworker’s expenses on Internet, land and mobile telephony and energy. This aid is NOT mandatory and will depend on the will of the parties.

In case you have any doubts, please contact us.

Term to Exercise the Right of Inspection in Simplified Joint-Stock Companies (SAS)

The right of inspection is the authority that associates or shareholders of a company have to examine, the books and commercial papers of the company in which they made their contributions, either directly or through a person authorized for that purpose. This right is intended to allow partners or shareholders who are not part of the management of the company to know about the administrative, financial, accounting and legal situation of the company. Thus, directors of the company have the obligation of allowing partners or shareholders to access this information. Failure to do so is sufficient cause for the competent corporate body or the authorities to remove the directors from their position.

In addition to the above, article 20 of Law 1258 of 2008 establishes that in Simplified Joint-Stock Companies (SAS), shareholders may exercise their right of inspection during the five (5) business days prior to the meeting in which end-of-year balance sheets or transformation, merger or split-up operations must be approved. However, it also establishes the possibility that a higher term can be agreed upon in the company’s bylaws. In this regard, the Superintendence of Companies recently reiterated that it is possible for shareholders to agree in the bylaws to the possibility of exercising the right of inspection permanently. Thus, as established by law, in SAS-type companies the opportunity to exercise this right will depend on what the shareholders have established in the bylaws.

In case you have doubts about it, do not hesitate to contact us.

Appointment of the Replacement of the Legal Representative at Simplified Joint-Stock Companies (SAS)

On June 7, 2022, the Colombian Superintendence of Corporations referred to the resignation of the legal representative in Simplified Joint-Stock Companies (SAS, by its Spanish acronym) and the appointment of their replacement. In this regard, it recalled that what has been established in the bylaws regarding the company’s legal representation and the procedure that must be followed to choose a replacement in case of resignation, removal, permanent disability, death, termination of the stipulated term, or any situation that implies that the individual or company appointed ceases to hold this position, should be consulted first. In case nothing has been stipulated, the Colombian Commercial Code must be applied, especially the provisions about Stock Corporations.

In addition, article 28 of the Colombian Commercial Code establishes that the appointment of legal representatives of companies must be registered in the commercial registry. Thus, once the replacement of the legal representative is appointed by the highest corporate body, the company must proceed with the registration before the Chamber of Commerce of the minutes of the meeting in which this decision was made. Consequently, following the provisions of article 442 of the Colombian Commercial Code, until both the appointment and the registration of the minutes are made, the outgoing legal representative will remain in the commercial registry despite their resignation or any other situation that puts an end to their appointment. This is because the cancellation of the registration of their appointment is only possible through the election and registration of the new legal representative. In this regard, the Colombian Superintendence of Corporations refers to Judgment C-621 of 2003 in which the Colombian Constitutional Court established that the corresponding corporate organs must make the designation of the replacement within the term established in the company’s bylaws or, in the absence of stipulation in this regard, within 30 days following the circumstance that ended the previous appointment. Thus, during this period of time, the registered representative will continue to exercise their position with the fullness of the responsibilities and rights that this entails. However, in the event that this term is exceeded without the appointment of the corresponding replacement, the outgoing legal representative must notify the corresponding Chamber of Commerce of this situation. Once this notice is made, the outgoing legal representative withdraw from his duties and will no longer be liable towards third parties, even if their name continues to appear in the commercial registry.

Additionally, the superintendence specified that when the appointment of the legal representative’s replacement is not made in the aforementioned terms, the person designated as their alternate, if any, will be in charge of assuming their functions. In the event that an alternate has not been appointed, the statutory auditor may summon the highest corporate body to appoint the new legal representative.

On the other hand, shareholders of companies that are NOT part of the financial sector may request the Colombian Superintendence of Corporations to convene the highest corporate body when it has not met in the moments that the bylaws or the law indicate. However, for this request to proceed, the following must be taken into account:

  • For companies that are not supervised by the Colombian Superintendence of Corporations and that as of December 31 of the immediately previous year have: (i) assets equal to or greater than 5,000 Colombian legal minimum monthly wages or (ii) income equal to or greater than 3,000 Colombian legal minimum monthly wages, the request must be made by one or more shareholders representing at least 10% of the share capital.
  • For companies supervised by the Colombian Superintendence of Corporations, that is, those that as of December 31st, 2021 have assets or total incomes greater than 30,000 Colombian legal minimum monthly wages, either: (i) shareholders representing no less than one fifth of the subscribed shares, unless the bylaws indicate something different, case in which the provisions of these will prevail, or (ii) the company’s creditors and other public authorities in exercise of their legal powers, may submit this request. Additionally, this request will proceed not only when the highest corporate body has not met in the moments that the bylaws or the law indicate, but also when serious irregularities have been committed in the administration of the company that must be known or remedied by this body or when the number of shareholders mentioned above considers it necessary.

In case you have doubts about this or any other corporate issue, do not hesitate to contact us.

Virtual Meetings of Corporate Organs After the Health Emergency

The Colombian Superintendence of Companies recently reminded the public that, despite the fact that the health emergency has ended, Decree 398 of 2020 is still in force. Therefore, it is possible for corporations to continue to hold their partners’ meetings, general assembly of shareholders or meetings of the board of directors in a non-face-to-face manner and complying with the requirements established both in the law and in the company’s bylaws.  In this regard, bear in mind that in order for non-face-to-face meetings to be held it is necessary that all members or partners participating in the meeting be able to deliberate or decide by simultaneous or successive communication, in accordance with the provisions of article 19 of Law 222 of 1995.

Additionally, the aforementioned Decree 398 establishes that the company’s legal representative must record in the minutes of the meeting on the continuity of the necessary quorum throughout the meeting. That is, they must certify that during the meeting the necessary number of participants were present to deliberate and decide in accordance with what is established in the law or in the bylaws of each company. Likewise, they must verify the identity of the participants to guarantee that they are in fact the partners, shareholders, or members of the board of directors or their proxies, as appropriate.

Finally, this decree specifies that legal and bylaw provisions on summons, quorum and majorities for in-person meetings are applicable to partners’ or shareholders’ meetings or the meetings of the board of directors held in a non-face-to-face or mixed manner (which allow the presence of participants both physically and virtually).

Contact us in case you require counsel regarding this or any other issue affecting your company.

The Deadline to Pay the Legal Bonus is Approaching

According to article 306 of the Colombian Labor Code, employers have the obligation to pay their employees a social benefit called “Legal Bonus” corresponding to 30 days of salary per year, that is, for each year worked, 30 days of salary must be recognized. This Legal Bonus must be recognized in two payments: half by June 30th at the latest and the other half no later than the first twenty days of December. The recognition of this payment must be made for the entire semester worked or proportional to the time worked.

In addition, bear in mind that all workers who are bound by an employment contract are entitled to the Legal Bonus, including domestic workers, family service drivers, daily workers or farm workers and, in general, those who are considered as dependent workers.

In accordance with the above, by June 30th at the latest, you will have the obligation to pay an amount equivalent to half of the monthly salary received by your workers for those that began working on or before January 1st. For workers who began after January 1st, payment must be made in proportion to the time worked. In case you do not make the corresponding payment before this date, you must pay, as compensation, a sum equal to the last daily salary for each day of delay, up to 24 months. If after 24 months you have not yet made the payment, you must recognize default interests[1].

In case you have doubts about this or any other work obligation, do not hesitate to contact us.


[1] Colombian Labor Code. Article 65.

Time Frame for Responding to Requests for Information are Back to Normal

Article 23 of the Colombian Constitution recognizes citizens’ right to submit requests and petitions before the authorities, in order to obtain information on situations of general and/or particular interest. In addition, the Colombian Code of Administrative Procedure establishes that it is possible for citizens to also file petitions before private organizations when it is necessary to guarantee their fundamental rights. These requests must be answered within the term that the law indicates. 

In this regard, bear in mind that within the framework of the health emergency caused by COVID-19, Legislative Decree 491 of 2020 was issued, which established an extension of said terms. Thus, public and private entities that received petitions had a longer period to give a substantive response to the requests that were submitted to them. However, on May 17, through Law 2207 of 2022, this measure was repealed, so terms to respond to the different requests are once again those indicated in article 14 of the Colombian Code of Administrative Procedure, namely:

  1. For documents and information requests, entities will have ten (10) business days to respond counted from the receipt of the request. 
  2. For requests addressed to the authorities on consultations regarding issues that are in their charge, thirty (30) business days, counted from the receipt of the request.
  3. Other requests that are not within any of the aforementioned cases must be resolved within fifteen (15) business days.

For more information, do not hesitate to contact us.