COLOMBIA Law and Practice Contributed by: Rodrigo Castillo Cottin, Ana María López and Alejandra Becerra, Rimon, P.C.
4.2 Succession Planning In Colombia, a testator only has an unlimited right of disposal over the half of their estate that corre - sponds to the freely disposable portion. The testator may decide the beneficiary of the assets comprising the remaining half of the estate, but must respect the compulsory portion that corresponds to their heirs. Certain corporate arrangements (national or foreign), involving life insurance policies and the use of foreign or national legal entities/structures, may be imple - mented when forced heirship rules do not meet the wishes or needs of the testator or their family. These arrangements can be achieved by legally allowing assets to be passed down to intended beneficiaries, thereby successfully circumventing Colombian forced heirship rules. Given these constraints, various lawful planning strat - egies may be implemented to facilitate the orderly transfer of wealth and control to the next generation while respecting forced heirship rules. Among the most commonly used structures and mechanisms are the following. Wealth Transfer Structures The most common vehicles include family holding companies – typically structured as a Sociedad por Acciones Simplificada (SAS) – which centralise assets and allow gradual share transfers through donations or sales during the founder’s lifetime. Other tools include donations with reservation of usufruct, lifetime partition of assets, life insurance policies (which pass outside the estate) and trusts or private foundations used to administer family assets with tailored distribu- tion instructions. Family Governance Arrangements To reduce the risk of disputes and ensure continuity, Colombian families increasingly adopt governance frameworks alongside the corporate structure. These typically include: • shareholders’ agreements governing transfer restrictions, pre-emptive rights, tag-along and drag-along clauses, and decision-making proto - cols;
ter, and irrespective of the powers granted to protec - tors, advisers or other fiduciaries or third parties. Additionally, where a Colombian tax resident or legal entity holds a fiduciary or equivalent position in a for - eign trust, foundation or similar vehicle, the arrange - ment may trigger reporting obligations under the RUB, particularly regarding the identification of natural per - sons exercising ultimate effective control.
4. Family Business Planning 4.1 Asset Protection
The most popular method for asset protection plan - ning is the incorporation of a separate vehicle from the individual’s personal estate, providing asset protec - tion from third parties or creditors. Individuals may also place assets held in their own names into a local trust in order to designate them or their proceeds to a specific purpose or persons. The assets placed into a properly structured local trust form an estate separate from the assets of the settlor. In structuring asset transfers, whether or not gratui - tously made, attention should be paid to Colombia’s creditor protection laws. The Colombian Commercial and Civil Codes include specific rules on the enforce - ment of a revocation action ( acción revocatoria ) against the unjustified actions performed by debtors prior to the request of a treaty process, a mandatory liquidation process or a restructuring process. Further asset protection can be obtained through an enforceable investment agreement with the following jurisdictions: • bilateral investment treaties – China, Spain, Swit - zerland, Peru, India, Japan, France and the United Kingdom and Northern Ireland; and • free trade agreements (investment chapters) – Can - ada, Chile, the European Free Trade Association (Switzerland, Liechtenstein, Iceland and Norway), Costa Rica, the EU, Mexico, the North Triangle (Guatemala, El Salvador and Honduras), the Pacific Alliance (Chile, Mexico and Peru), South Korea, the USA, Israel and the United Kingdom.
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