COLOMBIA Law and Practice Contributed by: Rodrigo Castillo Cottin, Ana María López and Alejandra Becerra, Rimon, P.C.
6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries Local Trusts Local trusts are used in Colombia as instruments to manage properties or businesses with a specific pur - pose or to grant guaranties or collaterals, considering that trustees are professional regulated entities. Only those companies duly authorised by the SFC may offer trust services and act as trustees. Such enti - ties are subject to supervision and special regulations. Colombian law sets forth a number of legal duties for trustees, which cannot be delegated to third parties, or waived. These include the following: • the duty to carry out trustee activities in a diligent manner; • the segregation of assets; • the management of assets in a trust in accordance with the trust agreement; • a trustee’s duty to act on behalf of, and for the benefit of, the beneficiaries; • a trustee’s obligation to consult the SFC when in doubt regarding its duties or when it deems neces - sary, potentially acting against the instructions set forth in the trust agreement; • a trustee’s duty to do its best to maximise the trust’s profitability; • upon a trust’s termination, a trustee’s obligation to transfer the assets to the final beneficiary set forth in the agreement; and • the requirement that a trustee should report accounts at least every six months. Foreign Trusts Regarding the use of corporate fiduciaries or other professional fiduciaries, there are no civil or commer - cial regulations establishing a higher standard of con - duct or additional supervision or regulations. Colombian law authorises individuals residing in Colombia and legal entities created under the laws of Colombia to invest and hold assets outside Colombian territory without the need to obtain further permits or authorisations. However, said tax residents and local
entities must comply with all tax and foreign exchange reporting regulations. 6.2 Fiduciary Liabilities In Colombia, the piercing of the corporate veil has been developed by case law and seeks to identify the individuals or legal persons who are beneficiaries of the legal entity. However, this procedure must be ordered by a judge and is not common on a day-to- day basis. From a tax perspective, Article 869-2 of the CTC, allows the CTO to pierce the corporate veil of any entity used by its shareholders, partners, directors or administrators to commit tax abusive conduct under Article 869, mentioned in 1.7 Transparency and Increased Global Reporting . The CTO may also obtain information regarding ulti - mate beneficial owners using the following mecha - nisms: • Colombia’s AML and CFT framework, SARLAFT – financial entities are required to identify and report to the CTO the ultimate beneficial owners in accordance with SARLAFT regulations mentioned in 1.7 Transparency and Increased Global Report- ing ; and • electronic tax information – Article 631 of the CTC requires Colombian affiliates or subsidiaries of national or foreign entities to identify and report the ultimate beneficial owners to the CTO electroni - cally. 6.3 Fiduciary Regulation There are no specific laws that encourage fiduciar - ies to invest assets prudently. However, and as men - tioned in 6.1 Prevalence of Corporate Fiduciaries , current regulations set forth a number of legal duties required of trustees in terms of investing and maintain - ing assets that cannot be delegated to third parties, or waived. 6.4 Fiduciary Investment Generally, parties involved in a fiduciary agreement will determine the risks and limitations in the invest- ment of assets. Colombian law does not require the diversification of assets or the application of modern
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