COLOMBIA Law and Practice Contributed by: Clare Montgomery, Karen Santamaria, Catalina Garzón and Diana Guerrero, Baker McKenzie S.A.S.
1. Introductory 1.1 Forms of Corporate/Business Organisations
Corporation or “S.A.” An S.A. corporation requires a minimum of five shareholders. None of the shareholders may hold 95% or more of the outstanding capital of the company. It is incorporated by public deed granted before a Colombian Public Notary and registered at the local trade register. Corporations must define the corporate purpose and a fixed term in the by-laws. A board of direc - tors and statutory auditor is compulsory. This is the traditional type of stock corporation and is used for listed companies and banks, among others. Capital is represented in shares. Liability is lim - ited to the capital contribution in the absence of fraud or abuse. The transfer of a corporation’s shares is carried out by endorsing the share cer - tificates or issuing a letter of instructions and registering the new shareholder in the compa - ny’s stock ledger. The transfer may be subject to a right of first refusal in favour of the company and the shareholders, if agreed in the by-laws. There is less freedom to agree different rules on the company structure, meetings, dividend distribution, reserves etc as these are regulated under the Colombian Commercial Code. Limited Liability Company (Ltda) This type of company must have at least two and no more than 25 partners. It is incorporated by public deed granted before a Colombian Public Notary and has to be registered with the local trade register. Limited liability companies must define the cor - porate purpose and a fixed term in the by-laws. This type of company has fallen into disuse since the simplified stock company became available in 2008. However, it is still used in specific indus - tries and sectors where this structure is required.
The most common structures to conduct busi - ness in Colombia are: (i) the simplified stock company (S.A.S.); (ii) the corporation ( sociedad anónima ); iii) the limited liability company (Ltda); and iv) the branch of a foreign company. A summary of the main characteristics of the most commonly used vehicles is set out below. Simplified Stock Company or “S.A.S.” A S.A.S. requires at least one shareholder and is incorporated by private document and regis - tered at the local trade register. This is unless assets are being contributed at the time of incor - poration. In this case a public deed is required for transfer (eg, real estate). The S.A.S. is a mod - ern and flexible structure, providing the parties with greater freedom to agree the rights of, and restrictions on, shareholders. It is used for small single owner companies, multinational sub - sidiaries, family companies and joint ventures, among others. The corporate purpose may be broadly defined and the term of the corporation can be indefinite. Liability is limited to the capital contribution in the absence of fraud or abuse. Capital is represented in shares. The transfer of shares is carried out by endorsing the share certificates or issuing a letter of instructions and registering the new shareholder in the com - pany’s stock ledger. Share issues and trans - fers may be subject to a right of first refusal in favour of the company and the shareholders, if expressly set out in the by-laws. A board of directors is optional but a statutory auditor must be appointed when certain thresholds are met.
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