COLOMBIA Trends and Developments Contributed by: Clare Montgomery, Karen Santamaria and Silvana Aroca, Baker McKenzie
Increased Focus of Colombian Authorities on Corporate Governance Over the last few years, the regulatory land - scape for corporate governance in Colombia has undergone significant transformation. While reg - ulations and guidelines on information transpar - ency and good business practices have existed for over 50 years in some cases, the authorities and regulatory bodies have intensified efforts to educate the business community and enforce the existing rules. They have recently introduced new regulations on identifying final beneficiaries, regulating con - flicts of interest and preparing sustainability reports. The increased scrutiny on transparent business practices, climate change and environ - mental, social and governance (ESG) has placed corporate governance centre stage in Colombia. Corporate governance is no longer regarded as exclusively applicable to publicly traded compa - nies. Large private companies and subsidiaries of multinationals are increasingly implementing more robust governance rules to drive profitabil - ity and innovation as well as attract investment and align with the interests of stakeholders. All entities, even small and micro-sized businesses have to identify and register final beneficiaries with the Colombian tax authorities. They also often have to identify and register final beneficiaries with third-party customers and suppliers even if they usually fall under revenue and asset thresholds for mandatory reporting in other areas. Corporate governance is slowly being regarded less as a set of onerous, expensive and irrel - evant rules transplanted from other jurisdictions and is instead being viewed more and more as a mechanism for succession planning. With
approximately half of registered entities being family companies in Colombia, improved profes - sional standards are required for management bodies and monitoring by investors. For these companies, the challenge is striking the right balance between the potential benefits in the mid to long-term of adopting these policies and the costs and administrative burdens involved. Some of these measures and their effects on the Colombian business environment are discussed below. Greater Transparency Registry of Ultimate Beneficial Owners Regulations requiring all companies and entities to register the individuals qualifying as ultimate beneficial owners (UBOs) by 31 July 2023 came into force in 2021. New entities must register qualifying individuals within two months of incor - poration. There are two main criteria for identify - ing individuals as UBOs: • ownership criteria: direct or indirect owners of 5% or more of the capital or voting rights, assets, benefits or profits of the entity; and • control criteria: direct or indirect control over the entity other than by ownership. Where no UBOs are identified under these cri - teria, the legal representative of the entity must be registered unless there is someone with a position of greater authority in relation to the management functions and administration of the entity. If this is the case that person must be identified instead. There is no exception for final parents that are publicly traded nor for foreign individuals identified as UBOs. The registration must be made electronically on the platform of the Colombian tax authorities (DIAN). Registration is expected to be an impor -
201 CHAMBERS.COM
Powered by FlippingBook