COLOMBIA Trends and Developments Contributed by: Clare Montgomery, Karen Santamaria and Silvana Aroca, Baker McKenzie
ing and evaluation of board members, prepara - tion of board regulations setting out policies on conflicts of interest, remuneration and functions and responsibilities are being adopted voluntar - ily by larger and mid-sized companies: • to regulate relationships between the different stakeholders better; and • to drive profitability and succession planning in second and third generation companies. Diverse boards globally are often viewed as being able to make decisions more effectively and approach strategy and risk from a broader perspective. In fact, board diversity can help validate and evidence actions taken in good faith under the newly adopted business judge - ment rule in Colombia. It can also be used to justify any waivers of conflicts of interest, as the directors without any direct interest can still ana - lyse the issue as being in the best interest of the company. Additionally, for businesses to expand and remain competitive in a multinational environ - ment, boards should have an understanding of their diverse customer base, shareholders and other stakeholders. Audit committees and statutory auditors Publicly traded companies in Colombia must have an audit committee made up of three direc - tors, including directors who are considered to be “independent” . This committee is responsible for monitoring compliance with the internal audit programme and for guaranteeing that financial information is prepared in line with legal require - ments. All committee meetings must be attended by the company’s statutory auditor, who might be able to deliver opinions on the matters under discus -
sion. Auditing and ethics committees are also common amongst private companies and non- profit entities to provide guidance to the board. The role of the statutory auditor has long been to supervise proper accounting records and ensure that the company’s activities are performed in compliance with the by-laws and board and shareholder decisions, among other duties. This role has been expanded over the last few years to cover other matters such as reviewing and reporting on anti-money laundering and business transparency programmes, reporting on suspicious operations to the relevant anti- money laundering authorities and alerting the shareholders to any acts of unfair competition and conflicts of interest. Auditors are being held to account by the authorities to review and issue formal opinions on these matters, even for pri - vate companies, where applicable. Business judgement rule New regulations expressly accept the applica - tion of the business judgement rule, which has been widely recognised by local case law. This will encourage management to make decisions that will require taking greater risks but could also mean higher economic returns without the fear of being prosecuted later. Therefore, as long as directors are acting in good faith, are duly informed, are acting rationally and within the authority established by law and the by-laws, courts should not review or question their deci - sions. The business judgement rule was recently extended to all authorities in Colombia as part of a major innovation to provisions on the matter. Enforcement Government agencies have recently become more active in enforcing transparency and
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