COLOMBIA Law and Practice Contributed by: Gabriela Mancero, Daniel Peña, Maria Fernanda González and Andrea Sánchez Gallardo, Peña Mancero Abogados
Timing and Process of Incorporation Once all the documents and requirements are fulfilled, the incorporation of a new company can take an average of three business days. Capital Requirements There is no initial capital requirement for incor- poration; all companies can define their capital structure in the by-laws, where the capital is usu- ally divided into authorised capital (determining the company’s maximum capitalisation), sub- scribed capital (the portion of authorised capi- tal that shareholders agree to pay) and paid-in capital. However, payment requirements vary depending on the type of company selected by the entre- preneurs. For a simplified stock corporation, which is the most common type of business entity, shareholders have up to two years to pay the subscribed capital. In a corporation or limited joint-stock company, at least 50% of the authorised capital must be subscribed, with one-third of the subscribed capital paid at incorporation and the remaining instalments paid within one year. Finally, if a limited partnership or limited com- pany is chosen, the subscribed capital must be fully paid at the time of incorporation. 2.2 Type of Entity Even though there are several types of business entities available for incorporation (stock com- pany, limited liability company, branch of foreign corporation, etc), entrepreneurs are typically advised to choose a simplified stock corpora- tion for the initial incorporation. The reason for this is that the regulation is more flexible; there is more flexibility for the shareholders in defining corporate governance in the by-laws. Branches
of foreign corporations are usually used to meet highly intensive investment needs, such as those in the oil and gas sector. 2.3 Early-Stage Financing Early-stage financing or seed investment for start-ups typically comes from a mix of sources, including family and friends (usually documented as loan agreements with no stock participation), family offices and – to a lesser extent – local angel investors that contribute not only capital but also technical financial assistance and net- working support. Additionally, there is increasing foreign investment through venture capital (VC) and private equity firms offering capital along with advisory business services, as well as for- eign direct investment. Recently, the Colombian government has been aiming to incentivise entrepreneurship and inno- vation in the country through programmes like iNNpulsa Colombia and Bancoldex, which pro- vide grants, loans and other financial incentives to start-ups in their early stages. These pro- grammes often focus on high-impact industries and promote innovation. Documentation of Seed Investment Seed investment in Colombia is commonly documented through various agreements vary- ing depending on the funding structure, such as convertible notes, simple agreement for future equity (SAFE), equity agreements, shareholders’ agreements and grant agreements. 2.4 Venture Capital The VC industry in Colombia is still develop- ing and lacks high levels of liquidity. Addition- ally, entrepreneurs face barriers to accessing the financing available through private equity funds, as they often lack the necessary financial and legal training and experience to structure
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