COLOMBIA Law and Practice Contributed by: Gabriela Mancero, Daniel Peña, Maria Fernanda González and Andrea Sánchez Gallardo, Peña Mancero Abogados
their business models in their early stages, com- pounded by high levels of informality in these initial stages. However, efforts are being made in Colombia to connect entrepreneurs with the investment capi- tal they need to grow their ventures, including the regulation of crowdfunding. Among these initiatives is the creation of A2cen- so, a crowdfunding platform managed by the BVC that aims to connect small to medium-sized enterprises with investors through a digital plat- form, and Bloom Crowdfunding, a fintech com- pany that, through a blockchain-based tech- nological solution, allows companies to set the term, rate and payment method offered to their investors, who can in turn provide capital directly to projects. Colombia remains attractive for foreign VC investment, despite a decline in 2023, ranking third in the region in terms of invested capital. 2.5 Venture Capital Documentation Standards for VC documentation are still devel- oping and are not as well-established as in more mature markets like the United States. How- ever, some typical practices and templates are becoming common among local VC firms and investors, especially as the industry grows and aligns more with international standards. For foreign investment or foreign VC transactions, documentation is usually based on US tem- plates, which are adjusted locally and generally enforceable under Colombian law. 2.6 Change of Corporate Form or Migration While start-ups in Colombia often begin with a simplified stock corporation ( sociedad por acciones simplificada SAS) structure, as they
seek more substantial VC funding or prepare for international expansion, they are typically advised to establish a foreign holding structure to accommodate investor expectations and optimise growth potential. Until 2023, if the com- pany intended to list its shares on the local stock exchange, it had to be transformed to a stock corporation ( sociedad anónima SA), as required by Colombian regulations. The law that lifted the prohibition on an SAS listing its shares on the local stock exchange was challenged on consti- tutionality grounds and is currently under review by the Constitutional Court. 3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale For most start-ups looking for a liquidity event, a sale process is preferred given the limited local market for initial public offerings (IPOs), limited size of the BVC and low liquidity, where the vol- ume of traded shares represents a minimal per- centage of total transactions. Additionally, regu- latory requirements and cost barriers make IPOs feasible only for a few select companies with significant revenue and international expansion. Although Colombian start-ups primarily would be more likely to run a sale process, some high- growth ventures with international appeal may adopt a dual-track process strategy, especially if the company has a holding structure abroad;
this facilitates both paths. 3.2 Choice of Listing
Given the regulatory efforts involved in pursuing a foreign exchange listing, companies may be more inclined to list on the local exchange. How- ever, since the Colombian exchange market is not mature enough and offers low liquidity, com-
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