COLOMBIA Law and Practice Contributed by: Gabriela Mancero, Daniel Peña, Maria Fernanda González and Andrea Sánchez Gallardo, Peña Mancero Abogados
for tax purposes; therefore, income tax will not apply. Regarding the participating entities: • the spin-off document must state that the assets transferred to the beneficiary entity will retain the same value (tax cost) as declared by the spin-off entity; • the transferred assets must retain their origi- nal nature as fixed or movable assets, as they were for the transferring entity; • the spin-off assets must qualify as one or more economic units or business establish- ments, rather than as individually considered assets; and • if the acquiring entity disposes of the assets within two years of the contribution, it may not offset accumulated tax losses or excess presumptive income over liquid income against the income generated by the sale of such assets. Regarding the shareholders: • holders of at least 75% or 85% of the shares in the transferring entities, depending on the type of spin-off, must participate in the ben- eficiary company; • the shares they receive in the beneficiary company must represent 90% or over of the consideration received by the entity resulting from the spin-off; and • the shares received in the beneficiary entity must retain the same value as declared for the shares in the transferring entity before the spin-off. 5.3 Spin-Off Followed by a Business Combination A spin-off immediately followed by a busi- ness combination is possible in Colombia. A
business combination may take the form of a merger, acquisition or joint venture. Require- ments will depend on the form of choice and on whether the parties involved are supervised by the Superintendence of Corporations. A merger control filing may also be required depending on the parties’ market share and whether local thresholds are met. 5.4 Timing and Tax Authority Ruling The timeline for a spin-off typically ranges from six months to one year, from the initial corpo- rate-level analysis to its consummation, depend- ing on the transaction’s complexity, regulatory requirements and corporate approvals. For example, mandatory law sets certain terms to be observed, such as allowing shareholders 15 business days to review the spin-off project before the meeting in which it is to be approved. Once the spin-off is approved by the sharehold- ers’ meeting, absent or dissenting sharehold- ers may exercise their right of withdrawal within eight days of the decision date. Additionally, the company must publish the pro- ject in a national newspaper, after which credi- tors have 30 days to exercise their rights. Although obtaining a tax authority ruling is not necessary, depending on the type of supervi- sion over the participating companies, additional formalities and authorisations may be required regarding rules on competition promotion and restrictive business practices.
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