COLOMBIA Law and Practice Contributed by: Jaime Trujillo, Andres Crump and Natalia Ponce de León, Baker McKenzie
clearance from the SIC prior to closing, either through a fast-track notification proceeding or through a pre-evaluation proceeding, depending on the joint market share of the parties in any of the overlapping markets (ie, market threshold), in accordance with the rules outlined below. Fast-Track If the aggregate market share of the parties to the transaction is below 20% in all the over - lapping markets, the business integration is deemed authorised provided that the transac - tion is previously notified to the SIC. Pre-Evaluation If the parties’ joint market share is 20% or high - er in any of the overlapping markets, express prior approval from SIC is required. These are information-intensive proceedings, with the SIC undertaking a substantive analysis of the trans - action (a “pre-evaluation” ) before deciding. 2.5 Labour Law Regulations The primary labour law regulations that acquirers should be concerned about in any jurisdiction will significantly depend on whether the trans - action is structured as a share deal or an asset deal. Share Deals When a business is transferred through a share deal, there is no change of employer. Conse - quently, employee conditions, benefits, and entitlements remain unaffected. Consent from employees or labour unions is not required for the transfer, unless specifically defined in a col - lective bargaining agreement (which is uncom - mon). Asset Deals In asset-purchase transactions where the assets constitute an ongoing concern, the transfer of
employees directly linked to such assets oper - ates automatically by virtue of law: transferred employees cannot legally refuse the change of employer or demand the payment of benefits. This is because the employment agreement remains intact and is not terminated, suspend - ed, or modified. As a rule, however, the former and the new employer will be jointly and sever - ally liable with respect to the obligations accrued prior to the transfer. 2.6 National Security Review Colombia has not formally adopted any national security review. However, foreign investment in activities directly related to defence or national security is prohibited. 3. Recent Legal Developments 3.1 Significant Court Decisions or Legal Developments Mercantil Galerazamba S.C.A & others v Muñoz Merizalde & CIA (2020), an arbitral award, creat - ed significant legal precedent by shedding light on the interpretation of key aspects of Colom - bian law-governed M&A transactions, such as: (i) the validity and enforceability of sandbagging and anti-sandbagging provisions; (ii) the role of representations and warranties; and (iii) the pro - cess for instituting claims. This precedent has been reinforced by another recent arbitral award, Korn Arquitectos S.A.S. vs César Antonio Pérez & others (2021), empha - sising its relevance and impact in shaping M&A practices in Colombia. The tribunal reached several noteworthy conclu - sions, which are outlined below.
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