Tools and Resources
FAQs Corporate Law
Home Page : Tools and Resources : FAQs Corporate Law
Which is the most convenient association type for people that want to incorporate a company within the Colombian Territory?
We recommend the incorporation of a Simplified Joint Stock Company because the procedure for its incorporation in the legal system is easy and its laws are not as strict as the Corporations and Limited Liability Partnerships or Companies. However, it preserves the juridical security of other kind of associations established in the Colombian legislation.
Which are the benefits of a Simplified Joint Stock Company?
They are incorporated by means of a private document. Simplified Joint Stock Companies can be incorporated with any amount of capital. The shareholders are complied to pay the whole amount of the stocks issued in the two (2) following years of its incorporation; however, a minimum of a thirty per cent (30%) of the issued stock has to be paid at the moment of the incorporation of the company.
They can be incorporated with one or several shareholders who can be natural persons or companies.
Its duration is indefinite. These companies are not compelled, as other companies ruled by the Colombian Commerce Code, to specify the social purpose they will dedicate to. If such is not specified, it will be understood that the company can perform any licit commercial activity under Colombian legislation.
The Simplified Joint Stock Companies are not compelled to have all the administrative organs as the classic Corporations, governed by the Colombian Commerce Code, such as the Board of Directors and an Auditor.
They assure the confidentiality of the personal data of the shareholders, as these is not of public knowledge and does appear in any public record.
If the Simplified Joint Stock Company has only one shareholder, it can be, at the same time, its legal representative.
The Simplified Joint Stock Companies are not compelled to have an Auditor, unless it exceeds certain amount of its gross income.
The liability regime of the shareholders is limited to the amount of their contribution to the company. The fiscal and labor debts of the company do not threaten the individual assets and patrimony of the shareholder.
What other kind of companies can be recommended for incorporation in Colombia?
Corporations and Limited Liability Partnerships
Which are the characteristics of a Corporation?
It is incorporated by means of a public deed.
The social contract has to be executed by a minimum of five (5) shareholders. The capital is divided in nominative shares of the same value; however, preferent shares can also be issued.
When they are incorporated, a minimum portion of shares, equivalent to a fifty per cent (50%) of the authorized capital have to be subscribed. A minimum portion of the subscribed shares, equivalent to the third part, has to be paid. The outstanding balance has to be paid within the following year.
The shareholders are responsible for the amount of their contribution. By no means, one shareholder can be the owner of more than ninety-five per cent (95%) of the shares of the company.
The identity of the shareholders is reserved, confidential; it does not appear in the Mercantile Public Register.
The main bodies of the corporation are:
The Shareholder's General Assembly, the maximum instance of the company.
The Board of Directors, that takes the necessary executive decisions for the company to carry out its social purpose.
The Corporation can be open. That is, its shares can be negotiated in the public stock market. But it can also be closed. That is, its shares are not negotiated in the public stock market. These type of companies are compelled to have an Auditor.
Which are the characteristics of the Limited Liability Companies?
It is incorporated by public deed before Notary Public.
It needs minimum two (2) partners and a maximum of twenty-five (25).
The social capital is divided in shares of the same value, not represented in titles.
At incorporation, the nominative initial capital has to be paid totally.
Any modifications to the by-laws, including the capital increase, has to be done through a public deed before Notary Public. The liability of the partners is limited to the value of the shares they own.
What requirements must a Corporation meet to be open, and in consequence, negotiate its shares in the public stock market?
It must have more than three hundred (300) shareholders.
None of the shareholders can own more than thirty percent (30%) of the company's circulating shares.
The stocks have to be registered in the Registro Nacional de Valores (National Value Register).
Who can issue shares?
Corporations and Limited Liability Companies.
Cooperatives.
Non-profit entities.
The Nation.
Public decentralized territorial and service entities.
Foreign governments.
Public and private foreign entities.
Multilateral credit organisms.
Branches of foreign societies.
Trusts.
Funds or Collective Portfolios whose legal regime allows the issue of shares.
What is needed to incorporate a branch office of a Foreign Company in Colombia?
To incorporate a branch office of a Foreign Company in Colombia it is needed: a certified copy of the documents of incorporation of the Parent Company (incorporation act, by-laws, good standing certificate, etc.), that prove the existence of the company; the legal capacity of its representatives and the act by which the company authorices the establishment of a branch office in Colombia.
Can the legal representative of a branch be a foreigner?
The legal representative of a branch of a Foreign Company can be a foreigner as long as the activities of the branch office pretended to be carried out in Colombia are not a public service or activities declared by the State as National Security Interest.
Should the legal representative of a branch office of a Foreign Company reside in Colombia?
Colombian law does not establish any limitation about this issue. If the legal representative is frequently absent or it is not possible for he (she) to be in the country, they can act through a substitute legal representative or through a power of attorney granted to a third party specially designated for that purpose.
Can a branch of a Foreign Company be a shareholder in Colombian Companies?
The legal concept of the branch is understood as the extension of the parent society (headquarter), therefore, the legal capacity of the branch is limited to the purpose for which it was openned. In other words, only natural persons and companies can be shareholders in Colombian companies, therefore the parent company or headquarter is the only entitled entity to be a shareholder of a Colombian company.
What does a foreigner need to incorporate a company in Colombia?
To have an attorney in Colombia, who can take care of the legal incorporation procedures of of the Company and Registration of the Foreign Investment before the Colombian Central Bank.
Which is the purpose of registering the Foreign Investment in Colombia?
The Registration of the Foreign Investment entitles the investor to certain money exchange rights that can allow the return abroad of all revenues produced by the investment. This is done before the Colombian Central Bank, directly or through an Intermediary (local bank), always with mediation of the investor or its representative in Colombia.
How is Foreign Investment registered in Colombia?
Usually, with the drafting and filling of a special form issued by the Colombian Central Bank (Form 4). This formality is done when the foreign currency has been deposited in Colombia through an Intermediary (local bank) or canalized through a Compensation bank account.
In the absence of the formality described above, the investor or its representative, can register the investment directly before the Colombian Central Bank, enclosing the necessary support documents.
What are the money exchange rights stated in the Colombian law?
The legitimacy to send abroad the net profit that the investment in Colombia produces.
To reinvest or retain the surplus of the non distributed profits, preserving the right to remit the money abroad.
To capitalize the capital gain that the investment generates without loosing the right to transfer them abroad.
When selling the total or partial investment, to send abroad the price of the sale in a free convertible currency.
Back to top ↑
We recommend the incorporation of a Simplified Joint Stock Company because the procedure for its incorporation in the legal system is easy and its laws are not as strict as the Corporations and Limited Liability Partnerships or Companies. However, it preserves the juridical security of other kind of associations established in the Colombian legislation.
Which are the benefits of a Simplified Joint Stock Company?
They are incorporated by means of a private document. Simplified Joint Stock Companies can be incorporated with any amount of capital. The shareholders are complied to pay the whole amount of the stocks issued in the two (2) following years of its incorporation; however, a minimum of a thirty per cent (30%) of the issued stock has to be paid at the moment of the incorporation of the company.
They can be incorporated with one or several shareholders who can be natural persons or companies.
Its duration is indefinite. These companies are not compelled, as other companies ruled by the Colombian Commerce Code, to specify the social purpose they will dedicate to. If such is not specified, it will be understood that the company can perform any licit commercial activity under Colombian legislation.
The Simplified Joint Stock Companies are not compelled to have all the administrative organs as the classic Corporations, governed by the Colombian Commerce Code, such as the Board of Directors and an Auditor.
They assure the confidentiality of the personal data of the shareholders, as these is not of public knowledge and does appear in any public record.
If the Simplified Joint Stock Company has only one shareholder, it can be, at the same time, its legal representative.
The Simplified Joint Stock Companies are not compelled to have an Auditor, unless it exceeds certain amount of its gross income.
The liability regime of the shareholders is limited to the amount of their contribution to the company. The fiscal and labor debts of the company do not threaten the individual assets and patrimony of the shareholder.
What other kind of companies can be recommended for incorporation in Colombia?
Corporations and Limited Liability Partnerships
Which are the characteristics of a Corporation?
It is incorporated by means of a public deed.
The social contract has to be executed by a minimum of five (5) shareholders. The capital is divided in nominative shares of the same value; however, preferent shares can also be issued.
When they are incorporated, a minimum portion of shares, equivalent to a fifty per cent (50%) of the authorized capital have to be subscribed. A minimum portion of the subscribed shares, equivalent to the third part, has to be paid. The outstanding balance has to be paid within the following year.
The shareholders are responsible for the amount of their contribution. By no means, one shareholder can be the owner of more than ninety-five per cent (95%) of the shares of the company.
The identity of the shareholders is reserved, confidential; it does not appear in the Mercantile Public Register.
The main bodies of the corporation are:
The Shareholder's General Assembly, the maximum instance of the company.
The Board of Directors, that takes the necessary executive decisions for the company to carry out its social purpose.
The Corporation can be open. That is, its shares can be negotiated in the public stock market. But it can also be closed. That is, its shares are not negotiated in the public stock market. These type of companies are compelled to have an Auditor.
Which are the characteristics of the Limited Liability Companies?
It is incorporated by public deed before Notary Public.
It needs minimum two (2) partners and a maximum of twenty-five (25).
The social capital is divided in shares of the same value, not represented in titles.
At incorporation, the nominative initial capital has to be paid totally.
Any modifications to the by-laws, including the capital increase, has to be done through a public deed before Notary Public. The liability of the partners is limited to the value of the shares they own.
What requirements must a Corporation meet to be open, and in consequence, negotiate its shares in the public stock market?
It must have more than three hundred (300) shareholders.
None of the shareholders can own more than thirty percent (30%) of the company's circulating shares.
The stocks have to be registered in the Registro Nacional de Valores (National Value Register).
Who can issue shares?
Corporations and Limited Liability Companies.
Cooperatives.
Non-profit entities.
The Nation.
Public decentralized territorial and service entities.
Foreign governments.
Public and private foreign entities.
Multilateral credit organisms.
Branches of foreign societies.
Trusts.
Funds or Collective Portfolios whose legal regime allows the issue of shares.
What is needed to incorporate a branch office of a Foreign Company in Colombia?
To incorporate a branch office of a Foreign Company in Colombia it is needed: a certified copy of the documents of incorporation of the Parent Company (incorporation act, by-laws, good standing certificate, etc.), that prove the existence of the company; the legal capacity of its representatives and the act by which the company authorices the establishment of a branch office in Colombia.
Can the legal representative of a branch be a foreigner?
The legal representative of a branch of a Foreign Company can be a foreigner as long as the activities of the branch office pretended to be carried out in Colombia are not a public service or activities declared by the State as National Security Interest.
Should the legal representative of a branch office of a Foreign Company reside in Colombia?
Colombian law does not establish any limitation about this issue. If the legal representative is frequently absent or it is not possible for he (she) to be in the country, they can act through a substitute legal representative or through a power of attorney granted to a third party specially designated for that purpose.
Can a branch of a Foreign Company be a shareholder in Colombian Companies?
The legal concept of the branch is understood as the extension of the parent society (headquarter), therefore, the legal capacity of the branch is limited to the purpose for which it was openned. In other words, only natural persons and companies can be shareholders in Colombian companies, therefore the parent company or headquarter is the only entitled entity to be a shareholder of a Colombian company.
What does a foreigner need to incorporate a company in Colombia?
To have an attorney in Colombia, who can take care of the legal incorporation procedures of of the Company and Registration of the Foreign Investment before the Colombian Central Bank.
Which is the purpose of registering the Foreign Investment in Colombia?
The Registration of the Foreign Investment entitles the investor to certain money exchange rights that can allow the return abroad of all revenues produced by the investment. This is done before the Colombian Central Bank, directly or through an Intermediary (local bank), always with mediation of the investor or its representative in Colombia.
How is Foreign Investment registered in Colombia?
Usually, with the drafting and filling of a special form issued by the Colombian Central Bank (Form 4). This formality is done when the foreign currency has been deposited in Colombia through an Intermediary (local bank) or canalized through a Compensation bank account.
In the absence of the formality described above, the investor or its representative, can register the investment directly before the Colombian Central Bank, enclosing the necessary support documents.
What are the money exchange rights stated in the Colombian law?
The legitimacy to send abroad the net profit that the investment in Colombia produces.
To reinvest or retain the surplus of the non distributed profits, preserving the right to remit the money abroad.
To capitalize the capital gain that the investment generates without loosing the right to transfer them abroad.
When selling the total or partial investment, to send abroad the price of the sale in a free convertible currency.
Back to top ↑