During the past years, cross border operations regarding mergers and spin offs between companies from around the world have increased considerably. As a result of globalization, these procedures in Colombia have become a common interest figure for companies and investors worldwide, as the operations regarding international mergers and acquisitions have become a very important part of the international economic relations. Consequently, it is important to take into account the general procedure as well as the most important issues that must be taken into consideration whenever a merger or spin off involving a Colombian company takes place.
Colombian law does not specifically regulate the procedure to carry out international mergers or spin offs. However, the entity that controls companies in Colombia known as the "Superintendencia de Sociedades" (hereinafter, the "Superintendency of Companies"), has ruled these procedures throughout the issuance of concepts and rulings. Although these operations are not established under any specific law, they have been carried out in the country throughout the Superintendency rulings and concepts. In this regard, the Superintendency expressed in different concepts that an international merger or spin off is possible when a Colombian company is involved. At this point, it is important to bear in mind that these mergers or spin offs are afforded tax-free treatment in Colombia.
As a general principle, in order to formalize a merger or a spin off involving a Colombian company, an authorization prior to the operation must be requested before the Superintendency of Companies. It is important to bear in mind that the authorization regime applies only to those companies that in accordance with the Colombian law are supervised by the Superintendency of Companies.
However, throughout an external ruling of 2007, the Superintendency of Companies established a regime of general authorization for mergers and spin offs. By means of this ruling, the entity established the possibility for companies involved in these types of operations to carry out the merger or spin off without being obliged to request any prior authorization. The above mentioned means that in accordance with this ruling, there are two different procedures for mergers and spin offs involving Colombian companies supervised by the Superintendency, that is to say that certain operations require a prior authorization and some others will benefit from an automatic authorization regime.
For those cases where the automatic authorization applies, the company must prepare some documents and inform publicly that the merger or spin off will take place. These documents may be requested at any time by the Superintendency. This regime is based upon the principles of "transparency" and "full- disclosure" correspondent to the right that the interested parties have to be informed that the operation is taking place. The Colombian law considers as interested parties the companies involved in the merge or spin off, its shareholders and other entities that may have control over the Colombian company involved in the operation, as well as any other creditor.
The documents that are required to be prepared and published are listed under section two of the mentioned ruling and they basically consist on information necessary to acknowledge the conditions of the operation, including the financial statements, balance sheet, valuation of the assets, list of lawsuits in which the company is involved, and an advertisement in a national newspaper informing the public about the merger or spin off operation, among others.
Creditors must as well be informed, and the Superintendency provides a period of thirty working days so that any interested creditor may review the documentation of the companies involved in the operation.
It is important to bear in mind that after this procedure has been completed, the company must send to the Superintendency of companies the document evidencing the legalization of the international merger or spin off.
In this regard, it is important to take into account that international mergers or spin offs may also apply to the general authorization procedure in those cases where the absorbed company is a foreign company or the resultant spin off company is Colombian.
On the other hand, the ruling expressly demands that when the absorbed company is Colombian or the resultant spin off company is a foreign company, the general authorization regime will not apply, therefore, the company will have to request a prior authorization before the Superintendency of companies. Furthermore, the Superintendency has concluded that when the Colombian company is absorbed, the foreign company will require to incorporate a branch in Colombia in order to carry on with the activities and corporate purpose of the absorbed company.
Consequently, we may conclude that international mergers or spin offs are operations that may be carried out in accordance with the Colombian rulings, but they require a special procedure either through the general authorization regime, or through the prior authorization, depending whether the absorbed company or the company resultant from the spin is a Colombian company or a company abroad.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
