Financial and business regulations promote a healthy Colombian economy


The Central Bank of Colombia is the authority on matters of monetary policy and currency exchange. Under the constitution and foreign investment regulations, foreign investment in Colombia shall receive the same treatment as an investment made by Colombian nationals. The conditions for repatriation of foreign investment and remittance of profits in effect at the time the investment is registered may not be changed so as to adversely affect foreign investment. An exception may exist on a temporary basis when international reserves are lower than the value of three months’ worth of imports.

Foreign investments are permitted in all areas of the economy, with the exception of activities related to defence and national security, as well as the processing and disposal of toxic, dangerous or radioactive waste not generated in the country. A Colombian company may be 100% foreign-owned unless the law specifically limits the holding percentage for a particular activity. Current limitations apply to the areas of radio and television broadcasting.

Foreign investments in Colombia do not require prior government approval. The projects must, however, be registered with the central bank in order to guarantee the investor access to the foreign exchange market where her or she may purchase convertible currency to remit dividends and repatriate the investment. Failure to report or register could result in fines by pertinent agencies and could imply that the investor would have to rely on the open market for access to convertible currency.

Portfolio investments in Colombia must be made through a licensed portfolio manager. Such managers are responsible for representing the offshore investor and for complying with applicable tax, foreign exchange matters and regulatory obligations.

Exchange Regime

Colombia has a relatively relaxed approach to exchange controls. Residents may freely transact with non-residents in foreign currency, but as a general rule, payments between residents must be made in Colombian pesos.

Most foreign currency operations between residents and non-residents may be made through either the free market or through the exchange market through Colombian banks, some financial institutions and exchange houses. The exceptions, which must be transacted through the exchange market or by using registered offshore accounts, are the import and export of goods; foreign loans and earnings related thereto; foreign investments in Colombia and associated earnings; Colombian investments abroad and related earnings; financial investments in securities issued or assets located abroad; guarantees in foreign currency; and derivatives. Colombia regulations do not allow for the off-set of payment obligations resulting from these transactions, although netting and off-setting of derivatives is possible, subject to compliance of special conditions.

A special regime is available for domestic and foreign companies operating in the oil and natural gas sectors, as well as in the mining of coal, nickel and uranium. Under this regime, companies are allowed to denote transactions and receive payments in foreign currency. Conversely, they have limited access to the exchange market when wishing to acquire foreign currency, and branches of foreign entities cannot directly incur foreign debt.

Loans & Accounts

Colombian residents may obtain loans denoted in foreign currency from Colombian banks or from any overseas entity, and may use such currency for any legal purpose. The parties are free to agree on the terms and conditions of the loan. All foreign lenders must register with the central bank, either simultaneously with, or prior to, disbursement. The debtor, too, must register the foreign debt with the central bank. Direct inter-company loans are permitted, although overseas principal offices may not lend to their branches located in Colombia.

Colombian banks do not offer foreign currency accounts, but Colombian residents are allowed to maintain offshore accounts in foreign currency for all types of operations. If the account is used to perform controlled operations, it must be registered with the central bank as a compensation account and the movements of these accounts must be reported to the central bank and to the tax authorities on a monthly and quarterly basis, respectively.

Simplified Corporations

Colombian law provides a number of corporate structures suitable for foreign commercial enterprises wishing to establish permanent business activities in Colombia. Unless there are special reasons for a foreign entity to assume unlimited liability in Colombia, the most suitable way to carry out business in Colombia is to set up a subsidiary – either a simplified corporation, a corporation or a limited liability company – or a branch of a foreign company.

The simplified corporation (sociedad por acciones simplificada, SAS) is a type of company that is inspired by the limited liability model and is appropriate for large business groups, smaller single-owner operations and joint ventures as the rules are very flexible. However, this option is not available for banks, insurance companies or publicly traded companies, which must be established as traditional corporations.

A public deed is not required to establish a simplified corporation and fewer officers are required, which makes the process quicker and less costly. Given their flexible and streamlined structure, these simplified corporations have been very popular since their introduction in 2008.

The liability of shareholders is limited, in principle, to the amount of the capital contribution. A simplified corporation may have a single shareholder and all forms of shares and associated economic and/or voting rights are permitted. The capital structure is very similar to the traditional form of corporation and consists of authorised, subscribed and paid-in capital, but is more flexible. In general terms, there is no minimum capital requirement. No board of directors is required and the company may have a single manager so the number of officers can be kept to a minimum. A statutory auditor is not required until the company meets the asset and income thresholds set out in the law. These companies can have an unlimited duration and do not need to list specific corporate activities.

Traditional Corporations

The traditional form of corporation (sociedad anónima, SA) is another structure. Generally, corporations are legal entities incorporated to receive substantial capital contributions and allow for a large number of shareholders. To be incorporated, a corporation requires a minimum of five shareholders (either individuals or entities), and no shareholder may hold 95% or more of the corporation’s shares at any one time. Each shareholder’s liability is limited, in principle, to the amount of his or her particular capital contribution.

A public deed is required in order to set up a corporation and for any amendment to the bylaws. There is no minimum capital requirement. The capital of the corporation is divided into shares of equal value and classified as (a) authorised or stated capital; (b) subscribed capital; and (c) paid-in capital. The subscribed capital may never exceed the corporation’s authorised capital. Shares in a corporation are typically freely negotiable unless there is a right of first refusal provided for in the bylaws. A corporation must have a board of directors with at least three principal members and three alternates who are appointed by the shareholders, and must have a statutory auditor regardless of the value of its assets and income.

Limited Liability Companies

Traditionally, limited liability companies (sociedad de responsabilidad limitada, SRL) are used to incorporate businesses with a reduced number of owners and fewer capital movements than a corporation. Limited liability companies are chosen typically as special-purpose companies because they do not require a board of directors, so they are easier to run. However, the simplified corporation is gradually replacing the limited liability company because the former is easier to establish, has fewer formalities and has a more favourable liability regime.

The Employment Regime

An employment agreement will exist under Colombian law whenever an individual (employee) agrees to render a personal service in Colombia to another person or entity (employer) under continued subordination for remuneration (salary). This contract will apply even if the agreement is not in writing, the relationship is given another name, and/or parties have chosen the laws of another country to govern the relationship.

As a general rule, employers can terminate the employment agreement at any time, with our without cause. There are some specific circumstances where the employer cannot terminate the employment agreement without prior authorisation of the labour authorities; including the cases of pregnant women, those who are sick or disabled, employees who have filed labour harassment complaints and employees who are union representatives.


There is no legal provision establishing special salary levels, except for the minimum wage. For 2017, the minimum monthly wage is set at COP737,717 ($220). In principle, any payment that qualifies as salary must be taken into account when calculating the employment benefits payable to employees. Labour legislation allows the contracting parties to agree on certain regular or occasional non-statutory benefits, paid in cash or in kind, that do not directly seek to remunerate the services rendered and performed by the employee, and that does not constitute part of the salary of the employee.

Salary Arrangements

Colombian labour law allows two types of payment arrangements. First is the ordinary salary under which salary and mandatory benefits are paid separately. Second is the integral salary structure under which mandatory benefits are already included, pro rata, in the monthly salary payments. An integral salary arrangement must be agreed upon in writing and applies only to employees who earn more than 13 legal minimum salaries, as enumerated above. It not only compensates for ordinary services but also pays, in advance, all social benefits, allowances, overtime work, vacations and whatever other payment or benefit in money or in kind expressly identified in the agreement, which the employee would otherwise have received separately. It cannot, however, replace the payment of vacations and social security quotations.

Working Hours

Legal maximum working hours are eight hours per day and a total of 48 hours per week. Ordinary working hours may be set during daytime (between 6.01am and 10.00pm) or nighttime (between 10.01pm and 6.00am). Night-time work, as well as any work performed on Sundays and holidays, shall be remunerated by the employer with a special statutory surcharge.

Mandatory Benefits

Those mandatory benefits payable to employees earning an ordinary salary include annual unemployment aid, equivalent to 30 days of salary, that is deposited by the employer into an account designated by the employee as a unemployment aid fund. These funds are regulated by a financial entity authorised by the government to receive and administer such funds, and fund must be deposited no later than February 14 of each year. Interest on unemployment aid, equivalent to 12% of the unemployment aid, is payable directly to the employee. Semi-annual bonuses are another perk. They are equivalent to 15 days of salary payable to the employee on the last day of June and another 15 days of salary payable to the employee within the first 20 days of December of each year.

Other Benefits

Other employment benefits, irrespective of the method of payment or the form of salary include vacation days equivalent to 15 consecutive working days of paid rest for each year of service.

Social Security

Contributions to the social security system are done by both employers and employees. Payments beyond the legal limit that do not constitute salary are not included in the base for setting the amount of integral social security contributions. The minimum base for this is 60% of the total income earned by the employee, which means that only 40% of the total income may be excluded from the base. If the employee earns an integral salary the base is 70% of the amount agreed upon as integral salary. The base for contributions is capped at 25 minimum monthly wages ( approximately $5530).

Indemnities & Termination Payments

If an employee is terminated without one of the proven just causes expressly set forth in the law, the discharged employee is entitled to severance pay. For employees who earn a salary of less than 10 legal monthly minimum wages, 30 days of salary for the first year of services and 20 days of salary for every year after the first, and proportionally by fraction, is paid out.

For employees who earn a salary equal to or higher than 10 legal minimum wages receives payment of 20 days of salary for the first year of services and 15 days of salary for every year after the first, and proportionally by fraction. If the employer does not pay the employee all wages and social benefits to which he or she is entitled upon the termination of the employment agreement, the employer must pay one day’s salary for each day of delay.

Payroll Taxes

Employers must pay payroll taxes to the Family Compensation Bureau, the Institute of Family Welfare and the National Apprenticeship Institute that are equivalent in the aggregate to 9% of monthly gross payroll, excluding for the employees earning 10 minimum legal salaries or less.

Restrictive Trade Practices

Any agreement that has the purpose or the effect of restricting free competition is illegal. Price fixing, price discrimination, market allocation, non-compete agreements, restriction of technological developments and abuse of dominance are all seen as trade-restricting practices under the Colombian legal code.

Unfair Competition

The Colombian competition regime sets forth rules against dishonest or fraudulent practices between competitors within a given market. These include fraud, inappropriate solicitation, discrediting of competitors, misleading advertisements, misleading imitation of products or services, exploitation of third-party reputation, violation of privacy rights, tortuous interference, unfair advantages arising from the infringement of the law and unfair exclusivity agreements.

If the acts prohibited under the unfair competition provisions extend beyond the scope of a private party’s rights, affecting public interest as well, the competition authority may exercise its administrative powers and initiate an investigation to determine if such conducts are illegal under the Colombian competition regime. Collusion on tenders or bid-rigging are not only considered restrictive trade practices, but are also considered criminal felonies which could lead to a sentence of imprisonment time.

Merger Control

Any transaction resulting in an economic concentration between parties engaged in the same business activity or that play a role in the same value chain will be subject to merger control regulations. The concentration can be by way of acquisition, merger or any other transaction that leads to market consolidation. These transactions will require prior government approval if certain thresholds are exceeded, namely the combined turnover and assets of the joining parties.

When the thresholds are exceeded but the combined market share of the parties in the relevant market is below 20%, a simplified notification and expedited procedure is available. In such cases, the competition authority has 10 business days to confirm if the requirements for an implied approval are met or if the transaction needs to be subject to clearance via a full filing procedure. If the combined share of the parties is above 20% in the relevant market, the full filing procedure would be applicable.

This filing procedure can take between 30 business days and three months to reach a decision, depending on whether or not the competition authority deems that the operation requires an in-depth analysis. In practice, however, the term to approve or deny can extend considerably beyond three months, as the process only begins from the moment all relevant information has been submitted to the authority.

Dispute Resolution

The judiciary is independent of the legislative and executive branches in Colombia. There are several jurisdictions in the Colombian system including the constitutional jurisdiction; the administrative jurisdiction for State matters; and the ordinary jurisdiction for criminal, civil, commercial, labour, employment and family matters. There is also a special indigenous jurisdiction which settles disputes in accordance with traditional indigenous norms and proceedings, and courts of the peace justices which settle certain minor disputes in equity. In addition to the courts, certain administrative agencies have been granted judicial powers as well.

Most decisions may be appealed to the relevant superior court, where the largest claims issued in the ordinary jurisdiction can end up in the Supreme Court of Justice through an extraordinary remedy. As a general rule in civil and administrative matters, before turning to the courts, an attempt at an extrajudicial conciliation between the parties is required.


In 2012 Colombia enacted a new arbitration law. It provides a modern body of provisions, especially for international arbitration, where the law further develops the assistance given to local courts for arbitration proceedings of matters such as the appointment of arbitrators, the order or enforcement of interim measures, the gathering of evidence and the enforcement of the award.

It takes an average of one year to obtain an arbitration award in the country. Although there is no right to appeal an arbitration award in Colombia, the unsuccessful party may be entitled to an extraordinary remedy to request a high court to declare the award void in certain limited events.

The new arbitration law adopted the UNCITRAL Model Law with few modifications. This new law makes Colombia an attractive arbitration forum by providing the parties with modern and effective procedures to ensure the protection of their interests

Enforcement Of Foreign Judgments

Awards received in cases determined by foreign judiciaries require recognition in order to be enforceable in Colombia. This procedure has been simplified and is now entirely regulated by the arbitration law, which adopts the same standards and terms established by the New York Convention, with slight modifications.

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The Report: Colombia 2017

Legal Framework chapter from The Report: Colombia 2017

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