3. Elements of a Subsidiary Company For the establishment of a subsidiary company, the investor must choose the appropriate corporate form. Colombian provisions establish several forms of association. However, it is common for foreign investors to take the form of a limited liability company, a simplified shareholding company or a corporation as a mechanism for their activities in Colombia. Nonetheless, for tax purposes abroad, sometimes investors prefer to adopt corporate forms that relate to collective associations, such as the "company limited by shares" (Sociedad en comandita por acciones). The incorporation process of a company in Colombia is similar for all types of companies. Entities are constituted by public deed or private document, and they form a legal entity independent of its associates. The document of incorporation must include the type of company that is being constituted, its name, its domicile, a description of the company’s purpose and activities to be developed, the amount of social capital, the administrative organs of the entity with their respective faculties, how profits will be distributed, its term of duration, which dispute resolution mechanism is established, among others. Also, said document must come with apostille in case the shareholders do not reside in the country, and must be accompanied by a copy of the identity documents of the shareholders and the people that will be appointed in the management and legal representation positions of the entity. Likewise, some forms shall be submitted and signed by the person who will be appointed as the legal representative. The entities that are constituted must be registered before the Chamber of Commerce with jurisdiction in the place agreed as registered office and the act of creation must

be registered in the corresponding Commercial Registry. Furthermore, a tax registration before the National Direction of Tax and Customs must be made, in order to obtain the company’s tax identification number. It is important to mention that there are no specific requirements in order to be shareholder or director, however, the creation of an entity implies the signing of the social contract (incorporation document), therefore shareholders or directors must be legally able to consent to be bound, that is, to be able to obligate by themselves, under the terms of article 1502 of Colombian Civil Code. Finally, there are no specific restrictions for foreign citizens to establish companies in Colombia. However, it is necessary to consider that if they are going to perform functions in the company, which would imply residing within the Colombian territory, a study of each particular situation should be done to determine what type of visa they require, whether a work visa or visa of owner partner, depending on the situation. However, it is not required under Colombian legislation that shareholders and / or legal representatives of companies reside in the country. Now, the main characteristics of each type of corporate entities are described below. (i) Corporation (Sociedad Anónima – S.A) Under Colombian provisions, the establishment of a corporation will require the assignment of the following elements: (i) the purpose of the company which in Colombia is known as “objeto social;” (ii) the domicile of the company; (iii) the term of duration and the causes for termination; (iv) Capital Contributions (v) Corporate bodies: Board of Directors and Legal Representative; (vi) Designation of an auditor.

ILN Corporate Group – Establishing a Business Entity Series

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