Corporations “S.A.” must be created with at least five (5) shareholders, none of which may own ninety-five percent (95%) or more of the share capital at a single time. The liability of shareholders is limited to the amount of their capital contributions, which is represented by shares. The capital of the Corporation is divided into shares of equal value and is classified into three categories: (i) Authorized or stated capital which represents the total number of subscribed shares plus the number of shares that are in reserve, if any. (ii) Subscribed capital, which represents the shares that have been issued to the shareholders and may never exceed the corporation’s authorized capital. Any issuance of shares over and above the authorized capital requires a prior increase in authorized capital by an amendment to the bylaws. (ii) Paid-in capital, which represents the shares paid by the shareholders. Upon incorporation of a Corporation, at least 50% of the authorized capital must be subscribed, and at least one- third of the value of the issued shares must be paid. The remainder must be paid within a one-year period. Further increases of authorized capital do not require subscription of any particular percentage of capital. At the ordinary annual general meeting, the board of directors submits the financial statements of the Corporation for the previous fiscal year to the shareholders for approval. Once the board has approved the financial statements, the shareholders determine the allocation of the Corporation’s distributable profits, if any, for the preceding year. Ten percent (10%) of the corporation’s net profits must be allocated to a legal reserve until such reserve reaches an amount equal to at least 50% of the subscribed capital of the

Corporation. The remainder of the net profits if any, is allocated as determined in the bylaws or by the shareholders and may be distributed as dividends. The corporation must distribute as dividend at least 50% of its annual profits, unless at least 78% of the shareholders vote otherwise. If the total amount of all the reserves of the Corporation exceeds the Corporation’s outstanding capital, it must distribute 70% of its annual profits. No dividends shall be distributed if previous losses that affect the capital have not been met. The dividend payment will be in cash, however, the dividend may be paid in the form of bonus shares of the same company, if so provided by decision of the general assembly by a vote of no less than eighty percent of the shares represented. (ii) Company Limited by Shares (Sociedad en comandita por acciones) Under Colombian provisions, the establishment of a Company Limited by Shares 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: Legal Representative; (vi) Designation of an auditor. This type of structure has two groups of partners: managers and limited partners. Managers are responsible for the administration of the entity, while the limited partners make capital contributions in order to finance the needs of the entity. The managing partners are jointly responsible for the operations of the company, while the liability of limited partners is limited to the sum of its corporate contributions.

ILN Corporate Group – Establishing a Business Entity Series

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