termination; (iv) Capital Contributions (v) Corporate bodies: at least a Legal Representative (vi) Designation of an auditor, only if the assets or income of the company exceeds the limits established by law, which were mentioned above. In this case there is no minimum or maximum of shareholders required. This corporate structure foresees the possibility of having only one (1) shareholder. The liability of shareholders is limited to the amount of their capital contributions, which is represented by shares. The capital once again is divided into the same three categories mentioned above. It will be divided into shares of equal value. In this particular case, there are no limits imposed on capital ratios in order for shareholders to subscribe and pay it. However, a deadline is imposed regarding the payment of subscribed shares, for which they must be fully paid in the term of two (2) years following the incorporation. This is an advantage offered by this type of corporation, as it provides a generous window for the payment of capital contributions. Regarding the dividend distribution, in this type of corporations, freedom will be the general rule. It is permitted to establish in the bylaws of the corporation the rules that shareholders consider should apply for dividend distributions. For example, shareholders may stipulate that there will be no dividend distributions. In these types of corporations there is no legal obligation to create legal reserves. Finally, Colombian provisions have established that in the event of absence of regulation regarding any subject for this type of corporations, one must apply the regulations set forward for Corporations (Sociedad Anonima.)

4. Minority shareholders’ rights and protection: In addition to the legal protections already established in the commercial legislation, such as the right of inspection, the requirement to make certain decisions with a plurality of partners, and the existence of the right of withdrawal or qualified majorities for certain key decisions at the general meeting of shareholders, the commercial legislation brings several protection measures for minority shareholders if their rights are considered violated by the controlling shareholder. Article 87 of Law 222 of 1995, establishes the possibility for shareholders or associates that represent not less than 10% of the share capital, or any of its administrators of companies, sole proprietorships or branches of foreign companies that as of December 31 of the immediately preceding year register a number of income or assets established by law, to request the Superintendency of Companies to reform the clauses of the bylaws that violate legal norms, as well as the practice of administrative investigations when they are presented irregularities or legal or statutory violations. Companies that do not comply with the requirements related to the assets, can resort to the dispute resolution method of conciliation before the Superintendency of Corporations to resolve the conflicts which arise between the associates, or between them and the society. However, any of these implies fulfilling a procedure and a series of additional requirements. Likewise, in accordance with the provisions of article 191 of the Commercial Code, administrators, fiscal reviewers and absent or dissident partners may challenge the decisions of the assembly or the board of partners which are product of the abuse of legal or statutory powers of the highest social body. Said

ILN Corporate Group – Establishing a Business Entity Series

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