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challenge may be brought before the judge or arbitrator, as agreed by an arbitration clause in the bylaws, or before the Superintendency of Corporations (in the case of supervised companies). 5. Exchange regime compliance: All payments for capital contributions, for both the assigned capital of the branch and the subscribed and paid capital of the subsidiary, are considered a foreign direct investment and as such must be registered before the Central Bank under Form No. 4. This form must include information such as the company’s tax identification number, the legal representative’s information, the amount of money that is being transferred and exchange rate, among others. In the event funds are brought as debt they must also be registered before the Central Bank, but in this case under Forms No. 3 and 6. Form No. 6 is particularly used when the funds are brought as Contributions for future capitalizations. The profits and dividends to be distributed and thereafter paid to the parent company also need to be registered before the Central Bank, through the corresponding form. 6. Registration of situations of control and corporate groups a) Situation of control: Although there are no specific grounds for such situation, it is understood that a situation of control exists when more than 50% of the capital belongs to the parent company, directly or indirectly, regardless of whether they are local or foreign companies or a person; when the parent company has the right to cast the votes corresponding to the minimum decision- making majority; when it has the necessary votes to elect the majority of the members of the board of directors; or when the parent
company, directly or indirectly, and due to a business with the controlled company, is dominant in the decisions of the company's management (Articles 26 and 27 of Law 222 of 1995). b) Corporate group: If, in addition to the existence of a situation of control in a company, there is a unity of purpose among several controlled companies, that is to say, when they pursue the same objective that has been determined by the parent company or belong to the same industrial sector or are complementary, there will be a situation of corporate group. Both the situation of control and the situation of business group must be registered before the Chamber of Commerce within 30 days from the date of configuration of the situation. 7. Renewal of the commercial registration: Individuals and legal entities registered with the Chamber of Commerce must renew their commercial registration annually. This obligation is performed by filling out and submitting the corresponding commercial registration renewal form to the Chamber of Commerce of Bogota. The cost of the procedure depends on the value of the assets of the company or individual. It should be noted that failure to comply with the obligation to renew the commercial registration may result in financial penalties imposed by the Superintendence of Industry and Commerce. 8. Conclusions and Recommendations: In order to determine which mechanism is the best for establishing business in Colombia, the first consideration that shall be made is if the activities that will be executed are permanent or not. If they are, the foreign company should evaluate whether a branch or a subsidiary best suits the company’s purposes and structure.
ILN Corporate Group – Establishing a Business Entity Series
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