Official letter 220-137265 of 2018 Decrease of the additional investment to the assigned capital, does not require authorization of the Supersociedades

In this regard, it is noted that the concern about the exchange issue was answered by the Bank of the Republic, according to the attached communication identified with Rad. 2018-01-307263 of July 4, 2018. In turn with regard to the subject of sanctions, and this Office was pronounced in Official 230-121313 of August 3, 2018, where only remains to answer the concern about the authorization that would be for the reduction of investment supplementary to the assigned capital.

For that purpose, it is enough to refer to the concept issued in Oficio 220-0377410 February 4, 2009, which supports the current doctrine of the Superintendence regarding the issue:

“In order to clarify and sustain the final conclusions, the Office considers it appropriate to transcribe the section concerning authorizations, the explanatory statement that served as support for the issuance of Decree 2300 of 2008, by means of which the article 124 of the law 1116 of 2006, on the supervision of the branches of foreign companies and the approval of the inventory of the social patrimony, and other dispositions are dictated, like this:

“(…)”. “In point of the reduction of the assigned capital, it should be noted that the obligation of the branches to request authorization from the Superintendence of Companies derives from the provisions of article 487 of the Commercial Code, in which virtue the reduction of capital is subject to what is indicated in said ordinance, that is, to the provisions of article 145, in harmony with numeral 7 of article 86 of Law 222 of 1995, norms that indicate that the reduction of capital of Commercial companies, whether supervised or not, require authorization from the Superintendency of Companies, whenever the aforementioned operation involves an effective reimbursement of contributions.

This means that all branches of foreign companies have the obligation to request authorization from the aforementioned Superintendency to reduce their assigned capital. For these purposes, the numeral 1 of article 2 was included in the project, which expressly states that the reduction of the additional investment does not require authorization by the Superintendence of Companies.

This in order to eliminate the various interpretations that have occurred over the past few years as to whether the supplementary investment of the branches is part or not of the assigned capital, and if it should be given the same treatment as that capital , which has resulted in legal uncertainty on the subject, creating uncertainty for foreign investors as well as for lawyers, accountants, legal representatives, tax auditors, public officials and, in general, for all interested parties.

The legal reason for not considering the additional investment for the purposes of the capital decrease assigned referred to in article 487 of the Commercial Code, as well as for calculating the cause of termination of the business in Colombia of the branch referred to in Article 490 of the same Code, obeys to motivations that the Superintendence of Companies has previously considered. In this regard, it is sufficient to mention what was stated by the supervisory body in Oficio 340-060621 of December 3, 2002, namely:

“… when the Code of Commerce refers to the expression” Assigned Capital “, it does not include the currencies received from the parent company as an additional investment to the assigned capital, therefore, it is worth noting that the purpose of the supplementary investment account assigned capital, is to provide the parent company with the channeling of its resources that it sends to the branch in Colombia, in order to carry out its operations.

In short, in the face of concern, related to the scope of the paragraph of Article 151 of the Commercial Code, which establishes that for all legal purposes it will be understood that the losses affect the capital when, as a consequence thereof, the net equity is reduced by below the amount of said capital, it is considered that it also applies in the application of article 490 of the aforementioned Code, by remission of article 497 inasmuch as, as in a national company, the occurrence of losses affecting capital by exceeding the limits indicated in relation to their assets, they place it in a cause of dissolution, in the case of a branch of a foreign company the same thing occurs, for which it must be borne in mind that it is the assigned capital, as expressly stated in the standard, it is say, without including the additional investment. ”

And it was, based on the above legal reasons, that the legislator included in Decree 2300 of 2008, clearly and exhaustively the following article:

“ARTICLE 2.- The general agents of all branches of foreign companies must:

1 Request from the Superintendence of Companies authorization to reduce the assigned capital. It will not require this authorization to decrease the additional investment to the assigned capital.

2 Notify the Superintendence of Companies of the decrease in the assets of the branch below 50% of the assigned capital, on the occasion of the losses that may have originated this circumstance.

3 Communicate the occurrence of any of the causes of surveillance enshrined in this decree, within the month following the occurrence of the same …

Paragraph In any case, the branch may not make the reduction of the additional investment to the assigned capital referred to in numeral 1 of this article, if as a result of it is incurred in the cause provided in Article 490 of the Commercial Code “

Based on the foregoing, it is concluded:

When the legislator disposes through numeral 1 of article 2 of the aforementioned decree 2300 of 2008, that for the reduction of the assigned capital IF the authorization referred to in article 145 of the Commercial Code is necessary and that for the reduction of the supplementary investment such capital is NOT required such authorization, clearly distinguished that the supplementary investment is not part of the assigned capital.

The branches of foreign companies, subject or not to the supervision of the Superintendence of Companies do NOT require authorization from said Entity, to make the reduction of the additional investment (numeral first article 2 of Decree 2300 of 2008). The protection of creditors, especially labor obligations, is enshrined in the prohibition provided by the legislator in the paragraph of Article 2 of the aforementioned Decree 2300 of 2008, by ordering that branches of foreign companies may not make the reduction of the additional investment to the assigned capital in the events in which the capital assigned to the branch decreases by fifty percent (50%) or more, article 490 of the Commercial Code.

Prohibition that should be understood as the substitution of the authorizations that both the Superintendency of Companies and the Ministry of Social Protection have been advocating in these events. So things and, as it is clear, both normatively and doctrinally that the supplementary investment is not part of the assigned capital, and the powers granted to the different State Bodies referred to in Article 145 of the Commercial Code, regarding the branches of foreign companies, refer to the reduction of assigned capital, it is not legally feasible to attribute competence to require the administrators to request authorizations in cases in which the branches of foreign companies intend to reduce the additional investment to the assigned capital, based on the mentioned article 145 idem. In the previous terms, your request has been answered within the term and with the effects contemplated in articles 14 and 28 of the Code of Administrative Procedure and Administrative Litigation.