NEW SIMPLIFIED COMPANY BY STOCKS – SCS

To increase the competitiveness of the Colombian market, the Colombian parliament issued in December 2008 a law, which provides a quick and simple establishment of a new legal entity SIMPLIFIED COMPANY BY STOCKS. For many corporations in Colombia this new SCS is a welcomed simple and safe legal entity, in which ancient societies can be transformed without problems (SCS transformation).

One of the major advantages is that the statutes of the simplified companies by stocks SCS can be structured more freely in accordance with the wishes of each stockholder. Also new and very flexible is that the SCS can belong to a single stockholder, this is, a Corporation of one
person, but of course the SCS may also have multiple stockholders. The most important advantage is the limitation of liability as described in detail below.

The other benefits include, among others, the possibility of establishing the company in a quick and extraordinary way. The most important advantages are briefly  described below:

Establishment of the company

The Simplified Company by Stocks SCS can be established by only one or more natural or legal persons.

One can establish the Company through a private document or if required, through a document certified by a notary. Notarial deed is only required, if, for example, there are real estates being part of the company’s capital, as the transfer (in relation to the real estate) requires notarial legalization

The capital can be paid within the first (2) two years. Previously in the Corporations by shares 1/3 of the total capital had to be paid in at the beginning and the other part within the first year.

Responsibility

The stockholders of this new type of companies basically respond only up to their social contribution. This seems to be normal mainly in capital companies, but for companies with limited liability (limited – Ltd.) there are two exceptions in the law that are the personal responsibility of stockholders for labour and tax debts.

Now, the new law clearly establishes that in SCS a personal or direct liability of the stockholders for labour, tax or other obligations pertaining to the society is not possible.

The contributions of each stockholder and to which amount they are responsible are at their own judgement; there are no requirements for this type of companies. A personal liability of stockholders is only taken into account if they are involved in relevant penal crimes.

From a fiscal point of view, the applicable regulations are those of a Corporation by Shares.

Representation of the company

If the company is formed only by one person, then this person is in turn the representation of the company in legal and commercial relations. The Simplified Company by Stocks SCS may, but is not obliged to have a board of directors.

Another innovation is that most of the SCS are not subject to review by a fiscal auditor, they only require an independent accountant who makes balances at the end of the year. In larger SCS companies, depending on the economic situation, a fiscal auditor is required by law and makes sense.

Limitation in the stock market

A participation of the company in the stock market and in the official exchange rate is not possible.