Currently, the institutions of transformation, merger, and split-off of companies are a topic that constantly creates concerns within a company, questions such as: what is transforming, merging, or splitting? how is it carried out?, or what are its implications and benefits? are just some of them. Likewise, the need arises to resolve the question of whether they are independent legal institutions or are part of each other. Law 1258 of 2008 creates the Simplified Stock Company (S.A.S.), in its Chapter V it establishes the provisions regarding statutory reforms and reorganization of the company, and its Article 31 indicates the possibility that they may transform before dissolution. According to the provisions of the law, the transformation of the company may be carried out when there is a unanimous decision of the assembly or partners' meeting, that is, with the agreement of all subscribed shares. Now, the requirement of unanimity of subscribed shares also applies in cases where there is a merger, split-off, or in general when a legal transaction involves the transition from a Simplified Stock Company to another type of company or vice versa. On the other hand, Law 222 of 1995 issues a new regime for insolvency proceedings, among which is the split-off process. From Article 3 and subsequent, it is established that there will be a split-off in any of the following cases: a) when a company without dissolving transfers a block or several parts of its assets to one or more existing companies or for the creation of one or more companies; and, b) when a company is dissolved, not yet liquidated, and the transfer of assets is carried out to several existing companies or for the creation of new ones. Thus, even though Law 1258 of 2008 expressly indicates that both the special laws contained herein and the rules regulating transformation, merger, and split-off together with Law 222 of 1995 will be applicable to Simplified Stock Companies, this "per se" does not imply that the split-off should be understood as a transformation. According to all the above, it can be evidenced that the split-off is the division of the corporate assets of a company into two or more parts to one or more companies that previously exist or that arise by virtue of this institution, as a consequence, the shareholders of the split-off company receive participation in the beneficiary companies. While the nature of the transformation is none other than the change of the corporate type, now, that change does not by itself imply the transfer of its assets. That said, it is concluded that if a company without dissolving, or that is dissolved without being liquidated, decides to transfer one or several parts of its assets to existing or created companies, a split-off operation is configured and not a transformation. Hence, it is understood that the split-off and the transformation are legal figures with a different nature and with opposite legal effects.
Prepared by: Valentina Peña. Consulting Attorney.