Law 2069 of 2020, better known as the Entrepreneurship Law, introduced several modifications and additions of prerogatives aimed at business viability, the promotion of small and medium-sized enterprises (SMEs), and the entrepreneurial sector, creation and expansion of entrepreneurship funds through state financing mechanisms, greater controls over chambers of commerce, tax benefits, accounting management under the going concern assumption, among others, which allows for better business and social performance in the face of the economic crisis generated by the COVID-19 pandemic. However, in this article we will review the following aspects:
- Grounds for dissolution due to non-compliance with the going concern assumption.
- Call and deliberation of ordinary and extraordinary meetings.
- Facilities for entrepreneurship.
Grounds for dissolution due to non-compliance with the going concern assumption.
Article 4 of the Entrepreneurship Law introduces as a ground for dissolution of companies in Colombia the non-compliance with the going concern assumption. But what is the “going concern assumption”? It shall be understood as the evaluation of the company's ability to generate profits and its operational capacity based on the financial statements and projections made over the last twelve months, since it will depend on whether the company is in a situation of insolvency, either due to cessation of payments or dissolution and liquidation thereof, or if, on the contrary, the company is viable, producing profits to a greater or lesser extent and maintaining and generating employment.
In the event that the evaluation of financial statements results in a negative situation for the company, the administrators and other similar personnel must refrain from carrying out operations other than those of the corporate purpose, and additionally, the highest corporate bodies must be convened in order to study the negative situation and propose formulas for its financial and administrative improvement, under penalty of being jointly and severally liable to the partners and third parties for the damages caused by non-compliance with this obligation, which is now of a legal nature.
From the foregoing, several obligations can be derived.
- It is the duty of companies to take into account the going concern assumption at the end of the 12-month accounting period.
- If the company is in an economic crisis, administrators must only carry out activities within the ordinary course of business.
- In addition to the above, a meeting of the highest corporate bodies must be called to discuss the economic crisis.
And in case of non-compliance with the above, administrators will be jointly and severally liable for damages caused to third parties and even to the partners themselves. This situation is practically an addition to the liability regime for administrators of Article 200 of the Commercial Code, given that administrators will also be jointly and severally and unlimitedly liable for the following cases:
- Damages caused to the company, partners, or third parties due to fraud or fault, unless they were unaware of the action or omission or voted against in the decisions requiring a vote.
- When they carry out activities outside the ordinary course of business of the company or exceed their functions.
- When the distribution of profits is executed without being justified by real and reliable balance sheets, in which case they will be liable for the amounts not distributed or distributed in excess and for the damages.
Therefore, it is imperative that administrators, in the exercise of their functions, work hand in hand with accountants and statutory auditors to strictly comply with this parameter, keeping a record of the company's situation, ideas for its improvement, approving the financial statements, etc., and the respective situations at meetings of shareholders' or partners' assemblies, in order to keep their liability clear and free from any circumstance that could lead them to be jointly and severally liable.
Call and deliberation of ordinary and extraordinary meetings.
In this second topic, we find it in Article 6 of the Entrepreneurship Law, which provides a legal basis that answers all the uncertainties left by the quarantine generated by COVID-19 in the case of ordinary and extraordinary meetings of companies. This law expands the way they are carried out given the background left by the quarantine and the flexibility that the use of ICT allows us. This article brings us the following modification:
- It may be requested by a number of partners representing 10% or more of the share capital.
- A transitory paragraph is added indicating that this article will be subject to changes that the government makes to face circumstances of fortuitous event, force majeure, public order, etc.
Entrepreneurship facilities.
Article 70 indicates that the Superintendence of Companies will exercise inspection, surveillance, and control over the chambers of commerce, mainly on the following matters:
- The Superintendence of Companies will determine the necessary books to carry out this activity.
- The Superintendence of Companies will impose fines of up to 17 current monthly minimum wages for persons who engage in commerce without being registered in the commercial registry.
- Appeals filed in registration procedures against the chamber of commerce will be heard by the Superintendence of Companies.
- In addition to the above, any situation of a superior or hierarchical nature will be heard by the Superintendence of Companies.
- It will establish the fee or contribution for the administrative supervision service that chambers of commerce must pay to the Superintendence of Companies.
This change of supervisory and hierarchical entity in charge of the chambers of commerce is quite important, since it is the Superintendence of Companies that is the knowledgeable, expert, and obligated entity to supervise, control, and inspect companies in Colombia, having extensive knowledge about the documents necessary to carry out this management in a transparent and agile manner, regarding the decisions of company registrations for any type of procedure, and also imposing fines on those commercial professionals who are not registered as such, given that it is precisely the chambers of commerce and the Superintendence of Companies that are the entities in charge of their registration and surveillance in order to have a commercial environment observed and regulated by the Colombian legal framework from the perspective of private law freedoms.
This law has brought a variety of regulations in corporate and entrepreneurship matters in order to activate the national economy in various ways, but without neglecting the legal, administrative, and accounting controls in charge of social bodies and the State to guarantee an economic resurgence in a legal and transparent manner in light of the social reality and the Colombian legal framework.
Author: Luis Carlos Ramírez Satizábal. – Consulting Attorney