The Covid-19 pandemic generated a series of events or crises that led to a reassessment of various economic, administrative, and legal situations throughout society. In Colombia, various measures were implemented to address the consequences that arose on a daily basis, and especially the direct effect on the country's economy. This led to the establishment of agile legal processes through Decree-Laws, in order to safeguard the internal economy and provide all entrepreneurs with a lifeline to continue their businesses, without having to resort to an unexpected closure, or, failing that, to ensure that the closure of the company was agile enough to pay off debts, return its assets to the normal flow of the market, and reactivate commerce within the sector where it operates.
These regulations that implemented agile economic insolvency processes are mainly divided into two: Decree 560 of April 2020 and Decree 772 of June 2020, which gave rise to the Emergency Negotiation processes, the Business Recovery Procedure before the Chambers of Commerce, abbreviated Reorganization, and simplified Liquidation, and also brought mechanisms for debt payment and tax relief, in addition to allowing precautionary measures to be ordered before the Superintendence of Companies, enabling the recovery of those rights and assets that were seized and/or sequestered, and preventing new proceedings from being initiated for the same debts.
These processes, broadly speaking, determined that the negotiation of the same had a maximum duration of three months, as well as simplified the procedures found in Law 1116 of 2006, and decisions are made in a single hearing. Payments of obligations for administrative expenses (debts incurred after the date of admission to these processes) could be deferred. However, it is not permitted to suspend payments of salaries, parafiscal contributions, or obligations of the social security system. Small claims, which represent 5% of the total graduated and classified liability, may be paid within the emergency negotiation without the need for prior authorization, as was required under Law 1116 of 2006.
On the other hand, in tax matters, each decree contemplated different settlement formulas, which included exemption from the payment of withholding or self-withholding at the source on account of income tax for the 2020 tax year. A 50% VAT withholding was applied on the acquisition of goods or services, and the calculation of presumptive income for 2020 was exempted, among others.
The aforementioned procedures have allowed, according to figures from the Superintendence of Companies, 2,081 applications for admission to processes under Decree 772 of 2020 (abbreviated Reorganization and simplified Liquidation) and approximately 528 applications for admission to processes under Decree 560 of 2020 (emergency negotiation). However, since their creation, these processes have had a specific purpose, which is to address the economic crisis derived from the measures taken by the national government to confront the Covid-19 pandemic, and therefore their validity was subject to two years from their promulgation.
However, due to the fact that the impact of the Covid-19 pandemic was of such magnitude both globally and nationally, and that companies throughout the country have embraced the aforementioned procedures with positive effects, the government, through Article 96, second paragraph, of Law 2277 of 2022 (tax reform), extended the validity of the regulation until December 31, 2023, hoping that within that term economic reactivation will continue, reducing the damage caused by the economic crisis.
Luis Carlos Ramirez. – AZC CONSULTING ATTORNEY