Shares without par value: a viable alternative in S.A.S.

This is where the subject of the reference is born: shares without par value. Although at first sight, such phrase would not seem to make sense (it would not seem understandable that a share could exist without par value), it does, and very much so. Thus, the Republic of Panama, in Law 32 of 1927 - Art. 22, allows the creation and issuance of shares without par value, provided that in its articles of incorporation it is stated: "(1) The total amount of shares that the corporation may issue, (2) The amount of shares with par value -if any- and the value of each one, (3) The amount of shares without par value" as well as a statement that the capital stock will be at least equal to the total amount represented by the shares with par value, plus a determined amount with respect to each share without par value that is issued and the amounts that from time to time are incorporated to the capital stock by resolution of the Board of Directors. 

In the Colombian regulations there is, for S.A.'s, but not for S.A.S., a capital stock. - but not for S.A.S.s-, there is a strict regulation regarding how the capital must be composed. In this sense, Article 375 of the Corporations Code establishes that "The capital of the corporation shall be divided into shares of equal value which shall be represented in negotiable instruments" and Article 376 paragraph 2 establishes that "when disclosing the authorized capital, the amount of the subscribed and paid-in capital must be indicated at the same time". On the contrary, in the case of the S.A.S., its creation law only establishes, in Article 9, that the subscription and payment of capital may be made under conditions and terms different from those provided for in the rules contemplated in the Code of Commerce and that in no case -when it is to be made- may it be made in a term longer than 2 years. Likewise, the rule for the creation of the S.A.S. establishes a non-exhaustive list of the classes and series of shares that may be created, and mentions, among others, preferred shares, shares with preferential dividend and without voting rights, shares with fixed annual dividend and payment shares. Therefore, in the absence of an imperative rule prohibiting it -as it exists in the S.A.S.-, nothing prevents, strictly speaking, the S.A.S. from creating and issuing shares without par value.

Now, having concluded the feasibility of doing so, it is pertinent to study when it is convenient or useful to implement this measure. The creation and issuance of shares without par value is an attractive option for companies that do not want to incur in the costs of creating and issuing shares with par value (registration taxes caused on the occasion of the capital increase subscribed) or that do not want, in doing so, to start the countdown that the law foresees to be able to subscribe them. This measure is interesting for companies that: (a) want to prepare future issuances on which the terms and conditions (par value and additional paid-in capital) have not been determined, (b) want to prepare future capitalizations of claims on which the terms and conditions of capitalization (value of capitalizable debt and component that can be taken to the additional paid-in capital account) have not been determined, and (c) they want to implement the strategy of share democratization among employees of the company, established in Article 44 of Law 789 of 2002, according to which, "the profits that are distributed through shares will not be taxed with income tax to the employer, up to the equivalent of 10% of the profit generated".