Doctrine with respect to the payment of dividends in kind

This doctrinal line began with the issuance of Official Letter 220-031783 of February 20, 2011 in which the Superintendency stated, in a pure and simple manner, that "(...) the general rule for the distribution of dividends has provided for payment in kind, in shares, however, in the opinion of this Office it is possible to make the payment in goods in kind, other than shares, provided that the shareholders expressly accept that they be given an asset other than cash and that the assembly when determining the dividend has provided for this possibility for the payment". This doctrine was reiterated by Official Notices 220-143915 of October 18, 2013, and 220-180473 of November 4, 2014 issued by said entity.

In response to this thesis, other State entities adapted their internal procedures to make it effective. Thus, the Banco de la República, through Official Letter JDS 2153 of February 4, 2015, indicated how the exchange procedure applicable to this operation should be carried out, as established in the External Regulatory Circular DCIN 83, for branches of foreign companies that distribute profits in kind to their parent companies, which applied -mutatis mutandis- to companies that pay profits in kind to their shareholders abroad.

In Oficio 220-111374 of August 25, 2015, the Superintendency began to condition the application of this thesis to the management submitting a prior study on the convenience and evaluating whether it would have an impact on the general pledge of creditors and established that the payment of the dividend in kind "under no point of view can affect the assets that generate income to the legal ante, attending that first the economic interests of the company must be safeguarded".

These conditions were foreign to corporate law, since they did not arise from any legal rule. However, the Superintendency, in Official Communication 220-063775 of April 13, 2016, disregarding the impact that this could have for those who - by virtue of the principle of legitimate trust - followed its doctrine, abruptly and untimely changed the thesis on distribution of dividends in kind that it had held for more than five years.

In the Oficio, it answered a question formulated by a citizen as to whether a Colombian company could pay a dividend to its Colombian shareholders through the substitution of an investment that such paying company had abroad and that was duly registered in the Banco de la República. In response to this, the Superintendency indicated that "(...) it is clear that exceptionally the dividend may be paid not in money but in shares, in which case the legislator was explicit in expressing that this could be done with shares of the same company; therefore, the company could not pay the dividend to a shareholder with the contributions it has as an investment abroad". It then indicated that, from the exchange point of view, it is not possible to make the substitution of the investment between the paying company and the Colombian shareholder who would receive the foreign species as dividend, which is inaccurate since it would be a simple change of owner of the Colombian investment, which is clearly allowed by the exchange regulation.

In this way, the Superintendence of Corporations changes a doctrine that seemed peaceful and that led many businessmen to carry out operations under the belief that it would be respected.