Waiver of economic rights... does it imply a donation?

On June 1, 2017, the Superintendence of Companies issued Official Letter 220-111369 by which it accepted a dangerous thesis according to which the waiver of economic rights in the capitalization of the equity revaluation implies a donation in favor of those who indirectly benefit from such act. The Superintendency established textually that "with respect to the capitalization of the equity revaluation account, the general shareholders' meeting has the power to approve it and, in turn, each shareholder may waive the (shares) corresponding to it as a result of the same, taking into account that it is a right of an economic nature, of free availability; however, since such waiver implies the economic favoring of a third party, whether this third party is a shareholder or not, it is an act of donation that must be formalized in the name of the donee(s)". In support of this position, the entity indicated that "(...) being an economic right in favor of the shareholder, the latter has the power to dispose of it, which includes the power to waive it, a situation that in the legal system cannot be conceived through a mechanism other than the donation (...)".

As indicated, this position is considered wrong and dangerous because it does not take into account the true nature of the legal act of donation and establishes a presumption (almost as a matter of law) in a factual assumption not contemplated by the law. This could lend itself to decontextualize certain corporate operations, which would make them unfeasible, not only from a tax point of view, but also from a corporate and civil point of view.

As established in Article 1443 of the Civil Code, a donation between living persons is an act by means of which a person transfers, free of charge and irrevocably, a part of its assets to another person who accepts it. According to article 1450 of the same body of law, the donation between living persons "is not presumed except in the cases expressly provided by law". Even the examples of the facts that do not constitute a donation provided by the Civil Code can be adapted to the situation presented today, keeping in mind that such examples date back to 1873 when it was clearly not known what the capitalization of the revaluation of the patrimony was, nor did the corporate and partnership law as such exist. Such examples of what does not constitute donation, established in articles 1451, 1452 and 1453 of the Civil Code, are the fact of repudiating an inheritance, legacy or donation, failing to comply with the condition to which a contingent right is subordinated even if it is done with the purpose of benefiting a third party, to give a good in gratuitous bailment even if it is customary to give it in lease, to agree on a loan without interest, to remit or assign the right to receive interest on a capital placed at interest or at a census, and to render gratuitous personal services even if they are of those that are ordinarily paid.

According to what has been established above, it is clear that the facts that the law excludes as constituting a donation can be applied by analogy to the situation under study, since there is not much difference between what two centuries ago implied repudiating an inheritance (which would naturally increase the right to receive from the other heirs) and what today implies repudiating the receipt of shares by virtue of the capitalization of the revaluation of the patrimony (which would naturally increase the right to receive from the other shareholders).

Since the acts constituting a donation cannot be presumed, except in the cases expressly indicated in the law, and the waiver to receive shares from the capitalization of the equity revaluation is not one of them, it is not legally viable to conclude that with this fact a donation can be configured.

If this thesis is accepted, it could begin to be considered that acts such as the asymmetric distribution of dividends, in relation to the shareholding that the shareholder has in a company (especially in an S.A.S.), would constitute a donation for those who have a shareholding in a company (especially in an S.A.S.). ), would constitute a donation for those who receive it, or that the waiver of the preemptive right, or simply the non-subscription of shares in a certain capitalization would constitute a donation for those who do or for those whose right to capitalize increases for such reason, or that the existence of shares without economic benefits (thesis recently endorsed by the Superintendence of Corporations through Official Communication 220-111526 of June 1, 2017) necessarily implies a donation for those who subscribe the shares that do have economic benefits.

The tax effects of the above (occasional profits), together with civil effects such as the need to make notarial insinuations every time a corporate operation is to be carried out, would imply a very serious setback in the normal course of corporate business in Colombia.