Being a minority shareholder in Colombia

Some decades ago my father, Ignacio Sanín Bernal, used to warn his students: "In corporations, the least; never as a minority and never within a business group". Today the world has changed and so has Colombia. Contrary to what happened at that time, minority shareholders are today an interest group that enjoys special protection under the law and special sympathy from the judicial authorities. The idea of this article is to analyze, succinctly, the status of minority shareholder protection today, both in closely-held companies and in companies whose shares are listed on the Stock Exchange.

As I explained in the recent forum on 'Compliance, Corporate Governance and Business Criminal Law' (which was organized by the Universidad del Atlántico and included speakers of the stature of Mario Spangenberg and Susana Rubinstein), Colombian corporate law has generated a series of norms and standards that have tacitly created a Statute for the Protection of the Minority Shareholder.

While some rules for the protection of minority shareholders date back to 1971 (such as the prohibition for companies to have commercial relations with parties related to securities other than the commercial one -C. de Co. Art. 264-), others date back to 2008 (such as the granting of a veto to the minority shareholder to be associated, by transformation or spin-off, in a S. A.S.), others from 2011 (such as the one that creates the criminal types of disloyal administration and private corruption, Law 1474/2011) and others from 2020 (such as the one that lowers the threshold to request the call for an extraordinary meeting of partners or shareholders to 10% of the capital stock or subscribed capital of the company, Law 2069/2020 Art. 6).

In turn, as Colombia is a member of the OECD, the Corporate Governance recommendations of this organization have generated reform currents in corporate compliance and good practices which have directly benefited minority shareholders. Today, most of the closed companies are obliged to report their business practices (report 42), their systems to combat money laundering (report 50) and their Business Ethics and Transparency Programs (report 52). Likewise, these standards have influenced how judges perceive and facilitate the possibility for minority shareholders to enforce their rights in court.

Now, in publicly listed companies, the standard of protection is even higher, as corporate rules converge with the rules of transparency and protection of investors in the stock market. Thus, while corporate rules abolish statutory majorities other than those required by law (Law 222/95 Art. 68), those of the stock market allow the use of mechanisms other than the electoral quotient to elect the boards of directors as long as it favors the minority, set minimum prices based on technical studies to carry out capital increases, establish mandatory communication mechanisms between minority shareholders representing at least 5% of the capital and the board of directors and incorporate multiple rules to ensure transparency and corporate governance of the entity (such as the existence of independent members on the boards of directors, reporting of relevant information to the market and surveys such as the Country Code).