Key Initial Planning Considerations | Colombia | Cash Repatriation Heatmap

Generally speaking, assuming a straightforward process how long does it take to pay a dividend?

It usually takes 1-2 weeks to hold a shareholder meeting and approve and pay a dividend once the financial statements and annual reports are prepared.

Dividends approved by the Shareholders' assembly can be paid at any time at the discretion of the Shareholders' assembly but, once the dividend is declared, it must be paid within one year (except for simplified corporations).

Where the company has foreign shareholders with registered foreign investment Colombian banks may require proof of registration and that all tax withholdings have been made. Usually companies are able to wire out the dividends in 1-2 days and must comply with the foreign investment regulations.

Any timing restrictions on paying dividends?

Yes, payment can be made up to a year from approving the dividend distribution (except simplified corporations).

Dividends can only be distributed after the financial statements are approved, normally once a year, as the fiscal year ends at December 31. If the company wants to distribute dividends more than once a year, this has to be stated in the bylaws and interim financial statements must be prepared and approved.

What accounts will be required to support payment of dividend and will these need to be audited?

Dividends must be distributed based on certified annual financial statements which will need to be audited if the entity has an appointed statutory auditor.

Are there restrictions on the amount of dividends that can be paid?

Yes, dividends, can only be distributed if there are no accrued losses from previous periods which reduce the net worth of the company to below its registered capital. Dividends can be approved after all appropriations for taxes and reserves required by the law and bylaws have been made.

Are there any ways to increase reserves, and if so, how long do these generally take?

Yes, it is possible to increase distributable reserves by releasing appropriations to the special reserves, releasing excess legal reserves, in which case this will be immediate or by eliminating a statutory reserve by amending the bylaws, in which case the bylaw amendment will take 1-2 weeks to formalize and register.

It is possible to reduce capital and distribute excess, provided that the company

has no external liabilities; or
after the reduction of the capital, the assets represent at least twice the external liabilities; or
the creditors of the company have accepted the reduction in writing, regardless of the value of the assets.

Financial statements and other requirements must be completed. Prior authorization may be required from the Superintendence of Companies, which takes 2-4 weeks and from the Ministry of Work if the company has employment liabilities on its balance sheet. This can take 6-12 months.

Are foreign investment or other regulatory approvals required on payment of a dividend?

Yes. Foreign investment must be registered with the Colombian central bank and guarantees investors access to the formal exchange market to remit dividends and repatriate cash. Failure to register means the investor may have to rely on the free market for access to convertible currency and may be subject to administrative investigations.

Are there any foreign exchange requirements on paying dividends to foreign parent companies?

Yes.

When remitting dividends a foreign exchange form must be filed with the Central Bank reporting the transaction. This is submitted through intermediaries of the exchange market duly authorized in Colombia or by the company filing the required form, when wiring from a registered foreign currency account.

Can cash be borrowed to settle a dividend?

Yes, there is no legal restriction, however there are thin capitalization rules and other factors that may affect the viability of this.

Are dividends in kind possible?

Yes, dividends can be paid with shares of the company if expressly accepted by each of the shareholders or determined by an 80% majority. A controlling shareholder cannot force a minority shareholder to accept payment in shares without the minority shareholder´s consent.

Are there any other general considerations with a significant timing impact on payment of dividends?

No.

Are there any restrictions on lending funds intra-group but cross border?

From a corporate perspective, loans between related entities must be expressly permitted in the corporate purpose and be justifiable for commercial and business reasons. Loans must be made on commercial terms and must be in the interests of the company and all rules on possible conflicts of interest observed. This applies to national or cross border loans. All foreign exchange requirements should be observed for cross border loans.

Cash Repatriation Heatmap

Colombia

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