[Last updated: 1 June 2022, unless otherwise noted]

2.1       Main legal framework

Public takeovers are primarily regulated by the following regulations:

• Law 964/2005 is the framework law of the public securities market, comprising the general statute in which the Colombian congress sets out the general principles, objectives and criteria for the government to regulate the Colombian securities market. It grants overall regulation and supervision  over the Colombian securities market to the Colombian Superintendence of Finance (Superintendencia Financiera de Colombia or "SFC").
• Decree 2555/2010 is an all-encompassing regulation that, among many other topics, regulates public takeovers, whether by tender offer, reorganization process, or other means (section 6.15.2.1.1 and following).
• The operational and procedural requirements of public tender offers are set forth in Chapter 3 of the General Regulations (Reglamento General) issued by the Colombian Stock Exchange (Bolsa de Valores de Colombia or "BVC").
• Colombian antitrust and competition rules, such as Law 155/1959, Law 1340/2009 and Decree 2153/1992 (among others), are relevant if antitrust clearance is required as a condition for obtaining control of the target company.

2.2       The regulatory authorities

The following authorities regulate public takeovers:

• The SFC is the national authority, linked to the Colombian Ministry of Finance and Public Credit, and  is responsible for the regulation and supervision of the financial sector (banks and insurance companies) and the capital markets (issuers, intermediaries, brokers and stock exchanges).
• The BVC is the Colombian securities exchange, which operates the trading platforms for equities, fixed income and standard derivatives securities. The BVC and its affiliates handle the entire value chain of the capital markets, from securities trading to custody and depository services. 
• The Superintendence of Industry and Commerce (Superintendencia de Industria y Comercio or "SIC") is the antitrust authority of Colombia. It is responsible for preventing restrictive trade practices and unfair competition and is also in charge of the general antitrust clearance regime for Colombian mergers and acquisitions.

2.3       General principles

In Colombia, the decision to sell shares of public companies lies exclusively with the shareholders. The management of the target does not play a formal role in the process. Therefore, the traditional distinction between hostile bids (that is, those bids that occur without the consent of the management of the target, but rather by directly approaching the target's shareholders) and recommended bids is not applicable.

Bids that occur without the prior agreement of the target company's shareholders are allowed, but are uncommon for the following reasons:

1. A bidder who has not reached an agreement with the controlling shareholder will not have access to information that is not in the public domain.
2. A shareholder cannot be compelled to sell its shares and can simply abstain from accepting a public tender offer.

Takeover bids in Colombia allow third parties (that is, parties that have not reached an agreement with the controlling shareholders) the opportunity to submit competing bids against a public tender offer that has been launched by a bidder whether or not it has reached an agreement with the controlling shareholder. In practice, competing bids are rare because, whenever there is a previous arrangement with the controlling shareholder, the third party bidders will be in a disadvantaged position in terms of access to information regarding the target.

Any person or group of persons that have the same "beneficial owner" may only acquire, directly or indirectly, shares representing 25% or more of the issued and outstanding shares of a public company in Colombia through a mandatory tender offer (oferta pública de adquisición, or "OPA"). Anyone who already owns 25% or more of the shares of a public company in Colombia can only increase its shareholding by more than 5% through an OPA. Mandatory tender offer rules aim to ensure that all shareholders have the opportunity of receiving the same treatment afforded to the controlling shareholders.

An OPA will also be required whenever a public company intends to delist the shares from a Colombian stock exchange if the decision is not approved unanimously by the shareholders of the company.

Certain events are exempt from OPAs. Among these exemptions are: transactions unanimously approved by the public company's shareholders, transactions between entities controlled by the same beneficial owner, privatization processes, stock buybacks, issuance of new shares, capitalization of receivables, transfer of shares resulting from donations, successions, court orders, companies' liquidation processes, liquidation of conjugal partnership and payments in kind.

Under current regulations, "prearranged transactions", (i.e., transactions referring to shares listed on a stock exchange in which the terms and conditions are not the result of open market transaction but of direct negotiations between the parties), are considered to be contrary to the securities regulations, unless they are disclosed to the SFC, the BVC and the market at least one month before the date on which they are to be completed. The parties must disclose the main terms and conditions as well as the date and time when the transaction will take place. A prearranged acquisition of shares of a listed company shall be done through the BVC's platforms. In those cases where a tender offer refers to anything less than 100% of the issued and outstanding shares of the public company, the shareholders with whom an agreement has been reached may not be able to dispose of all the shares that they intended to sell because the remaining shareholders will have the right to sell proportionally to their interest. Conversely, it could mean that, in order to assure the selling shareholders that they will dispose of all the shares they intend to sell, the bidder may be willing to offer to buy more shares than it needs. This is because, in those cases where the shares tendered exceed demand, shares are allocated proportionally among the relevant sellers.

If the shares representing 25% or more of the target company (or representing more than 5% in the case of a  purchaser who already owns 25% or more) are acquired as a result of a merger or a corporate reorganization process, an ex-post tender offer would have to be launched within the three months following the transaction, unless the purchaser divests the relevant shares within the three months following the merger or the corporate reorganization process. The tender offer would have to refer to a percentage of shares of the target equal to those that were directly or indirectly acquired by way of the merger or the corporate reorganization process (or the balance in case the percentage acquired by way of merger is greater than 50%) at a minimum price to be established in an independent valuation, as described in Section 4.4 below.

Minority shareholders owning at least 1% of the shares of a listed company may request the owner of more than 90% of the shares of a public company to launch a tender offer for all the shares of the company if such 90% threshold was reached without a tender offer. In this case, the OPA would have to be launched within the three months following the date on which the 90% threshold was exceeded.

A person may carry out a tender offer, even if not legally required to, for at least 5% of the shares of a public company, and will be subject to the same rules set out for OPAs.

2.4       Foreign Investment Restrictions

Foreign investments in Colombia are permitted in all areas of the economy except for activities related to defense and national security, and the processing and disposal of toxic, dangerous or radioactive waste not generated in the country. A Colombian company can be 100% foreign-owned, except for national broadcast television companies, which may only be 40% foreign-owned.

Under the Colombian Constitution and foreign investment regulations, a foreign investor shall receive the same treatment as a local investor. The conditions for reimbursement of foreign investment and remittance of profits in effect at the time the investment is registered may not be changed so as to affect foreign investment adversely, except in the case of an extraordinary event in which international reserves are lower than the value of three months of imports.

Foreign investments in Colombia do not require prior government approval but the relevant funds must be transacted through exchange market intermediaries, or a clearing account and registered before the Central Bank. For this purpose, a foreign exchange declaration (declaración de cambio) for international investments must be filed. The registration of foreign investment guarantees the foreign investor access to the foreign exchange market to purchase convertible currency to remit dividends and repatriate the investment. The failure to report or register could result in the imposition of fines by pertinent authorities and require the investor to rely on the free market for access to convertible currency.

Colombia has exchange controls, but these are relatively benign.

All foreign currency for the operations listed below must be acquired or handled through 'exchange market intermediaries', i.e., Colombian banks, some financial institutions and exchange houses, or by using overseas registered clearing accounts known as 'compensation' accounts:

1. import and export of goods;
2. foreign loans and earnings related thereto;
3. foreign investment in Colombia and related earnings;
4. Colombian investment abroad and related earnings;
5. financial investments in securities issued or assets located abroad and earnings related to them, except when investment is made with currency originating from 'free market' operations (i.e., operations that are not required to be made through the exchange market);
6. guarantees in foreign currency; and
7. derivatives.

All other foreign currency operations may be made through the exchange market or the free market. In general, Colombian regulations do not allow the set-off of the payment obligations resulting from these transactions.

Unless the law specifically permits otherwise, the general rule is that payments between Colombian companies or individuals must be made in Colombian pesos, or through clearing accounts.