Comments on the need for the legal representative's signature on the minutes of General Assembly remote meetings under Law 222 of 1995

The development of corporate affairs requires flexibility and adaptability from corporate law, in order to protect the shareholders’ interests. Similarly, economic development depends largely on the entrepreneurs’ ability to make quick decisions as pressing issues arise. Therefore, regulation on corporate matters must provide freedom, while ensuring that corporate governance and public policy goals are met. One of these norms, which goal is to give business owners tools to manage their social affairs, is Law 222 of 1995. This law introduced a new directors’ regime and other norms which updated Colombian corporate law. Articles 20 and 21 of said law regulated the General Assembly’s remote decision-making. Article 21 provides that the company’s legal representative must sign the minutes of a remote meeting for them to be valid, meaning that each of these minutes must have the legal representative’s signature at the end of the document. In practice, this requirement is excessively formalistic and represents a disproportionate risk for companies that require remote meetings.

To illustrate how problematic this provision is in practice, it often happens that when exercising the Shareholders’ right to freely remove the legal representative (an essential corporate law instrument) or in case of removal of the legal representative for breach of their director’s duties, the decision of the General Assembly may be frustrated by the same legal representative who is being removed. Consequently, the shareholders would be unable to perform said removal in a remote meeting, since the legal representative could easily refuse to sign the meeting minute. This would entail that such removal could not be registered before the Chamber of Commerce, which is necessary for the removal to have legal effects.

It could be argued that, if this is the problem, the partners would only have to meet in person to make the aforementioned social decisions effective. However, with the measures imposed by the national government within the framework of the public health crisis caused by the covid-19 pandemic, in-person meetings were not possible, and they are still highly discouraged. Thus, this regulation went from being simply problematic to becoming an overcoming contingency for the associates, leaving them without effective measures when legal representatives refuse to sign their own removals.

Recently, it is recurrent that when registering a Shareholders´ Assembly minute where the associates followed all the legal requirements to remove a legal representative, but the minute lacks the legal representative’s signature, the Chamber of Commerce refuses to register said removal based on the aforementioned requirement of article 21 of Law 222.

Not to mention, the need for this requirement is not entirely clear, considering that the legal representative is part of the company's administrative body, not the Shareholders' Assembly. Therefore, it does not make sense that a director - who is accountable to the General Assembly – has the power to provide legal effects (or block) a decision validly taken by the General Assembly. Hence, the main problem with this provision is that it distorts the relationship between directors and shareholders, and positions legal representatives in a place where they can block the decisions from the corporate body to which they are accountable to.

Additionally, this article of Law 222 clashes with other legal provisions which regulate the General Assembly’s decisions and actions. To mention a few, the clash is evident with article 189 and 188 of the Commercial Code, which provide the mandatory nature of the minutes and their value as proof of the decisions taken during the meeting, and where the legal representative has no power. Likewise, it conflicts with articles 187 and 379 of the same code, where full power is granted to the General Assembly to make its own decisions, without any interference by another body of the legal entity, such as the legal representative.

Finally, the measure is disproportionate, since shareholders already have tools to protect their interests in the event that abusive, illegal, or invalid decisions are made in the General Assembly, such as the action to challenge acts or decisions of the General Assembly provided in Article 191 of the Commercial Code. Therefore, the additional protection entailed by the review and signing of the minutes by the legal representative is not justified.

To conclude, business owners should beware of holding remote shareholders meetings with the purpose of removing the company’s legal representatives, because they will face an absurd application of a corporate rule that will lead to a violation of their rights as shareholders.