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New challenges of the COVID-19: Major Test for Colombian Companies' Adaptability

According to the Code of Commerce ("C of Co"), the Ordinary Shareholders' meeting must occur before March 31 of each year [1] Art.422 of Colombian Commercial Code. . However, due to the Covid-19 pandemic, the National Government issued the Decree 434 of 2020, providing, among others, an extension for holding the 2020 Ordinary meeting (for the financial year 2019), allowing to hold such meeting a month after finishing the Covid-19 health emergency declared by the government.

The Decree 434 extended the March-31st deadline only for the 2020 meeting and remained silent regarding the 2021 meeting. As a response, the transitory paragraph of article 6 of the Entrepreneurship Law [2] For further information, see publication " Entrepreneurship Law: a new step for business growth and economic reactivation in Colombia".  mandated the National Government to regulate the 2021 meeting.

Consequently and due to the extension of the Covid-19 emergency up to May 31, 2021 [3] Ministry of Health and Social Protection, Resolution 222 of February 25, 2021. , The National Government issued Decree 175, 2021 in order to regulate the 2021 ordinary meeting, second call notices and pending 2020 ordinary meetings

Under the regulations issued by the Government, the most important dates to be considered during 2021 regarding the meetings to be held by the highest corporate body for financial years 2019 and 2020 are as follows:

Based on the above, from Corporate Law perspective, we would like to mention the following matters regarding the meetings to be held by the highest body of a Company:

Ordinary MeetingsSecond Call meetings

Meetings to approve 2019 and 2020 financial years results shall be held on March 31, 2021 the latest (Art. 1 and 2, Decree 176 of 2021).

The meetings must occur as provided by Art. 422 of the C of Co., which means that if the Meeting is not summoned, the can meet on the first business day of April (April 5, 2021), at 10 a.m., at the main domicile where the Company's administration is located (Art. 1 and 6, Decree 176 of 2021).

If both financial years need to be evaluated at the same meeting, the shareholders’ meeting shall address them in a chronological order during the meeting (Art. 5, Decree 176 of 2021).

Given the nature of this meeting, whenever it is not possible to travel and/or hold the meeting, it will not take place in the 2021.

Call notice: 5 days prior to the meeting for S.A.S. (Art. 20, Law 1258) and 15 days prior the meeting in case of other Companies (Art. 424 C de Co.)

Shareholders are entitled to request the competent Superintendence to summon the meeting at which all issues related to the ordinary meeting are addressed, within 30 calendar days following the date on which the meeting could not be held (Art. 7, Decree 176 of 2021). 
The right of inspection shall be exercised pursuant to Art. 447 of the Civil Code, and companies may use technological instruments to facilitate its exercise (Art. 4, Decree 176 of 2021). 

 

The new Decree 176 does not postpone the term to hold ordinary meetings for the assessment of 2020 financial year as it was done in Decree 434. However, it sets forth the rules applicable to ordinary meetings, including new requirements for its celebration, in order to enable and ease fulfillment of Co of C's provisions, without neglecting the public health protection.

Consequently, the Company and the shareholders’ meeting are responsible for holding on-site, online or hybrid meetings, at their convenience and in compliance with applicable Law. Regarding on-site meetings, the Company must comply with existing restrictions related to public health protection.

Also, according to Circular 100-000001 of March 2, 2021 regarding online meetings the Company must indicate in the call notice all required information to ensure a successful development of the meeting. In the same way it must specify: (i) the technological platform which will be used to hold the meeting; (ii) the basic functioning instructions; (iii) the procedure to identify members identity and; (iv) the quorum verification. Not to mention, the company must adopt all necessary measures to preserve confidential information when conducting the right of inspection using technological instruments.

Current legal requirements concerning ordinary meetings respond to an effort to prevent the spread of the virus and protect public health. However, regulating the use of technology to hold meetings and exercising rights is another step towards creating efficiencies through technological tools. Moreover, it allows companies to exercise the very important right to meet and approve financial statements, distribute dividends and perform other activities typically performed in ordinary meetings.

Authors

Portrait of Andrea Zúñiga, LL.M.
Andrea Zúñiga, LL.M.
Associate Director
Bogotá
Portrait of Camilo Caicedo, LL.M.
Camilo Caicedo, LL.M.
Associate
Bogotá
Portrait of María José Agón
María José Agón
Associate
Bogotá