There are several restructuring/reorganisation mechanisms.
Firstly, private and voluntary restructuring proceedings are allowed between debtors and their creditors, who are free to agree on the terms of the restructuring/reorganisation.
There are also multiple special restructuring/reorganisation regimes applicable to, among others, public/governmental entities, financial institutions, and individuals who are not “merchants”.
Finally, Law 1116 of 20016 provides a comprehensive insolvency regime that applies, except otherwise excluded, to “merchants”, legal entities, branches of foreign companies and commercial trusts (patrimonios autónomos) that carry out business transactions.
As a reaction to the Coronavirus pandemic crisis, the above mentioned statute was partially amended temporarily until 15 April 2022, through Decree 560 of 2020 (“Law 1116”).
Law 1116 and additional special regulations to that effect (Regulatory Decree 1074 of 2015) also provide the possibility to, at any time and without having to comply with regular admissibility requirements, enter into an out-of-court restructuring/reorganisation agreement. Such an agreement may be filed with the insolvency court/judge for validation and approval, upon request of any of the parties to the agreement. Once approved, the out-of-court agreement shall have the same effect as a judicial restructuring/reorganisation agreement.
All in all, despite the fact that there are multiple “restructuring/reorganisation mechanisms” in Colombia, this document focuses only on the judicial restructuring/reorganisation regime of Law 1116, as it is the most important and relevant one for this publication.
The purpose of the restructuring/reorganisation process referred to in Law 1116 is as follows: (i) to enter into an agreement to preserve viable enterprises and normalise their commercial and credit relations, and to restructure their operations, management, assets and liabilities; (ii) to promote and protect good faith in commercial and asset-related relations in general; and (iii) to impose sanctions regarding acts that were performed in violation of the insolvency regime.