Procedures to set up a company in Colombia

Colombia, with its booming economy and vast market potential, is increasingly attracting the attention of domestic and foreign investors. The procedure for setting up a business in Colombia is designed to ensure transparency, comply with the law, and facilitate business activities. While there may be certain differences depending on the type of company you choose (such as Sociedad por Acciones Simplificada – SAS, Sociedad de Responsabilidad Limitada – SRL, or others), in general, this procedure includes some basic stages that every investor needs to be aware of. Viet An Law will provide an overview of the key steps in setting up a company in Colombia through the article below.

Choosing the type of company to set up in Colombia

Colombia has many types of companies for investors to consider, each with its own unique characteristics, suitable for different goals and scale of operations. Here are some common types of companies that investors often consider when operating in Colombia:

Simplified Joint Stock Company (SAS) – Simple Joint Stock Company

• Advantage:
  • Superior Flexibility: Especially suitable for startups and small and medium-sized businesses, SAS offers significant flexibility in setup and management.
  • No minimum charter capital required: Facilitate the start of business.
  • Allow one or more shareholders: Expand the possibility of cooperation and investment.
  • Freedom to define operating rules: The company’s charter can be customized to suit the unique needs of the business.
• Note: May not be suitable for large enterprises: For companies that are large in size or plan to list on the stock exchange, SAS regulations may not meet the strict requirements.

Sociedad de Responsabilidad Limitada (SRL) – Limited Liability Company

• Advantage:
  • Limited Liability: Members are only responsible for the scope of their capital contributions, protecting personal assets.
  • Simple management structure: Limited number of members.
  • Suitable for small and medium-sized businesses: It is a popular choice for businesses with a stable operating scale.
• Note:
  • Number of members limit: There is usually a limit on the number of members (usually no more than 50).
  • The ability to transfer capital may be limited: The transfer of contributed capital requires the consent of the members.

Sociedad Anónima (SA) – Joint Stock Company

• Advantage:
  • Ability to raise large capital: Suitable for businesses with a broad development vision and need significant investment capital.
  • High share liquidity: Shares can be easily transferred (depending on the provisions of the charter).
  • Professional management structure: There is a board of directors and an executive board.
• Note:
  • Minimum charter capital requirements: It is necessary to meet the minimum charter capital as prescribed.
  • Comply with strict legal regulations: Subject to stricter legal regulations.

Business name verification to set up a company in Colombia

To verify a business name in Colombia, you need to carry out the following procedures, mainly through the Chamber of Commerce (Cámara de Comercio) in the area where you plan to locate the head office of the business. The specific process may have some minor differences between different Chambers of Commerce, but the basic steps are usually similar.

Key steps to verify a business name in Colombia:

Choosing a business name

You need to choose one or several business names that you want to use. The business name must comply with Colombia’s naming regulations (e.g., it must not overlap with registered names, do not use confusing words, or violate the law).

Check name availability

• Online Lookup: Most Chambers of Commerce in Colombia offer an online business name lookup service through their website. You can visit the website of the Chamber of Commerce corresponding to the area where you intend to locate the headquarters to use the lookup tool.
• Search for information: You can conduct a search on search engines to see if there are any other businesses using similar or confusing names.
• Formal verification request (optional or required): Some chambers of commerce may require you to submit a request to verify the name. The petition usually asks you to provide the name of the business you want to check, your contact information, and the intended type of business.
• Apply and pay the fee (if applicable)
• Get the verification result: The Chamber of Commerce will notify you of the verification result.
  • If the name is registrable: You will receive confirmation that the business name you have chosen has not been registered and can proceed with other business registration procedures.
  • If the name is not available: You will be notified that the name is already in use or similar to a registered name, and you will need to choose a different name.
• Reserve name (optional): Once a name is confirmed as registrable, you may have the option to reserve it for a certain period of time (usually a few days or weeks) so that you can complete other business registration procedures.

Drafting and notarizing the company’s charter to set up a company in Colombia

The Articles of Incorporation in Colombia usually include the following essential information:

• Company name;
• Type of company;
• Address of the head office;
• Business Purpose: A detailed description of the business activities that the company is allowed to undertake. The business purpose should be clearly and concretely stated;
• Charter capital: Determine the total amount of capital contributed by members/shareholders to the company, including the number and value of contributed capital or shares;
• Management structure: Regulations on the management organizational structure of the company, including management agencies (e.g. Board of Directors, Board of Directors), and the functions and tasks of each agency;
• Rights and obligations of members/shareholders: Determine the rights and obligations of each member or shareholder in the company, including voting rights, the right to receive dividends, the obligation to contribute capital, etc.;
• Term of operation of the company;
• Other regulations.

Drafting and notarization process

• Drafting the Charter: You or your lawyer will draft the Charter of the Company based on the provisions of Colombian law and agreements between members/shareholders.
• Review and approval: Members/shareholders will review and approve the content of the Company’s Charter.
• Notarization: After the Charter is agreed, this document needs to be notarized by a notary in Colombia. Notarization is mandatory to ensure the legality and validity of the Charter. The notary will confirm the signatures of the participants and certify the legality of the document.

Procedures for registering foreign investment to set up a company in Colombia

Determine the type of investment

• Direct investment (Inversión Extranjera Directa – IED): This is the most common form, which involves setting up a company, buying shares, contributing capital to projects, or investing in real estate.
• Indirect investment: Includes the purchase of stocks, bonds, or other financial instruments on the Colombian stock market.
• Other forms of investment: Including loans, technology transfer, etc.

Register with Banco de la República (Central Bank of Colombia)

• For direct investment: As a rule, most foreign direct investments in Colombia must be registered with Banco de la República.
  • Prepare documents: Investors need to prepare the necessary documents to register. The list of documents includes
    • • Application form;
      • Information about the investor: Copy of passport or identity document (if individual), document proving legal status (if legal entity);
      • Information about the investment: Details about the amount, currency, purpose and field of investment, information about the company or project receiving the investment;
      • Papers certifying the source of investment capital;
      • Documents related to investment transactions (e.g., capital contribution contracts, share purchase and sale contracts);
  • Submission: Applications can be submitted in person at the Banco de la República or through authorized entities.
  • Monitoring and approval: Banco de la República will review the application and approve the investment if it meets the requirements. Upon approval, the investor will receive a Certificate of Foreign Direct Investment (Certificado de Inversión Extranjera Directa).
• For indirect investments: The registration procedure may differ and usually involves registration through authorized financial institutions or stockbrokers.

Opening a bank account and contributing capital to set up a company in Colombia

After completing the procedures for registering and verifying the business name, one of the next important steps in the process of establishing a company in Colombia is to open a bank account for the company and proceed with capital contribution.

Open a bank account for your company

Steps to open a bank account for a company in Colombia

• Choice of banks: There are many banks operating in Colombia, both domestic banks and international bank branches. Some of the popular banks in Colombia include: Bancolombia, Banco de Bogotá, Davivienda, Banco Popular, BBVA Colombia, etc.
• Prepare documents: Banks usually require the following documents to open an account for the company:
  • Company name verification paper;
  • Identity documents of the legal representative;
  • A notarized copy of the company’s charter (Estatutos Sociales);
  • Other documents required by the bank

After opening a bank account, you need to make a capital contribution according to the provisions of the company’s charter.

Filing documents to set up a company in Colombia

The list of documents for company formation includes:

• The Company’s charter has been notarized;
• Company name verification paper;
• Certificate of capital contribution to the company’s account;
• Identity documents of members/shareholders;
  • For individuals: Copy of passport or other valid ID.
  • For legal entities: Documents proving the legal status of the legal entity (e.g., business registration certificate, company charter, etc., notarized translation may be required).
• Documents proving the company’s address;
• Other documents required by the Chamber of Commerce

Incorporation Process

Submission of documents: Submit the application for establishment of the company at the Chamber of Commerce corresponding to the location where the company’s head office is located. If the dossier meets the requirements, the Chamber of Commerce will proceed with the registration of the company and issue a Certificate of Business Registration (Certificado de Registro Mercantil) – authentic proof of the incorporation of your company in Colombia.