The Colombian Simplified Corporation An Empirical Analysis of a Success Story in Corporate Law Reform

Abstract

Law 1258 was enacted in Colombia on December 5, 2008. During the last five years the country has witnessed a revolutionary turnaround in its Corporate Law. This legislation introduced a new type of business entity referred to as the Simplified Corporation or Sociedad por Acciones Simplificada (also known as SAS, according to its acronym in Spanish). Following the most progressive approach to Corporate Law, this law reduced incorporation formalities to a simple filing before the Mercantile Registry. It also streamlined costs and requirements associated with the formation and operation of boards of directors, fiscal auditors, purpose clauses, and other formalistic requirements that existed before its enactment. Law 1258 made it clear that shareholders would be shielded from any liability concerning obligations arising from the business activities of the corporation. It also reduced old-fashioned prohibitions pertaining to shareholders and managers activities and, most significantly, it reinforced an effective principle of freedom of contract. Furthermore, by applying the method of structural transplants, this law also introduced an innovative enforcement environment where arbitration and administrative adjudication superseded inefficient judicial procedures. This paper briefly analyzes the evolution of the Colombian SAS during the first five years after the enactment of quoted Law 1258 of 2008. It provides an empirical evaluation based on statistical data collected at the Colombian Confederation of Chambers of Commerce, the Mercantile Registry of Bogotá and the National Office of Corporations.

Keywords: Corporate Law, Latin America, Law Reform, Business Associations

JEL Classification: K22