20. Corporate Insolvency Law

The insolvency regime was established in Colombia by Law 1116 of 2006, as part of an initiative to protect loans and protect the companies in their condition as an economic unity and job creators.

This is a process whose purpose is to protect legal companies ― both national companies and branch offices of foreign companies ―performing activities in Colombia, should they have economic problems and face difficulties to meet their obligations towards their creditors.

There are two ways in which these objectives can be achieved:

• Reorganization: it aims, through an agreed arrangement, to protect viable companies, normalizing their commercial and credit relationships through the operational and administrative restructuring of their assets and liabilities. 
• Legal Liquidation: it seeks a prompt and orderly liquidation, aiming to make an optimal use of the debtor’s assets.

Depending on the requested course of action, and upon fulfillment of the prerequisites through authorized persons, different effects will result. For example:

• Processes for the restitution of possession of movable or immovable assets used by the debtor to conduct their business activity may not be initiated or continued during reorganization proceedings.
• The functions of the corporate governing and oversight bodies of the legal entity will cease with judicial liquidation.

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To explore the topics previously discussed in more detail—learn about the various effects of each path within the insolvency regime, the prerequisites for initiating an insolvency process, the priority of claims applicable in Colombia, the competent authority in the process, roles within the insolvency process, and other relevant information—we invite you to download the complete chapter on the Business Insolvency Regime.