Why it matters

A corporate reorganization can simplify a group, separate businesses, prepare a sale or an investment round, or reduce costs. In Colombia it can also trigger taxes nobody planned for, give creditors and minority shareholders tools to delay the process, or leave the new structure without the contracts, permits and registrations the business needs. For a foreign parent, the difference usually lies in what was reviewed before the local shareholders’ meeting approved the change.

A note on terminology: this piece is about corporate and tax reorganizations, such as contributions of assets or shares, mergers, spin-offs and changes in the chain of control. It is not about the “reorganization” proceeding under Law 1116 of 2006, which is an insolvency procedure to preserve viable businesses through an agreement with creditors.

The decision: objective first, instrument second

Start with what the group wants to achieve: ring-fence a risk, rationalize holdings, concentrate a business ahead of a sale or prepare an investment. Each objective can be reached with different instruments:

• Contribution in kind. A shareholder contributes assets or shares to a Colombian company in exchange for new shares or quotas. It can be tax-neutral if the conditions of article 319 of the Tax Statute are met, including an express statement by both parties in the contribution document that they elect that treatment; without it, the contribution is a taxable transfer (article 319-1).

• Merger. One or more companies dissolve without liquidation and are absorbed by another or form a new one, which takes over their rights and obligations (Commercial Code, articles 172 and 178).

• Spin-off. A company transfers one or more parts of its equity en bloc to existing or new companies, with or without dissolving (Law 222 of 1995, article 3).

Tax: neutrality is not automatic

The Tax Statute allows certain mergers and spin-offs to be tax-neutral if precise requirements are met. It distinguishes acquisitive transactions between unrelated entities, where shareholders holding at least 75% must continue in the resulting or beneficiary entity with substantially equivalent rights (articles 319-3 and 319-4), from reorganizational transactions between related entities, where the continuity threshold rises to 85% and the consideration in shares must be at least 99% of what each shareholder receives (articles 319-5 and 319-6). Transactions that fail these requirements are taxable transfers (article 319-7).

Cross-border structures deserve particular care. Mergers and spin-offs between foreign entities that transfer assets located in Colombia are, in principle, taxable in Colombia (article 319-8), and the sale of a foreign company holding Colombian assets can be taxed as an indirect transfer (article 90-3). A reorganization designed at group level abroad may therefore have a Colombian tax cost that the group’s home advisors do not see.

Corporate law: shareholders, creditors and authorities

• Approval and content. The merger agreement must be approved with the quorum set in the bylaws and include the reasons, the accounting data, the valuation of assets and liabilities and the exchange methodology (Commercial Code, article 173). Spin-off plans have their own minimum content (Law 222 of 1995, article 4).

• Information to shareholders. The plan must be available to shareholders at least 15 business days before the meeting, and the notice must include the item and mention the right of withdrawal; otherwise the decisions are ineffective (Law 222 of 1995, article 13).

• Withdrawal right. If the transaction increases shareholders’ liability or impairs their economic rights, for example by reducing their percentage or restricting the transferability of their shares, absent or dissenting shareholders may withdraw (article 12).

• Creditors. Within 30 days of publication, creditors may demand sufficient guarantees; if a court grants the request, the transaction is suspended as regards the debtor company (Commercial Code, article 175; Law 222 of 1995, article 6).

• Authorizations. Mergers and spin-offs of companies under the supervision of the Superintendencia de Sociedades, the corporate regulator, require its authorization (Law 222 of 1995, article 84, number 7). Companies in the same activity or value chain that exceed the thresholds in force must notify the SIC, the competition authority, before closing (Law 1340 of 2009, article 9).

What the new structure needs to operate

• Contracts. Which agreements prohibit or condition assignment or a change of control, and which were entered into in consideration of the person, since those require the counterparty’s consent (Commercial Code, article 887).

• Employees. If a business moves to another entity and keeps its identity, there is an employer substitution: contracts continue and both employers are jointly liable for obligations due at that date (Labor Code, articles 67 to 69).

• Registered assets. In a spin-off it is enough to list real estate and other registered assets in the spin-off deed, and the transfer takes effect before third parties when the deed is recorded in the mercantile registry (Law 222 of 1995, article 9).

• Foreign investment. Foreign investment resulting from a merger or spin-off must be registered with Banco de la República (Colombia’s central bank) under the origin “business reorganization” (External Regulatory Circular DCIP-83, section 7.2.1.2), and the registrations must match the new cap table so that profits and proceeds can later be remitted abroad.

• Permits, licenses and databases that transfer with the business, and those the continuing company must obtain again.

• Governance of the new structure: bylaws, bodies, legal representation and shareholder agreements that reflect how decisions will be made after the change.

Common mistakes

• Designing the transaction for its tax effect without checking that neutrality requirements will actually be met in Colombia.

• Forgetting the express election required for a tax-neutral contribution in kind.

• Skipping the shareholder information or withdrawal-right notice and exposing the decision to ineffectiveness.

• Discovering after closing that a key contract required consent or that a permit did not transfer.

Conclusion

Reorganizing without losing control means running the transaction as a project with simultaneous fronts: tax, corporate, contractual, employment, foreign exchange and governance. Our Tax and Corporate & M&A teams design these transactions together. When the reorganization prepares a sale or an investment, read it together with due diligence before investing in Colombia: the buyer will review exactly what is decided here.

Sources and legal references

• Commercial Code, articles 172 to 178 and 887.

• Law 222 of 1995, articles 3 to 9, 12, 13 and 84.

• Tax Statute, articles 90-3 and 319 to 319-8.

• Labor Code, articles 67 to 70.

• Law 1340 of 2009, article 9.

• Banco de la República, External Regulatory Circular DCIP-83, chapter 7.

• Law 1116 of 2006, article 1.

This content is for general information and is not legal advice on any specific matter. Rules verified as of 25 September 2026.