Contributed By Baker McKenzie S.A.S.
Local trusts are used in Colombia as instruments to manage properties or businesses with a specific purpose or to grant guaranties or collaterals, considering that trustees are professional regulated entities.
Only those companies duly authorised by the Colombian financial authority (Superintendencia Financiera de Colombia, or SFC) may offer trust services and act as trustees. Such entities are subject to supervision and special regulations.
Colombian law sets forth a number of legal duties for trustees, which cannot be delegated on third parties or waived. These include the following:
Regarding the use of corporate fiduciaries or other professional fiduciaries, there are no civil or commercial regulations establishing a higher standard of conduct or additional supervision or regulations.
Colombian law authorises individuals residing in Colombia and legal entities created under the laws of Colombia (ie, a 'resident of Colombia') to invest and hold assets outside Colombian territory without the need of obtaining further permits or authorisations. However, said residents of Colombia must comply with foreign exchange regulations.
Piercing of the Corporate Veil
In Colombia, the piercing of the corporate veil has been developed by case law and seeks to identify the individuals or legal persons who are beneficiaries of the legal entity. However, this procedure must be ordered by a judge and is not common on a day-to-day basis.
The Colombian Commercial Code includes a provision whereby the assets of a trust negotiation cannot be pursued by the creditors, unless debts are prior to the constitution of the trust. The creditors of the beneficiary of the trust can only pursue the financial yields the assets report. The execution of a trust with fraud can be challenged by the interested creditors.
There are no specific laws that encourage fiduciaries to invest assets prudently. However, current regulations set forth a number of legal duties for trustees to invest and maintain their assets that cannot be delegated to third parties or waived. These include the following:
As a general rule, parties involved in a fiducial agreement will determine the risks and limitations in the investment of assets. Colombian law does not require the diversification of assets or the application of modern portfolio theory. Certain exceptions may apply if government assets are involved.
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