The mergers and acquisitions (M&A) market in Colombia has seen a decline in both the number and value of transactions during the first nine months of 2024. Specifically, there has been a 7% drop in transaction numbers and a 14% decrease in their total value. In total, M&A transactions in Colombia reached approximately USD2.868 billion.

However, when compared to the overall trend in Latin America, Colombia’s performance appears relatively strong, especially given the 20% drop in M&A activity across the region during the same timeframe. Notably, the software sector has emerged as a leader in Colombia’s M&A landscape, registering 28 transactions, which marks a 33% increase from the same period in 2023.

This growth in the software sector is largely attributed to the accelerated digital transformation that many companies are undergoing as they seek to modernise operations and adapt to an increasingly competitive landscape. The rising demand for technology and digital solutions has prompted many firms within the software sector to pursue growth opportunities through M&A.

The continued growth of the technology sector has raised concerns regarding the need for strengthened data protection and cybersecurity regulations, which are now critical factors in M&A due diligence amid ongoing digital transformation. Companies are also increasingly aware of sustainability and environmental, social and governance (ESG) initiatives, adapting to international ESG standards to attract foreign investment. This shift has become particularly important for the financial sector and companies publicly listed on the Colombian stock exchange (BVC), as they are required to report ESG-related information – a requirement now extending to companies under the supervision of the Superintendence of Companies.

Additionally, the Colombian government, in alignment with the country’s long-term sustainable energy goals, is promoting investment in renewable energy through incentives and regulatory adjustments to support green investments.

Finally, both investors and companies should be mindful of the recent enforcement of stricter antitrust and competition regulations by the Superintendence of Industry and Commerce (SIC), which particularly impacts tech companies. This shift has been evident in high-profile cases involving major telecom entities, aimed at ensuring competitive market conditions, notably in cases of potential market dominance.

Place of Incorporation

In Colombia, most start-up companies are typically incorporated in the country. Additionally, commercial law establishes that foreign companies must incorporate a branch if they intend to carry out their main activities in Colombia on a permanent basis, and from a tax point of view, the figure of permanent establishment is applied when a foreign company carries out all or part of its activities in the country for income tax and supplementary tax purposes.

Timing and Process of Incorporation

Once all the documents and requirements are fulfilled, the incorporation of a new company can take an average of three business days.

Capital Requirements

There is no initial capital requirement for incorporation; all companies can define their capital structure in the by-laws, where the capital is usually divided into authorised capital (determining the company’s maximum capitalisation), subscribed capital (the portion of authorised capital that shareholders agree to pay) and paid-in capital.

However, payment requirements vary depending on the type of company selected by the entrepreneurs. For a simplified stock corporation, which is the most common type of business entity, shareholders have up to two years to pay the subscribed capital.

In a corporation or limited joint-stock company, at least 50% of the authorised capital must be subscribed, with one-third of the subscribed capital paid at incorporation and the remaining instalments paid within one year.

Finally, if a limited partnership or limited company is chosen, the subscribed capital must be fully paid at the time of incorporation.

Even though there are several types of business entities available for incorporation (stock company, limited liability company, branch of foreign corporation, etc), entrepreneurs are typically advised to choose a simplified stock corporation for the initial incorporation. The reason for this is that the regulation is more flexible; there is more flexibility for the shareholders in defining corporate governance in the by-laws. Branches of foreign corporations are usually used to meet highly intensive investment needs, such as those in the oil and gas sector.

Early-stage financing or seed investment for start-ups typically comes from a mix of sources, including family and friends (usually documented as loan agreements with no stock participation), family offices and – to a lesser extent – local angel investors that contribute not only capital but also technical financial assistance and networking support. Additionally, there is increasing foreign investment through venture capital (VC) and private equity firms offering capital along with advisory business services, as well as foreign direct investment.

Recently, the Colombian government has been aiming to incentivise entrepreneurship and innovation in the country through programmes like iNNpulsa Colombia and Bancoldex, which provide grants, loans and other financial incentives to start-ups in their early stages. These programmes often focus on high-impact industries and promote innovation.

Documentation of Seed Investment

Seed investment in Colombia is commonly documented through various agreements varying depending on the funding structure, such as convertible notes, simple agreement for future equity (SAFE), equity agreements, shareholders’ agreements and grant agreements.

The VC industry in Colombia is still developing and lacks high levels of liquidity. Additionally, entrepreneurs face barriers to accessing the financing available through private equity funds, as they often lack the necessary financial and legal training and experience to structure their business models in their early stages, compounded by high levels of informality in these initial stages.

However, efforts are being made in Colombia to connect entrepreneurs with the investment capital they need to grow their ventures, including the regulation of crowdfunding.

Among these initiatives is the creation of A2censo, a crowdfunding platform managed by the BVC that aims to connect small to medium-sized enterprises with investors through a digital platform, and Bloom Crowdfunding, a fintech company that, through a blockchain-based technological solution, allows companies to set the term, rate and payment method offered to their investors, who can in turn provide capital directly to projects.

Colombia remains attractive for foreign VC investment, despite a decline in 2023, ranking third in the region in terms of invested capital.

Standards for VC documentation are still developing and are not as well-established as in more mature markets like the United States. However, some typical practices and templates are becoming common among local VC firms and investors, especially as the industry grows and aligns more with international standards. For foreign investment or foreign VC transactions, documentation is usually based on US templates, which are adjusted locally and generally enforceable under Colombian law.

While start-ups in Colombia often begin with a simplified stock corporation (sociedad por acciones simplificada; SAS) structure, as they seek more substantial VC funding or prepare for international expansion, they are typically advised to establish a foreign holding structure to accommodate investor expectations and optimise growth potential. Until 2023, if the company intended to list its shares on the local stock exchange, it had to be transformed to a stock corporation (sociedad anónima; SA), as required by Colombian regulations. The law that lifted the prohibition on an SAS listing its shares on the local stock exchange was challenged on constitutionality grounds and is currently under review by the Constitutional Court.

For most start-ups looking for a liquidity event, a sale process is preferred given the limited local market for initial public offerings (IPOs), limited size of the BVC and low liquidity, where the volume of traded shares represents a minimal percentage of total transactions. Additionally, regulatory requirements and cost barriers make IPOs feasible only for a few select companies with significant revenue and international expansion.

Although Colombian start-ups primarily would be more likely to run a sale process, some high-growth ventures with international appeal may adopt a dual-track process strategy, especially if the company has a holding structure abroad; this facilitates both paths.

Given the regulatory efforts involved in pursuing a foreign exchange listing, companies may be more inclined to list on the local exchange. However, since the Colombian exchange market is not mature enough and offers low liquidity, companies with significant revenue and international expansion might eventually consider listing on a more established foreign exchange, such as Nasdaq or the New York Stock Exchange.

If the company chooses to list on a foreign exchange, the feasibility of a future sale will still be subject to local regulations governing the specific type of entity involved, including minority-shareholders’ protection.

Although it is legally possible to run a private auction in the sale process, the sale process is typically run as a bilateral negotiation with a chosen buyer.

The typical transaction structure for the sale of a privately held technology company with VC investors usually involves selling the entire company rather than just a controlling interest. However, potential buyers often request that the founders remain involved in the company’s operations as key employees or directors to ensure short- to medium-term profitability. Additionally, the parties may agree on earn-out payments if specific revenue and profitability targets are met.

Transaction structures are highly dependent on the tax regulations in force at the time of their implementation. Prior to the regulation on the indirect transfer regime under Law 1943 of 2018 and Law 2010 of 2019, it was common to include a combination of stock and cash compensation, usually involving stock of foreign (off-shore or tax heavens) corporations. Indirect transfers of shares of corporations located in Colombia are now taxed as if the transfer had occurred directly within the national territory. This has resulted in more transactions being cash-based.

It is common for founders and VC investors to stand behind representations, warranties and certain liabilities post-closing, typically through indemnification mechanisms. The main areas of liability in Colombia are tax, labour and the environment.

Escrows and holdbacks are becoming customary to secure indemnification obligations, with a portion of the purchase price placed in escrow or held back for a negotiated period. However, representations and warranties insurance is not yet common in Colombia.

Spin-offs in the technology industry are becoming more frequent as the sector grows. When tech companies do pursue spin-offs, it is generally to support specific strategic or financial goals, especially for high-growth businesses that want to unlock value or focus on core areas.

Current tax regulations in Colombia provide for a fiscal neutrality regime in spin-off transactions, under which, if the requirements set forth in the tax statute are met, it is not considered a transfer for tax purposes; therefore, income tax will not apply.

Regarding the participating entities:

• the spin-off document must state that the assets transferred to the beneficiary entity will retain the same value (tax cost) as declared by the spin-off entity;
• the transferred assets must retain their original nature as fixed or movable assets, as they were for the transferring entity;
• the spin-off assets must qualify as one or more economic units or business establishments, rather than as individually considered assets; and
• if the acquiring entity disposes of the assets within two years of the contribution, it may not offset accumulated tax losses or excess presumptive income over liquid income against the income generated by the sale of such assets.

Regarding the shareholders:

• holders of at least 75% or 85% of the shares in the transferring entities, depending on the type of spin-off, must participate in the beneficiary company;
• the shares they receive in the beneficiary company must represent 90% or over of the consideration received by the entity resulting from the spin-off; and
• the shares received in the beneficiary entity must retain the same value as declared for the shares in the transferring entity before the spin-off.

A spin-off immediately followed by a business combination is possible in Colombia. A business combination may take the form of a merger, acquisition or joint venture. Requirements will depend on the form of choice and on whether the parties involved are supervised by the Superintendence of Corporations. A merger control filing may also be required depending on the parties’ market share and whether local thresholds are met.

The timeline for a spin-off typically ranges from six months to one year, from the initial corporate-level analysis to its consummation, depending on the transaction’s complexity, regulatory requirements and corporate approvals.

For example, mandatory law sets certain terms to be observed, such as allowing shareholders 15 business days to review the spin-off project before the meeting in which it is to be approved. Once the spin-off is approved by the shareholders’ meeting, absent or dissenting shareholders may exercise their right of withdrawal within eight days of the decision date.

Additionally, the company must publish the project in a national newspaper, after which creditors have 30 days to exercise their rights.

Although obtaining a tax authority ruling is not necessary, depending on the type of supervision over the participating companies, additional formalities and authorisations may be required regarding rules on competition promotion and restrictive business practices.

It is not uncommon for potential acquirers to purchase a stake in a public company before making a formal offer. This strategy can help secure a foothold and potentially influence the target company’s management and shareholders. However, this is subject to regulatory requirements to ensure transparency and protect all stakeholders involved, namely:

• reporting threshold – the threshold for reporting the acquisition of an interest in a public company is 10% or more of the outstanding shares;
• if a shareholder already holds 10% or more and plans to increase their stake by 5% or more, this also triggers the reporting requirement; and
• timing of reporting – the acquisition must be reported to the Financial Superintendence of Colombia (FSC) within five business days after the acquisition.

There is a mandatory tender offer threshold that applies to public companies listed on the BVC. The threshold is triggered when a buyer acquires a significant stake of 25% or more in a public company’s shares with voting rights. Additionally, if an investor already holds 25% or more and seeks to acquire an additional 5% or more of voting shares, they must also launch a tender offer to provide other shareholders the opportunity to sell.

The typical transaction structures for acquiring a public company include:

• public tender offer;
• direct purchase – the acquirer can directly purchase shares from the market, either through open market transactions or privately negotiated deals;
• merger or consolidation – while mergers and consolidations are available, they are less commonly used for acquisitions of public companies because they involve more complex legal and regulatory requirements, and the process can be more time-consuming and costly; and
• asset purchase – in some cases, the acquirer may choose to purchase specific assets of the target company rather than acquiring the company as a whole.

Public company acquisitions in the technology industry are typically structured with cash consideration, takin into account variables related to valuation and liquidity. However, capital market regulation does permit stock-for-stock transactions, but in that case the bidder must offer to pay in cash for at least 30% of the shares intended for purchase.

Minimum Price

In principle, the price of the securities subject to a public tender offer will be determined by the offeror. However, if the offeror has acquired the securities within the last three months from the date of submitting the application to the Financial Superintendency of Colombia, the price may not be lower than the highest price paid.

Additionally, if there is a pre-agreement for the offer, the price may not be lower than the highest price set in said pre-agreement.

Colombian regulation establishes that takeover offers for public companies must be directed to unspecified persons and may not include additional conditions for acceptance other than those customary to the legal transaction intended. In this regard, it is not permitted to require that those accepting the offer do so for the minimum or maximum quantity of securities.

It is customary to enter into a transaction agreement in connection with a takeover offer or business combination involving a public company. The agreement formalises the terms, obligations and protections for both parties, providing a structured framework for the transaction including clauses related to the obligations of the target company, an exclusivity clause prohibiting it from seeking or encouraging other offers for a specified period as well as the obligation to inform the bidder if a competitor’s offer is received, and indemnifications and liabilities.

Although limited compared to private company transactions, it is still customary for a public company in Colombia to provide basic representations and warranties, which are usually related to corporate authorisations, compliance, the absence of litigations and the accuracy of financial statements.

When the consideration consists of voting capital in a company whose shares are listed in the BVC, the recipients of the offer may only accept it for a number of securities that would result in their beneficial ownership position in the company equating to less than 25% of the voting capital of that company or, if they hold a position equal to or greater than 25%, for an amount less than 5%.

Except for the foregoing, acceptances may not be subject to any condition, except that the securities be sold under the “all or nothing” method. The all or nothing method means that the acceptor is willing to proceed with the sale only if it is possible to allocate the full amount of securities covered by the acceptance.

Colombian legislation does not expressly enshrine a positive law provision that allows for the forced exclusion of a minority shareholder. Moreover, there are certain figures that could lead to the understanding that the implementation of measures such as those provided for in common law systems violate the rights of minority shareholders.

However, certain limited mechanisms are available including, among others, the following.

• Merger without shareholder assignment:Law 1258 of 2008, which incorporated the simplified joint stock company typology into the Colombian legal system, allows the shareholders of a company absorbed through a merger to receive, as the only consideration, cash instead of shares in the absorbing company. In this way, the majority shareholder could consolidate 100% ownership of the capital of the acquiring company, while the minority shareholders would only receive cash as consideration for their exclusion from the share capital. To carry out the merger on these terms, the majority shareholder must have a majority that allows it to comply with the requirements of the company’s by-laws.
• Global disposal of assets: The company sells all its assets and liabilities to a third party that is 100% controlled by its majority shareholder. Once the sale is completed, the company is dissolved and liquidated so that the minority shareholders receive payment of the sale price as a distribution of the liquidation proceeds.
• Partial division: Pursuant to Article 3 of Law 222 of 1995, the shareholders of a spun-off company may participate in the beneficiary company in a different proportion to that which they held in the spun-off company. This implies that the shareholders of the spin-off company may not even participate in the capital of the target company. In any case, such a decision must be taken by unanimity of those present at the general meeting at which the division is adopted.
• Sunsetting of economic and political rights: Since the rights conferred by the shares of a company are considered to be economic rights, the company may claim, before a judge of the Republic (either as an action or as an exception), the expiration of the economic and political rights that have not been exercised by the minority shareholder during the applicable statute-of-limitations period (ten years).

The public acquisition offer will be allowed when the constitution and delivery of guarantees is accredited before the BVC. Such guarantees may be provided by the commission agent through whom the offer is made, the offeror or a third party, and in any case, they will be established to be in favour of the stock exchange and irrevocably available to it for the fulfilment of the operations resulting from the offer and/or the payment of the obligations arising from the execution of the public acquisition offer (offerta pubblica di acquisto; OPA) by the offeror.

The admissible guarantees are:

• a deposit in legal Colombian currency in a banking institution legally authorised to operate in Colombia, whose holder is the stock exchange;
• a bank guarantee or irrevocable stand-by letter of credit, whose beneficiary is the stock exchange, issued by a local or foreign bank;
• an insurance policy issued by an insurance company legally authorised to operate in Colombia, designating the stock exchange as the beneficiary;
• debt securities issued or guaranteed by the nation;
• assignment to the stock exchange of rights in collective investment funds or portfolios; and
• a deposit of guarantee in a foreign currency.

Typically, a target company may grant deal protection measures such as non-solicitation, non-compete, and non-disparagement provisions. Additionally, the target may commit to recommending the approval of the transaction to its shareholders.

These protective provisions serve to align the interests of the target company with those of the acquiring party, minimising the risk of competing offers and ensuring that the target management actively supports the proposed transaction.

The bidder can enter into a shareholders’ agreement to internally regulate the relationship between the shareholders of a company and their relationship as contracting parties vis-à-vis the company, in aspects additional or supplementary to those contemplated in the partnership agreement.

In the case of simplified joint stock companies, these agreements may deal with the purchase or sale of shares, the preference for acquiring them, the restrictions for transferring them, the exercise of voting rights, the person who will represent the shares at the meeting and any other lawful matter.

For other types of corporations, shareholders’ agreements typically address voting in a uniform or specific manner during shareholders’ meetings. Such agreements may include provisions that enable one or more shareholders, or a third party, to represent all shareholders at those meetings.

The possibility of making pre-agreements is provided for, in which case compliance with the rules regarding good practices and uses must be observed, and a copy of the executed contract must be sent or – if it is not in writing – a document that accurately describes everything agreed upon. The pre-agreement may not contain clauses that prevent, hinder or make the participation of shareholders of the affected company in competing offers more burdensome.

When an ongoing offer is improved, the recipients of the offer who have already accepted it will automatically benefit from the conditions of the modification.

Prior to carrying out the tender offer, the offeror must request authorisation for the transaction from the FSC, which will have five business days from the date the application is filed to make any pertinent observations. The offer notice must be published within five days following the expiration of this period, provided that the FSC has raised no objections. If objections are raised, the term for publishing the notice begins from the date on which the FSC confirms its approval of the information, data and clarifications requested.

Authorisation is granted for the transaction as a whole; neither the price nor other terms are subject to the FSC’s approval.

Timeline

The timeline for the tender offer is defined by regulations that set a maximum period for accepting the public acquisition offer; however, the offeror may set the acceptance period without exceeding the maximum limit stipulated by law.

On the other hand, if a competing offer is announced, it must follow the same procedure established for the preceding acquisition offer, and the first offer notice must be published no later than two business days before the expiration of the acceptance period for the preceding offer. Therefore, the timeline for each offer proceeds independently.

The offeror may extend the initially established acceptance period for the offer, provided that notice is given at least three business days before the initial period expires and the FSC is informed in advance. This extension, combined with the initial period, must not exceed the maximum time limit specified.

If the tender offer requires authorisation or an opinion from an administrative authority, including a decision by the SIC on the acquisition project, the offeror must submit this opinion to the FSC along with the authorisation request.

Providers of telecommunications networks and services, including operators of open broadcasting television and sound broadcasting services, must register with the Single Information Technology and Communications’ Registry, managed by the Ministry of Information and Communication Technologies.

With this registry, the general authorisation for the provision of telecommunications networks and services will be formally deemed granted, which also includes the authorisation for the installation, expansion, modification, operation and exploitation of networks for the provision of telecommunications services.

Additionally, technology companies may require specific permits and approvals in certain regulated sectors or are subject to specific regulations, such as the following.

• Fintech: In general, fintechs that engage in financial, securities and insurance activities, as well as any other activities related to the management and investment of public funds, will require an operating licence from the FSC. This includes platforms for crowdfunding, digital wallets, crypto asset exchanges and digital banks. The FSC must decide on the authorisation request within four months from the date the applicant submits all required documentation. This timeframe may be suspended if the FSC requests additional information or clarifications.
• Healthtech: Although the technology provider is not considered a healthcare service provider and, therefore, does not require authorisation, healthcare service providers offering telemedicine services through technological platforms must ensure the authenticity, integrity, availability and reliability of the data, and comply with guidelines for security, privacy and personal data protection.

The primary regulator overseeing M&A transactions in the securities market is the FSC. The FSC is responsible for regulating and supervising financial institutions, including stock exchanges and securities markets, ensuring compliance with relevant laws and regulations related to securities and financial transactions.

For certain aspects of M&A transactions, particularly those in relation to merger control, the SIC may also be involved.

Foreign investment is prohibited in the following sectors:

• activities related to national defence and security; and
• processing, disposal and waste management of toxic, hazardous or radioactive materials not produced in the country.

Foreign investment is limited in concession companies providing open television services, which cannot have foreign investment exceeding 40% of the total share capital of the concessionaire.

Besides the above-mentioned foreign investment restrictions, there is no additional national security review of acquisitions.

In Colombia, there are no explicit restrictions based solely on an investor’s country of origin.

Export Control Regulations

Export controls exist on the following:

• coal ore is controlled by the National Mining Agency (ANM);
• fishery products are regulated by the National Authority of Aquaculture and Fisheries (AUNAP), among other agencies;
• cell phones – the export of smartphones or cellular phones and their parts is prohibited for postal traffic and express shipments, but travellers leaving the country may carry up to three smartphones or cellular phones as part of their personal effects;
• to export precious stones, precious metals and manufactured goods included in Chapter 71 of the Customs Tariff (excluding costume jewellery), the exporter must be registered and authorised in the Unique Registry of Mineral Traders (RUCOM) and must possess the necessary measuring equipment and tools to determine the quality and weight of the merchandise; and
• coffee exporters must register with the Foreign Trade Directorate of the Ministry of Commerce, Industry and Tourism – passengers may carry up to the equivalent of 10 kg of roasted coffee per person on each trip.

Transactions covered by merger control regulation in Colombia are those intended to merge, consolidate, acquire control or integrate, regardless of the legal form of any such transaction. The Colombian competition agency – SIC – considers that there is a concentration when control over two companies or undertakings that were participating independently in the market is acquired permanently by the same management or decision centre, whatever the legal structure designated for that purpose.

Standards for Reporting

Transactions that have to be disclosed or require prior authorisation (waiting period) from the SIC in Colombia are those that:

• are entered into by companies that are dedicated to the same activities or participate in the same vertical value chain; and
• together or separately had operational income or owned assets in Colombia, in the year prior to the transaction, in an amount that meets the thresholds that the SIC has established. Currently, the notification threshold is equivalent to approximately 60,000 minimum monthly legal wages (approximately USD18,571,000).

Market Share

If the individual or joint market share of the participants in the transaction is below 20%, then the transaction is deemed authorised and needs only to have been previously disclosed (no waiting period) to the SIC. If the market share is – or exceeds – 20%, a waiting period is triggered and the parties will need to file an extensive amount of information concerning the transaction, the parties’ activities, the market and the competitors.

Once the transaction has been reported, the SIC may approve, object to or impose conditions on it.

Colombian employment law is protective of employees. In M&A transactions, acquirers should be primarily concerned about the effects of employer substitution schemes, including indemnity obligations in case of dismissal or unilateral transfer of employees.

Works Council Consultation

Labour legislation does not require registration or prior authorisation from regulatory and oversight entities, unless the transaction involves a personnel restructuring that may result in a mass layoff. In such cases, prior authorisation must be requested from the Ministry of Labour. A collective dismissal occurs when between 5% and 30% of a company’s workforce is terminated, depending on the total number of employees, and is assessed based on the dismissals that occur within a period of six months.

Central bank approval is not required for an M&A transaction. However, if one of the parties is a foreign entity or a non-resident, the investment must be registered with the central bank.

Recently, the SIC approved the integration of Movistar and Tigo’s mobile access networks under a newly established infrastructure company with shared ownership. This approval was granted with several conditions aimed at preventing any negative impact on wholesale markets, ensuring effective governance of the new entity (NETCo), maintaining coverage levels, guaranteeing the separation of network cores and ensuring adherence to principles of free competition.

Securities issuers (including companies listed in the BVC) must keep the National Registry of Securities and Issuers (Registro Nacional de Valores y Emisores; RNVE) continuously updated by submitting periodic and material information to the FSC. This information must also be submitted to the trading systems where these securities are listed.

When disclosing periodic and material information, issuers must consider information that a prudent and diligent investor would consider relevant when deciding to buy, sell or hold the issuer’s securities, or when exercising the political rights associated with those securities.

Periodic information includes quarterly reports on financial status, litigation, securities performance, management activities and other relevant data. Material information, which must be disclosed, includes the issuer’s commercial and operational status, accounting and financial information, corporate governance, legal matters, information on the issuance and trading of securities and any event deemed important to investors.

This information must be publicly accessible to the market, ensuring that all investors have equal access, as it must be published through the mechanism provided by the FSC.

When conducting due diligence on a technology company, personal data regarding employees, clients and suppliers may need to be disclosed. In doing so, the company must ensure compliance with data privacy regulations – including obtaining and maintaining proof of authorisations granted by the data subjects and data protection regulations related to the processing and recording of databases – if the company meets the thresholds (total assets exceeding 100,000 taxvalueunits(approximately USD1,120,000). The disclosure of personal data must be deemed necessary for the purposes for which authorisation for collection and processing was granted.

Furthermore, if personal data is to be transferred abroad and the destination country is not on the list of countries deemed by the SIC to provide adequate levels of data protection, a personal data transfer agreement must be signed with specific authorisation thereto.

Colombian law allows for preliminary promotion of a takeover offer once the request for authorisation has been filed with the FSC.

After the takeover offer is authorised, the offeror must publish the tender offer notice at least three times – with intervals of no more than five business days – prominently in the economic section of a widely circulated national newspaper, either in print or online. Additionally, the notice must be published on the websites of the issuer, the offeror, the BVC and the Integrated Securities Market Information System (Sistema Integral de Información del Mercado de Valores; SIMEV).

A prospectus is required for the issuance of shares, including in a stock-for-stock takeover offer, given that when consideration consists of shares, such securities must be registered on the BVC or listed on an internationally recognised stock exchange, as determined by the FSC.

The prospectus must include, at a minimum, the terms and characteristics of the securities being offered; the details of the offering, if applicable; the authorisations obtained; and a clear, complete, precise, objective and verifiable description of the issuer, covering organisational structure, historical background, financial information, expectations, risks, future projects and the intended use of funds raised from the issuance.

When the transaction structure is a merger, special financial statements must be prepared and included in the merger project. The date of such statements may not be more than one month before the date of the call to the board of shareholders’ meeting where the merger is to be approved.

For takeover offers, financial statements for the latest fiscal year and the opinion of the statutory auditor or audit reports in connection therewith must be disclosed in the offer’s booklet.

As a general rule, companies are required to prepare financial statements in accordance with the International Financial Reporting Standards (IFRS). Colombia has adopted the IFRS as its official accounting standard to align with global financial reporting practices.

The offer documents must be published in the websites of the issuer, the offeror, the BVC and SIMEV.

Directors, as administrators, must act in good faith, with the loyalty and diligence of a prudent businessperson. Their actions must serve the company’s interests, taking into account the interests of its shareholders. Directors’ primary duties include making informed and careful decisions, ensuring equal treatment of all shareholders, avoiding conflicts of interest, maintaining confidentiality and ensuring regulatory compliance.

Although Colombian law does not require the formation of a special committee for a takeover offer or business combination, some companies establish support committees for the board of directors. These committees may be tasked with analysing and recommending either the approval or disapproval of an M&A transaction to the board.

If a director has a conflict of interest, regulations stipulate that they must abstain from participating in the decision unless authorised to do so by the board of shareholders.

Usually, the board is not directly involved in negotiations as they are limited to approving the transaction based on the information and recommendation provided by the management of the company.

Additionally, Article 6.15.2.1.19 of Decree 2555 of 2010, which regulates the financial, insurance and securities market sectors, incorporates the passivity rule for takeover bids. This rule restricts directors’ scope of action when a takeover offer is launched, prohibiting them from actions that would be permitted in the absence of such a bid such as issuing shares or convertible securities, performing operations on securities affected by the offer if it could disrupt it, disposing of any asset or group of assets representing 5% or more of the total assets or performing any act that is outside the company’s ordinary course of business or that could disrupt the offer.

The board typically mandates obtaining legal and financial advice from an independent contractor. It is not customary for a financial advisor to provide a fairness opinion, as their advice primarily consists of valuing the shares and/or the company.