In general, private debt restructuring is viable where major creditors have the corporate and regulatory ability, as well as the financial capacity, to extend the payment terms of obligations in their favour. However, debtor companies often have to negotiate with the social security authorities, which are not allowed to settle the terms of obligations in their favour.
The government recently submitted to Congress a bill proposing amendments to the insolvency regime. The proposal outlines a single regime for debt restructuring, bankruptcy and liquidation proceedings for companies and individuals. While overall the proposed bill appears beneficial, a number of areas of concern must be resolved before it is finally approved.
Colombian companies have begun to use the US Chapter 11 proceedings as an alternative to Colombian proceedings. However, procedural problems and legal questions exist as to the enforceability and binding effect in Colombia - or other jurisdictions in which a Colombian company has creditors, assets or payment obligations to fulfil - of decisions handed down in the US courts.
Including: Existing Legislation; Successes; Criticisms; Proposal.
The Colombian Superintendency of Corporations has issued several circulars and advisory opinions for the interpretation of Law 550/1999, which deals with the appointment of an administrator of insolvency proceedings.
The Ministry of Finance has established criteria that must be met before tax obligations may be negotiated in restructuring proceedings. In special cases, insolvent entities may be given up to seven years to pay back taxes.
Several insolvency issues have recently been the subject of opinions issued by the Superintendency of Corporations. These opinions deal broadly with the enforcement of third-party securities in the event of restructuring, and specifically with the rights of internal creditors and the measures that should be taken to ensure registration of credit is noted.
Including: The Restructuring Agreement; The Negotiation Process; Approval of the Agreement; Termination of the Agreement; Reversal of Acts and Contracts; Debt Treatment; The Superintendency of Corporations; Mandatory Liquidation Procedure
Law 550 introduced a new pro-debtor insolvency regime in Colombia. It aims to promote agreements to restructure companies that are insolvent or at risk of becoming insolvent. Additional regulation has been enacted amending existing provisions on bad debt reserves of financial entities, in order to make them compatible with the new restructuring law.