How to Invest in Colombia

August 14, 2023

Businesses and entrepreneurs looking to invest in Colombia and enter the Colombian market have a wide range of options to allocate their funds. From a comprehensive perspective, the various options for these private entities range from establishing new businesses, expanding through the opening of foreign branches, to purchasing properties and investing in shares of local companies.

However, when intending to undertake investment activities in a country's market, it's essential to familiarize oneself with its legal framework to understand the regulations governing such transactions.

In this blog, we will explore the different forms of investment options in Colombia for both domestic and foreign businesses and entrepreneurs, and the legal norms to consider before investing.

Ways to Invest in Colombia:

Businesses have a variety of options to enter the Colombian market, depending on factors such as their economic activity, commercial operations, presence within the national territory, and others.

Among the methods to invest in Colombia, we can mention the following:

• Starting a company in Colombia.
• Establishing a foreign branch in Colombia.
• Purchasing properties or real estate.
• Acquiring shares in a Colombian corporation.
• Setting up a franchise.

1. Starting a Company in Colombia:

For those looking to invest in Colombia, establishing a company or business entity is a prudent decision for entering the Colombian market.

Among the numerous benefits of forming a legal entity, such as a commercial corporation, the distinction between the company and its partners regarding liability stands out. Additionally, depending on the business transactions entrepreneurs aim to conduct and their intended duration of stay within Colombian territory, establishing the company might be a legal requirement.

The steps to start a company in Colombia are:

1. Check the availability of the company name.
2. Choose the type of corporate structure.
3. Draft the corporate bylaws.
4. Register with the Chamber of Commerce.
5. Enroll in the Single Tax Register (RUT).
6. Record the official company books.
7. Obtain the invoicing resolution.
8. Open a bank account.

If you are considering establishing a company in Colombia, we invite you to read our article, where we detail all the steps to start a business. Access the information by clicking on this link.

2. Establishment of a Foreign Branch in Colombia

Foreign companies looking to expand their businesses and operations into Colombia have the option to open branches of their already existing company within the country. In this regard, companies with a headquarters abroad can establish a Colombian branch, and it will be these headquarters that oversee the commercial operations and labor activities.

This process of setting up a foreign company or opening a foreign branch is governed by the Colombian Commercial Code and other Colombian legislation. Therefore, they will be subject to registration procedures and legal requirements within the country.

What is a Branch?

In the Colombian Commercial Code, branches are defined as:

"... Commercial establishments opened by a company, within or outside its domicile, for the development of the company's business or part of it, managed by agents with powers to represent the company."

In this context, branches are foreign companies domiciled in Colombia for the execution of the business plan of a parent company abroad.

If you want to know the requirements to open a branch in Colombia, we invite you to read our publication by following this link.

3. Purchase of Real Estate or Properties

There are several reasons why an individual or legal entity chooses to buy properties in Colombia. These can be for personal use, when the buyer is an individual, or for rental purposes or the establishment of offices, when the buyer is a legal entity or corporation.

Foreigners can purchase real estate or properties in Colombia; however, they must meet the legal requirements stipulated for the formalization of the legal transaction. Among the steps to purchase properties in the country, the following can be highlighted:

1. Title search.
2. Drafting of a purchase agreement.
3. Payment and legalization of funds.
4. Preparation of the public deed.
5. Formalization of the purchase and settlement of notary expenses.

Source: www.agtabogados.com/blog/como-comprar-una-propiedad-en-colombia/

Do you need a visa to purchase property in Colombia?

Foreigners wishing to buy properties in Colombia do not need a visa to finalize the purchase. In other words, having a valid Colombian visa is not a prerequisite to purchase real estate in the country.

However, foreigners who have acquired a property whose value exceeds 350 times the Minimum Monthly Legal Wage (SMLMV) and the title is exclusively in that person's name may apply for an Investor M Visa with the Ministry of Foreign Affairs.

The Investor M Visa allows the property owner to legally and regularly enter Colombian territory for the conduct of their business activities, if applicable. This visa can be valid for up to 3 years.

If you have purchased a property in Colombia and want to apply for your visa, or are in the process of making the purchase, do not hesitate to contact AGT Attorneys. In our firm, we have specialists in Real Estate Law who will advise you throughout the purchase process in Colombia, and specialists in Immigration Law who can handle your immigration proceedings with the Ministry of Foreign Affairs.

You can contact us by filling out this contact form or by calling (310) 5706331.

4. Purchase of shares in a Colombian company

Shares are securities that represent a portion of a company's share capital. As a result, when a person acquires shares of a company, they become a shareholder and gain economic and political rights. Accordingly, companies can represent their capital in shares, considering the type of corporate structure chosen at the time of incorporation.

Since the introduction of the simplified joint-stock company or S.A.S. through Law 1258 of 2008, Colombian companies often opt for this corporate structure when forming their businesses due to the advantages it offers, such as the issuance of shares.

With this in mind, those wishing to invest in Colombia have the option to acquire shares in Colombian commercial companies and thereby become partners in these firms.

Shares, as previously mentioned, are securities representative of share capital and can come in various forms. Shares in Colombia will be registered and can be of the following types:

1. Common shares.
2. Preferred shares.
3. Industry shares.
4. Shares with preferential dividends and without voting rights.
5. Shares with a fixed annual dividend.
6. Paid-up shares.

If you or your company are considering acquiring shares of a Colombian corporation, we invite you to read our blog about the different types of company shares by clicking on the following link to understand their benefits and commercial advantages: here.

Do you need a visa to buy shares in Colombia?

Foreigners who have acquired a stake in the share capital of an operating commercial company can apply for a Partner M Visa with the Colombian Ministry of Foreign Affairs. However, foreigners wishing to purchase shares do not need a visa to complete the acquisition.

Thus, foreigners looking to apply for the Partner M Visa must meet the general visa requirements in Colombia and demonstrate their participation in the paid capital of a company for an amount not less than 100 times the legal minimum monthly wage (SMMLV).

5. Setting up a Franchise

In recent years, the franchise business model has gained popularity in Colombia, with around 600 brands operating under this legal and commercial scheme within the country. Consequently, an increasing number of both Colombian and foreign companies are acquiring franchises in the nation due to their market success.

A franchise is a type of legal contract or agreement in which one company grants another the right to market certain products or services within a specified geographic area and under set conditions.

Entrepreneurs and business owners find numerous benefits in the model provided by a franchise. This is because the growth of a franchise typically tends to be quite rapid, benefiting from the experiences of other previously established franchises under the same brand and the expertise of the franchisor.

To acquire a franchise, the first step is to sign the franchise agreement and establish the terms and conditions to which both parties are bound. Hence, seeking legal advice from Intellectual Property specialists is essential for both sides, laying out provisions that safeguard the franchisor's know-how and the methods through which it will be conveyed to the franchisee.

Do You Need Legal Advice for Investing in Colombia?

The various ways to invest in Colombia – whether through starting a business, establishing a foreign branch, purchasing real estate, acquiring shares in a Colombian company, or setting up a franchise – present a promising outlook for growth and profitability.

However, each of these investment avenues has its own intricacies and demands a comprehensive understanding of various legal domains, including Commercial Law, Immigration Law, and Intellectual Property Law. Therefore, securing personalized advice from attorneys specialized in these legal areas will be advantageous for those looking to invest in Colombia, taking into account all the contractual and legal implications necessary for such business operations.

At AGT Attorneys, we have specialists in the aforementioned legal areas (Commercial, Immigration, and Intellectual Property) who will guide you and your company through all the necessary legal processes to validate your investment in Colombia. We will handle the drafting of the relevant contracts, visa procedures with the Foreign Ministry when applicable, among other tasks.

Write to us on our Contact Form, schedule your legal appointment with our lawyers through the following link or contact us at +57 310 5706331.

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