Colombia Update: New Causes of Dissolution for Non-Profit Entities

Non-Profit Entities (“ESALES”) play a crucial role in society, since they are dedicated to promoting social, cultural, environmental welfare, among others, without pursuing economic purposes for their associates or members. However, and like any legal person, its operation can come to an end.

In Colombia, the dissolution and liquidation process for ESALES is regulated by the Civil Code, and for entities domiciled in Bogotá, additionally by District Decree 848 of 2019. These rules clearly describe the grounds for dissolution, and the steps to ensure an adequate and legally valid closure.

It is worth noting that the causes of dissolution indicated in the aforementioned regulation include (i) the expiration of the term of duration, (ii) the decision of the highest body of the ESAL, (iii) the termination of the patrimony, (iv) the decision of the competent authority, as well as, (v) other causes that can be agreed in a statutory manner.

Within the recent National Development Plan “Colombia World Power of Life”, proposed by the government, three new grounds for dissolution have been introduced. The ESALES that incur in the behaviors indicated below, will be presumed as not active, and the competent authority of inspection, surveillance and control of plan must declare ex officio the dissolution and cancellation of its legal personality.

These grounds are as follows:

1. Duty of registration: The ESALES that have the legal duty to register with the Chamber of Commerce of their main domicile and do not do so within twelve (12) months following the entry into force of this Law.
2. Renew registration: ESALES that do not renew their registration for a term of three (3) years.
3. Report to the inspection, surveillance, and control authority: The ESALES that do not send the information required by their respective inspection, surveillance and control authority for three (3) consecutive years.

These three new causes are aimed at ensuring that the ESALES themselves maintain an active role in society, and likewise, comply with the requirements of transparency and accountability during their operation. This is beneficial for ESALES themselves, as it helps maintain trust with stakeholders, including beneficiaries, collaborators, donors, and government authorities.

With the above, we have seen that during this year there is a particular interest on the part of the state to unify the regulations applicable to the ESALES, however, these efforts still seem not to be enough and ultimately will depend on the local authorities, in whom their registration has been delegated, as well as their inspection, surveillance and control. Likewise, they are far from being able to cover all the gaps in the current regulation.

We hope that all these questions and gaps that arise with each new norm are complemented, and collected in the bill for this sector that has been working.

By LLOREDA CAMACHO & CO, Colombia, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact colombia@transatlanticlaw.com 

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