Types of company shares in the Colombian legislation
Companies can raise capital by selling equity interests. In Colombia, there are basically four (4) categories of company shares:
1) Ordinary shares: these are the most usual shares in the capital market. They bring for the company the possibility of financing without looking for debt alternatives (like a bank of personal loan), in order to raise capital for their development.
When acquiring an ordinary share, the holder becomes the owner of a proportional part of the company, with the right to voice and vote during the general assembly sessions. This kind of share may not receive annual dividends, because this decision is taken usually by the board of directors. The holder has also the right to transfer or sell the shares at any moment unless the right of preference has been agreed upon them (Articles 379 and 391, Code of Commerce).
2) Preferential shares: according to Article 381 of the Code of Commerce, the holders of this kind of shares have the right to receive a predefined payment of dividends, independently to the company's rentability. E.g., if the return is not the expected, or during the liquidation process, the company will give priority in the payment of dividends to the holders of preferential shares (in the quantity defined for each share).
Preferential shares are attractive for companies because allow their capitalization without giving the power of decision (a voice and vote) to new shareholders.
Apart from that, this kind of shares is difficult to find, because there is a low quantity of them in circulation.
3) Privileged shares: these are the less usual to find in the market because their emission requires at least approval from 75% o more of the shareholder present in the general assembly (Article 381, Code of Commerce). They give to the holder, the right of a voice and vote, and the same benefits of preferential shareholders during the liquidation process. They have also the right of preferential subscription and don't have a due date.
4) Industry shares: these are created to compensate for the contribution of services, work, technological knowledge, business secrets, technical assistance, and other kinds of payment obligations to the holder, who acquire the same rights of the ordinary shareholders.
In the case of the Simplified Actions Society (SAS), a relatively new (and very popular) kind of society introduced in Colombian legislation since 2008, it is possible to create other kinds of shares apart from the ones defined by the Code of Commerce, as long as the specific right is endorsed in the title (Article 10, Act 1258 of 2008). And there are also payment shares, allowed as a way of payment for the company workers (Paragraph, Article 10, Act 1258 of 2008). Nevertheless, this kind of society cannot offer its shares in the securities market, by the explicit legal provision of the Act 1258 of 2008.
It is important to say that according to Article 377 of the Code of Commerce, company shares can be nominatives or registered to the bearer. Nevertheless, Decision 291 of the Andean Community of Nations has set that the capital of the companies must be represented only by nominative shares. As a result, there are not shares registered to the bearer in our country. Preferential and privileged shares exist in Colombian legislation since 1995.
Sources:
(Juancan_Rodriguez) (2020, May 27). ¿Cuáles son los diferentes tipos de acciones? In Rankia. Retrieved from: https://www.rankia.co/blog/analisis-colcap/4154927-cuales-son-diferentes-tipos-acciones
(2018, January 29) Acciones: clasificación según la ley mercantil y excepciones para la SAS. In Actualícese. Retrieved from: https://actualicese.com/acciones-clasificacion-segun-la-ley-mercantil-y-excepciones-para-las-sas/
(n.d.) Las sociedades por accciones simplificadas. In Activo Legal. Retrieved from: http://www.activolegal.com/web/index.php/noticias/actualidad/337-
(n.d.) Tipos de acciones en la S.A.S. In Blasco Ibañez Abogados. Retrieved from: http://blascoibanezabogados.com/web/tipos-de-acciones-en-las-s-a-s/
(2018, February 18). Las acciones de la SAS pueden tener valores nominales diferentes. In Portafolio. Retrieved from: https://www.portafolio.co/negocios/empresas/las-acciones-de-la-sas-pueden-tener-valores-nominales-diferentes-514403
1) Ordinary shares: these are the most usual shares in the capital market. They bring for the company the possibility of financing without looking for debt alternatives (like a bank of personal loan), in order to raise capital for their development.
When acquiring an ordinary share, the holder becomes the owner of a proportional part of the company, with the right to voice and vote during the general assembly sessions. This kind of share may not receive annual dividends, because this decision is taken usually by the board of directors. The holder has also the right to transfer or sell the shares at any moment unless the right of preference has been agreed upon them (Articles 379 and 391, Code of Commerce).
2) Preferential shares: according to Article 381 of the Code of Commerce, the holders of this kind of shares have the right to receive a predefined payment of dividends, independently to the company's rentability. E.g., if the return is not the expected, or during the liquidation process, the company will give priority in the payment of dividends to the holders of preferential shares (in the quantity defined for each share).
Preferential shares are attractive for companies because allow their capitalization without giving the power of decision (a voice and vote) to new shareholders.
Apart from that, this kind of shares is difficult to find, because there is a low quantity of them in circulation.
3) Privileged shares: these are the less usual to find in the market because their emission requires at least approval from 75% o more of the shareholder present in the general assembly (Article 381, Code of Commerce). They give to the holder, the right of a voice and vote, and the same benefits of preferential shareholders during the liquidation process. They have also the right of preferential subscription and don't have a due date.
4) Industry shares: these are created to compensate for the contribution of services, work, technological knowledge, business secrets, technical assistance, and other kinds of payment obligations to the holder, who acquire the same rights of the ordinary shareholders.
In the case of the Simplified Actions Society (SAS), a relatively new (and very popular) kind of society introduced in Colombian legislation since 2008, it is possible to create other kinds of shares apart from the ones defined by the Code of Commerce, as long as the specific right is endorsed in the title (Article 10, Act 1258 of 2008). And there are also payment shares, allowed as a way of payment for the company workers (Paragraph, Article 10, Act 1258 of 2008). Nevertheless, this kind of society cannot offer its shares in the securities market, by the explicit legal provision of the Act 1258 of 2008.
It is important to say that according to Article 377 of the Code of Commerce, company shares can be nominatives or registered to the bearer. Nevertheless, Decision 291 of the Andean Community of Nations has set that the capital of the companies must be represented only by nominative shares. As a result, there are not shares registered to the bearer in our country. Preferential and privileged shares exist in Colombian legislation since 1995.
Sources:
(Juancan_Rodriguez) (2020, May 27). ¿Cuáles son los diferentes tipos de acciones? In Rankia. Retrieved from: https://www.rankia.co/blog/analisis-colcap/4154927-cuales-son-diferentes-tipos-acciones
(2018, January 29) Acciones: clasificación según la ley mercantil y excepciones para la SAS. In Actualícese. Retrieved from: https://actualicese.com/acciones-clasificacion-segun-la-ley-mercantil-y-excepciones-para-las-sas/
(n.d.) Las sociedades por accciones simplificadas. In Activo Legal. Retrieved from: http://www.activolegal.com/web/index.php/noticias/actualidad/337-
(n.d.) Tipos de acciones en la S.A.S. In Blasco Ibañez Abogados. Retrieved from: http://blascoibanezabogados.com/web/tipos-de-acciones-en-las-s-a-s/
(2018, February 18). Las acciones de la SAS pueden tener valores nominales diferentes. In Portafolio. Retrieved from: https://www.portafolio.co/negocios/empresas/las-acciones-de-la-sas-pueden-tener-valores-nominales-diferentes-514403
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