The Superintendency of Securities, the entity in charge of regulating the Colombian securities market, has issued Resolution 0275, dated May 23 2001, which constitutes an important breakthrough for the implementation of corporate governance standards in the Colombian corporate sector.
Resolution 0275 sets the minimum requirements that private and public entities (except for the state itself) must fulfil so that pension funds may invest in the securities issued by such entities.
Under the new regulation, in order for public or private entities to be able to receive investments from pension funds, they must first guarantee the protection of all shareholders and investor's rights and must adopt specific mechanisms that allow minority shareholders to:
- evaluate and control the administrators' activities;
- identify, prevent and disclose conflicts of interest;
- elect fiscal auditors in a transparent manner;
- implement adequate internal control mechanisms;
- request a general shareholders' meeting whenever it is clear that such a meeting is necessary in order to protect their rights; and
- conduct, at their own cost, audits of the respective entity, through recognized auditing firms.
Given that disclosure of corporate governance mechanisms within each entity is fundamental for the protection of minority shareholders' rights, the entities subject to the new regulations must inform the general public of the criteria and all relevant aspects of decision making procedures. They are also required to provide the public with accurate and complete information regarding, among other things, their financial status, the persons that compose their corporate bodies (such as board members, administrators and internal control authorities), and details on the external audits they have been subject to.
All of the corporate governance standards included in Resolution 0275 are to be compiled into a single Código de Buen Gobierno (Good Governance Code), which must, at all times, be available to all shareholders and investors.
Private investment is crucial for the recovery of the Colombian economy. The implementation of corporate governance standards which guarantee minority investors' rights and prevent abuse from majority shareholders and investors, is an important step towards a stronger and more mature stock market in Colombia.