This content is from: Local Insights

Colombia

New restrictive practices in Colombia

The Colombian Superintendency of Securities has recently defined new illegal, non-authorized and insecure practices in relation to publicly-traded companies, with the purpose of protecting the rights of minority shareholders, and of guaranteeing transparent decisions at general shareholders meetings (Resolution 0116, February 27 2002).

These new practices include the following as prohibited and thus illegal practices for the officers and directors of a company:

  • the acceptance or recommendation to shareholders that they issue blank or very broad powers of attorney that would allow them representation and/or voting rights at general shareholders meetings;
  • the recommendation to shareholders that they should submit any specific proposal at these meetings; and
  • the recommendation to shareholders that they should vote in any specific way on the matters submitted to them.

Resolution 0116 also adopts a series of mandatory corrective measures that seek to guarantee the avoidance of such practices at general shareholders meetings in the future.

In practice, the effect of Resolution 0116 has already been felt because a large publicly-traded company in Colombia, was forced to change its summoning notice to its shareholders, previously published in the newspapers, by publicly informing its shareholders of the extent of this new regulation in order to avoid the type of documents or activities that are now prohibited.

Exclusivity clauses not always acts of unfair competition

Not all exclusivity clauses constitute per se acts of unfair competition according to the Colombian Superintendence of Industry and Commerce (opinion No 02008933). Only if the purpose and result of a specific clause is to restrict the access of competitors to a certain market or cause a monopoly in the distribution of goods and services can unfair competition be judged to occur.

The Superintendence of Industry and Commerce is the entity in charge of enforcing Law 256, which states that the inclusion of exclusivity clauses in supply contracts constitutes an act of unfair competition (article 19, Law 256, 1996). The law is concerned with the fact that such clauses may limit competitors' access to the market or create a monopoly for the supply of determined goods or services. And because the events that the law considers unfair are not rigid, it had previously been interpreted that the limitation for exclusivity clauses was applicable to all circumstances and contracts, not only supply contracts.

However, the prohibition against these type of clauses is not a general rule, since free competition and contractual autonomy play a significant role in determining the validity of the clause and therefore there may be circumstances where agreeing to an exclusivity clause may be valid. Nevertheless, when these exclusivity clauses in any way affect free competition they will automatically be considered acts of unfair competition.

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