How to Properly Close a Company in Colombia as a Foreigner

As a foreign business owner operating a company in Colombia, there may come a time when you need to dissolve and officially close down the enterprise. Whether due to retirement, changing business conditions, or any number of reasons, properly shutting down a company is a multi-step process that must be followed carefully to avoid legal issues or penalties down the road.

This guide will walk you through all the necessary steps for foreigners to close a Colombian company while abiding by the country’s corporate laws and regulations. While not an easy process, completing each phase thoroughly is critical to tie up loose ends and avoid future liabilities associated with the business entity.

By methodically working through dissolving the company, settling accounts, and canceling registrations, you can bring closure with confidence and peace of mind. Let’s dive into the first section…

Step 1: Review Corporate Documents

As a sole proprietor or single-owner of a small business in Colombia, the first step is to locate and review any existing corporate documents related to your company. However, for many smaller operations, you may not be sure where to find these records or if they even exist.

If you don’t have copies readily available, start by taking the following steps:

• Contact the Chamber of Commerce where your business is registered. Request copies of the Commercial Registration (Matrícula Mercantil), Articles of Incorporation (Escritura Pública), corporate bylaws, or any other documents they have on file.
• Check past tax filings like your NIT and ICA registrations. You may have submitted incorporation documents when first setting up the company.
• Consult a Colombian lawyer or accountant if you still cannot locate any corporate records. They can help research what founding documents may officially exist for your business entity.

The key is making your best effort to locate any legal contracts, registrations, or corporate bylaws that stipulate terms for closing down the company you’ll need to follow. If no such documents can be found, you can proceed by adhering to the standard legal process for company dissolutions outlined in Colombian corporate law.

Step 2: Settle Outstanding Debts and Liabilities

Before you can proceed with officially dissolving your Colombian company, it’s crucial to settle any outstanding debts, liabilities, or financial obligations the business owes. Leaving these unsettled can lead to legal issues, penalties, and complicate the closure process.

Accounts to Settle:

• Outstanding Loan Balances
• Final Payments to Suppliers/Vendors
• Unpaid Utility Bills
• Any Pending Tax Liabilities (Income, IVA, etc.)
• Leases or Rental Agreements to Terminate

Go through all company financial records carefully. Make a full list of any debts, liabilities, or contracted payment obligations that remain outstanding. For each one, you’ll need to either pay the outstanding balance in full or properly terminate/withdraw from the agreement according to the terms. Get written confirmation and receipts documenting settlement.

Tax Liabilities:

• File final income tax returns up to the closure date.
• Pay any outstanding income, VAT, or other tax balances.
• Obtain a “Zero Debt” certificate from DIAN confirming no pending tax obligations.

Only once you’ve fully settled and documented all outstanding debts, liabilities, and tax obligations can you move forward through the dissolution process properly.

Step 3: Hold Final Shareholders/Partners Meeting

For companies with multiple shareholders or partners, Colombian law requires holding an official final meeting to approve the dissolution of the business entity. 

Here are the key steps:

1. Issue Call for Final Meeting Per the bylaws, issue proper notice calling for a final shareholders/partners meeting stating the proposed dissolution will be voted on.
2. Achieve Quorum Ensure the required quorum of owners is present per bylaws.
3. Vote on Dissolution The owners must vote, with the required majority approving the dissolution according to the corporate governing documents.
4. Appoint Liquidator If not done previously, a liquidator must be appointed by vote to oversee the liquidation process.
5. Approve Liquidation Plan Review and approve a plan outlining the remaining assets to be sold, debts settled and how final distributions to owners will occur.
6. Record Minutes Prepare and record detailed minutes of the meeting including:

• Method of calling meeting and notice given
• Quorum verification
• For each decision: # of votes in favor, against, abstentions
• Approval of the full minute text
• Original signatures of president and secretary

If you are the legal representative, you may need to demonstrate your authority to call the meeting and act as the dissolution authority per bylaws.

For sole proprietorships, you as the sole owner can record a written resolution documenting your dissolution approval instead of a meeting.

Step 4: Notify Relevant Authorities

Notify the Directorate of National Taxes and Customs (DIAN) about the liquidation status of your company. DIAN will modify your RUT (tax identification) to include the words “in Liquidation” at the end of your company name. Additionally, notify the Chamber of Commerce and any other relevant government entities.

Step 5: Publish a Notice of Dissolution

Publish a notice of the company’s decision to liquidate in a widely circulated communication medium, such as a local newspaper. This publication should be clear and detailed, including the liquidator’s contact information to inform creditors and other interested parties.

Step 6: Prepare an Inventory and Liquidation Project

The liquidator, along with the company’s statutory auditor or accountant, must prepare an inventory of the company’s assets and liabilities, and create a detailed liquidation project, which includes:

• Inventory of assets
• Balance sheet
• Profit and loss statement
• List of liabilities and their payment status
• Indication and destination of remaining assets

Step 7: Approve the Liquidation

Hold another shareholders meeting to approve the liquidation project prepared by the liquidator. Ensure that the minutes of this meeting explicitly state:

• Any remaining assets/value after liquidation
• Unanimous approval or vote counts for approving the final liquidation accounting
• Approval of the final settlement/distribution plan

The properly recorded minutes containing these approvals are required documentation.

Step 8: Register the Final Settlement Account Certificate

Register the final settlement account certificate with the Chamber of Commerce, formally requesting the cancellation of the company’s business registry in Colombia.

Step 9: Cancel the RUT

Request the cancellation of the RUT before DIAN. Ensure that all tax returns and obligations arising during the liquidation process are settled, as failure to do so will prevent the effective cancellation of the RUT.

By following these steps, you can ensure a thorough and legally compliant closure of your company in Colombia, avoiding potential legal issues and penalties in the future.

Wrapping Up: Ensuring a Smooth Closure

Closing a company in Colombia is a complex and multi-step process that requires meticulous attention to detail. Each phase must be completed thoroughly to avoid future liabilities and ensure compliance with Colombian corporate laws. 

As a foreign business owner, navigating this process can be particularly challenging due to language barriers and unfamiliarity with local regulations.

At YellowKey Capital, we specialize in helping foreigners manage their business affairs in Colombia, including the dissolution and liquidation of companies. 

Our team of experienced professionals can guide you through each step, ensuring a smooth and legally compliant closure. From reviewing corporate documents to settling outstanding debts and notifying relevant authorities, we handle the complexities so you can focus on your next venture.

While this guide provides a comprehensive overview, certain parts of the process will require legal expertise. We recommend consulting with our legal team to ensure all aspects are covered, and your company’s closure is handled efficiently and correctly.

For personalized assistance and to learn more about our services, contact us today. We’re here to make your business journey in Colombia as seamless as possible.