A foreign company entering the Colombian market usually faces three legal decisions early on: which vehicle to use, how to structure the relationship with a local agent or distributor, and how to secure its brand before sales begin. Below is what Colombian law says on each, with the official Spanish text in «» followed by an English rendering.
The SAS: the usual vehicle for a Colombian subsidiary
Article 1 of Law 1258 of 2008 provides: «La sociedad por acciones simplificada podrá constituirse por una o varias personas naturales o jurídicas, quienes sólo serán responsables hasta el monto de sus respectivos aportes» (the simplified stock company may be formed by one or more individuals or legal entities, who are liable only up to the amount of their respective contributions). The article does not limit shareholders to Colombian persons, and a single legal entity is enough. It adds that, except as provided in article 42 of the law, shareholders are not liable for the company’s labor, tax or other obligations. Article 42 applies where the SAS is used in fraud of the law or to the detriment of third parties: the shareholders and directors who carried out, took part in or facilitated the fraudulent acts answer jointly and severally for the resulting obligations and damages.
Article 5 sets out how the company is formed: by contract or unilateral act in a private document, registered in the commercial registry of the chamber of commerce of the principal domicile, stating, among other items, the shareholders, the name, the domicile, the capital and the management, with at least one legal representative. The document must be authenticated before registration, and «Dicha autenticación podrá hacerse directamente o a través de apoderado» (the authentication may be done directly or through an attorney-in-fact). Under article 7, until registration the company is treated as a de facto partnership if there are several partners, and if there is only one, «responderá personalmente por las obligaciones que contraiga en desarrollo de la empresa» (that person will be personally liable for the obligations incurred in running the business).
When a branch is required instead
Article 471 of the Commercial Code: «Para que una sociedad extranjera pueda emprender negocios permanentes en Colombia, establecerá una sucursal con domicilio en el territorio nacional» (for a foreign company to undertake permanent business in Colombia, it shall establish a branch domiciled in the national territory). Article 474 lists what counts as permanent, including «Intervenir como contratista en la ejecución de obras o en la prestación de servicios» (acting as a contractor in the execution of works or the provision of services). We first review what your company plans to do in Colombia.
Local agents and the payment due when the agency ends
Article 1317 of the Commercial Code defines commercial agency as the independent and stable assignment by which a merchant promotes or exploits business in a given line within a predetermined zone of the national territory, acting «como representante o agente de un empresario nacional o extranjero» (as representative or agent of a domestic or foreign principal).
The key rule is article 1324. When the agency ends, the agent is entitled to a sum equal to «la doceava parte del promedio de la comisión, regalía o utilidad recibida en los tres últimos años» (one twelfth of the average commission, royalty or profit received over the last three years) for each year the contract was in force, or the average of everything received if the contract lasted less. If the principal terminates without proven just cause, the second paragraph of the same article adds an equitable indemnity as compensation for the agent’s efforts to establish the brand, product line or services.
A foreign governing-law clause does not avoid these rules. Article 1328 states that agency contracts performed in Colombia «quedan sujetos a las leyes colombianas» (are subject to Colombian law) and «Toda estipulación en contrario se tendrá por no escrita» (any stipulation to the contrary shall be deemed not written). We calculate that exposure before any termination letter is sent.
Protecting your trademark before the SIC
Trademark filings in Colombia are handled by the Superintendencia de Industria y Comercio (SIC). For a foreign company entering the market, we run a clearance search, file in the name of the foreign company itself rather than letting a local partner file, answer office actions and oppositions, and keep a watch on new applications that could conflict with the mark.
How we work with foreign clients
We start with a short written plan: the vehicle we recommend, the corporate documents we will need from your home jurisdiction, the terms to negotiate with your local agent or distributor, and the trademark filings to make first. Fees are agreed in writing before work begins.
Frequently asked questions
Can a foreign company be the only shareholder of a Colombian SAS?
Yes. Article 1 of Law 1258 of 2008 allows an SAS to be formed by one or more individuals or legal entities, and article 5 allows formation by unilateral act.
Does a foreign company need a branch to do business in Colombia?
Article 471 of the Commercial Code requires a branch to undertake permanent business in Colombia, and article 474 lists the activities treated as permanent.
What do we owe our Colombian agent if we end the agency?
One twelfth of the average commission, royalty or profit of the last three years for each year of the contract, or the average of everything received if it lasted less (Commercial Code, article 1324). An equitable indemnity is added if you terminate without proven just cause.
Can our agency agreement with a Colombian agent be governed by foreign law?
Not for an agency performed in Colombia. Article 1328 of the Commercial Code subjects it to Colombian law and treats any contrary clause as not written.
Should our distributor register our trademark in Colombia for us?
We recommend filing in the name of your own company.
Talk to a commercial lawyer in Colombia
Write to us on WhatsApp with a short description of your company, what you plan to do in Colombia and whether you already have a local partner. We will reply with the next steps.
Related services in English
For the trademark side of your entry, see trademark registration in Colombia and trademark licensing and franchising. If a Colombian customer or distributor owes you money, see debt recovery in Colombia, and if you need a Colombian lawyer for a personal matter from abroad, see Colombian lawyer for clients abroad. Spanish-speaking teams can read our derecho comercial page. See also company formation in Colombia for foreigners.