Essential and non-derogable shareholder rights

In Official Letter 220-197373 of August 30, 2017, the Superintendence of Companies, when clarifying some concepts related to the right of inspection, indicated that this "belongs to the category of non-derogable rights of the associates, and it is an essential right that has a fundamentally informative purpose (...)". It is interesting to analyze, under this categorization made by the Superintendence of Corporations, what exactly are the essential and non-derogable rights of the shareholders and what is the implication of a right having such nature.

Since the law does not distinguish or grant degrees to the rights of the shareholders, it is necessary to resort to the jurisprudence and doctrinal studies that have arisen in this regard in order to approach the subject. Perhaps the clearest and closest precedent to understand what it means for a shareholder's right to be "essential and non-derogable" is found in an arbitration award rendered in 2007 by the Medellín Chamber of Commerce (Elio Sala C. vs. Química Amtex, et al.).

In such proceeding, once the Court had provisionally recognized its competence to act based on the arbitration clause established in the corporate bylaws, and the Litis having already been filed, the majority shareholders of the company (in their capacity as defendants) proceeded to amend the corporate bylaws to eliminate such clause so that when the Court had to make a substantive study of its own competence, there was no arbitration clause and therefore the Court should declare itself incompetent. The Court decided to declare itself competent -even though the arbitration clause had been repealed- under the understanding that, more than being part of the corporate bylaws (which can be amended by the majorities), the arbitration clause was part of the corporate contract and in such sense its modification should have the consent of all the contracting parties, including the minority affected by the measure.

Such decision confirmed the thesis of the plaintiff's attorney, Néstor Humberto Martínez Neira (today Attorney General of the Nation), regarding the difference between the corporate contract and the bylaws; the former being the contractual agreement (modifiable only by the intervening parties) and the latter being the instrument through which it is materialized (modifiable by the majorities provided therein).

Thus, which rights of the partners or shareholders could be considered as essential and non-derogable? The first, undoubtedly, is the right to a dividend. Since the distribution of profits is an element of the essence of the corporate contract, it is clearly unthinkable that a company could exist in which one of the shareholders is deprived, by majority vote, of the right to the dividend.

Another different thing is that the majority vote is not to distribute dividends (for all) or that such shareholder voluntarily renounces to it, which can occur for different reasons and is valid. The second is the right of inspection, in which the shareholders may review the documents pertaining to the company's operations. The third is the right to be summoned to the company's shareholders' meetings, where they may exercise their political rights (voice and vote). The fourth is the right to resolve their disputes in the forum contractually chosen by the participants, a precedent that was established in the Elio Sala C. case.

The essential and non-derogable rights of the shareholder must be studied and matched with the flexibility and freedom brought by the law that created the S.A.S. (Law 1258 of 2008). Such law establishes that several types of shares can be created (including, according to Oficio 220-111526 of June 1, 2017 issued by the Superintendence of Corporations, shares without economic rights), the call to meetings can be waived (Art. 21), the vote can be divided (Art. 23), shareholders can be excluded by majority vote (Art. 39), among many other matters that may seriously violate the essential and non-derogable rights that shareholders have as shareholders.