Corporate regulation to navigate through the crisis

From the financial crisis of 2007-09 it became clear that the role of the supervisor goes beyond being a mere overseer; it must also play an active role in regulating the activities of its supervised parties in order to foresee, mitigate, transit and overcome the crisis. This role has been assumed -in great detail- by the Superintendency of Companies as supervisory body, which has been proactive in accompanying the regulator in the issuance of the necessary rules to overcome the crisis. In the following lines, reference will be made to three of them, issued in August of this year, which have a high impact on business recovery.

First, on August 3, 2021, the Ministry of Commerce, Industry and Tourism (MinCIT) issued Decree 854 of 2021, which established the general indicators (indicator, dimension and formula) that must be used by the corporate administrators to verify the cause for dissolution due to non-compliance with the going concern hypothesis, and clarified that such situation would be verified at the time of preparing the general purpose financial statements at the close of the fiscal year.

The positive aspect of this Decree is that the going concern hypothesis -according to the thesis of Professor Juan Antonio Gaviria- once again becomes a rule (where, when contrasted with certain parameters, it may or may not occur) and ceases to be a broad and discretionary standard of the administrators, who became jointly and severally liable for the damages of its non-application.

Secondly, on August 10, 2021, the MinCIT issued Decree 890 of 2021, which regulated the regime of risk bonds that may be included in the reorganization agreements of Law 1116 of 2006 or Decree 560 of 2020 of the companies affected by the crisis generated by covid-19, and voluntarily subscribed by the interested creditors as a mechanism for capitalization of liabilities.

This Decree benefits the companies in crisis, since they can refinance their debt by generating -at the same time- a combined financial instrument (quasi-equity instrument) that can be freely traded and can be converted into shares, quotas or participation rights, as established in the agreement. This rule, in addition to offering a practical solution for debtors, creates a market for creditors.

Thirdly, on August 19, 2021, the MinCIT issued Decree 939 of 2021 by means of which the capital, interest, penalties or fines of credits in favor of the Dian and other State entities are regulated, which may be granted in order to help preserve the company and employment in the companies that have been seriously affected by the crisis generated by the covid-19 pandemic.

With the issuance of this Decree, such entities receive the express power to grant these facilities (subject to compliance with certain maximum percentages to be granted and the eventual existence of a Committee for the approval of rebates), thus avoiding the possibility of an investigation for the use of public resources (especially in relation to capital rebates).

The foregoing shows the efforts made by the Superintendency of Corporations and all its delegations (especially the insolvency delegation), in just one month, to ensure the smooth transit of companies in a crisis situation.