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Legal News No.

12 December 2011

NEWS OF INTEREST GRUPOSURA FROM COLOMBIA ACQUIRES LATIN AMERICA INGS OPERATION GROUP Within the acquisition process of the assets of ING Latin America, operation that has an estimated value of U$ 3.700 million, RODRGUEZ-AZUERO ABOGADOS firm has advised GRUPOSURA in the process of negotiating contracts, has coordinated the Latin-American law firms that lead the process in each country and has managed the authorization process of the operation before the Finance Superintendence (Superintendencia Financiera de Colombia), which was obtained on 7 December. RODRGUEZ-AZUERO ABOGADOS has also provided legal counsel to GRUPOSURA in the recently held non-voting preference stock issuance and placement for the amount of 3.9 billion Colombian pesos. This process became the largest private stock issue in Colombian history, the most important conducted to date in the MILA and the largest in Latin America in 2011 to date. OPPORTUNITY COLOMBIA We provided consultancy in the creation of a collective management trust mechanism that currently includes 20 participants, destined to performing projects to invest in mid-sized companies, for its development in four strategic sectors. LAFISE We acted as legal representatives in the creation of the Representation Office in Colombia of the Central American Group LAFISE and we provided support in the first syndicated credit operation performed by this group in the country. NEW PRODUCT: OVERVIEW YEARLY

We are offering our clients the possibility of reviewing the regulations dictated in the previous year for their sector, not only looking to achieve a fluid integration with the preexisting doctrine, jurisprudence and general dispositions, but also to attempt, based on the analysis performed with the entitys executive committee, to identify the strengths and weaknesses and submit them to management analysis.

This product, already used with great success by several financial entities, can be offered to trust companies, banks, stock brokers and insurance companies, to quote some relevant examples.

CONCEPTS BASEL III IN RESPONSE TO THE FINANCIAL CRISIS By: Sergio Rodrguez Azuero Through an invitation by Limas Universidad Catlica, a debate on the current approach to the financial crisis was held with the participation of the British specialist Andrew Powell, currently with the IDB, and of our partner Sergio Rodrguez Azuero. The debate touched upon different strategies or decisions that have been adopted or are considered upon the current events, including the Basel III proposal as an adequate response to the events. In our opinion this proposal, by itself, is unsatisfactory as it is restricted to toughen the way to increase, structure authorize capital, a recurring element in the Basel proposals since its start, as if any problem could be solved by the size of this variable and not through others that say that this can be achieved through mentality and the management of banks. In fact, the American problem was the result of a combination of lack of supervision and inadequate allocations. That is, it was a problem of exponential increase of contaminated assets and not of capital. The truth is that the main banks lacked the necessary capital compared to the volume of undesirable operations generated. But the greatest fault was that no one demanded that they comply with the minimum established by Basel. In summary, there was no lack of regulation but derived permissibility, maybe, in the possibility of building their own risk measurement models allowed in Basel II. Furthermore, there is no evidence that suggests that, if properly capitalized, the crisis would have not occurred. The European banking struggles increase, not only as a result of the existence in some countries of real estate bubbles but also as a result of the risk level in very important banks, derived from the placement of public debt papers in certain countries, under the subliminal recommendation of investing in those highlighted in Basel I, by considering them zero risk assets; what we have always criticized.6 The Basel recommendations are sound but mechanical and insufficient before the situation. The mistake of the of the people responsible for the most affected countries regulatory policies would be in understanding that, upon the crisis, the solution would be in dictating new dispositions without understanding that, whichever their
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See relevant conferences dictated by Sergio Rodrguez Azuero in different countries and different moments that, without ignoring the important contributions of Basel, have criticized several of its approach definitions and are available in the offices website: www.rodriguezazuero.com

scope would be, these would result insufficient if not enforced. And, above all, that the regulations for capital must be complemented with measures that guarantee the presence of ideal and law abiding administrators, who receive exemplary sanctions if they were to breach them. More regulations, maybe and marginally but, above all, better supervision, as is the general case with the Latin American banking system. THE TRUST AND COLOMBIAN FIDEICOMISO By: Sergio Rodrguez Azuero In the first Latin American meeting of STEP (Society of Trust and Estate Practitioners) held midway through November in Panama, our founding partner made an interesting presentation to show how, despite Latin American countries being part of the so called civil law countries, the reality is that there is not the slightest influence of French law or Roman law in the conformation of the Latin American trust or of the commercial trust, as we call it in Colombia. On the contrary, considering the background, it is clear that both the expressions of the Chilean and Colombian civil codes have a strong Anglo-North American influence, as these regulate a limitation in property and creates separation from the modern figure, but become a preceding reference, as are the THE

influences of the Kemmerer Mission that came to several countries during the twenties and thirties in the previous century, but, in particular, the work of the Panamanian juror Alfaro in the year 24 and that of Mexican law in the year 26. For this reason, despite the differences, some with a historical explanation, the fidecomiso ends up being a functional equivalent of the trust; sharing essential similarities.7 THE COURT CONSIDERS THAT IT IS POSSIBLE TO WAIVE THE DISCONTINUANCE OF TRADE DURING THE SUBSCRIPTION AND/OR EXECUTION OF THE COMMERCIAL AGENCY CONTRACT By: Diana Surez Barbosa Through the October 19, 2011 ruling, the Civil Cassation Chamber of the Supreme Court, Reporting Judge, William Namn Vargas8, modified the jurisprudence on the waiver of the discontinuance of trade considered for the commercial agency contracts in subsection one of article 1324 of the Commercial Code. According to the Court, the condition of no-waiver of the discontinuance of trade, during the
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The documents corresponding to the offered conferences will appear on the previously noted website. 8 The co0mplete text of this ruling may be consulted in the firms website: www.rodriguezazuero.com

subscription and execution of the agency contract, was based on public order motives, this is a dynamic, mutable and changeable concept and, subsequently, it is evidenced that the contractual relation between agency and contracting party currently does not have influence over public order or good customs. Considering the above, the Court considers that the legal relationship generated from a commercial agency contract is solely of interest to the parties. In consequence, taking into account that there is no express norm that prohibits it, the parties could, within the autonomy of free will and contractual freedom, waive or modify the discontinuation of trade during the subscription, execution or termination of said contract. As declared by the Court: From this perspective, for the Court, according the correct interpretation of article 1324, first subsection of the Code of Commerce, the law regulated in the norm is of the contractual and patrimonial nature, it is incurred through the execution of the contract, makes it demandable at its termination for any reason and is susceptible to arrangement by the parties, made legitimate from the pact or during its execution, with the purpose of excluding, authorizing or modifying the percentage, the time or the calculation factors, increasing them or reducing them, and also to sign and execute all licit dispositive act, verbi gratia, conciliations, advanced

payments, dation in payment, compensations or transactions, in compliance with the law, acts that in principle are assumed as in compliance to the regulations and can be ineffective hoc eciam valet through transgression of the ius cogens, good costumes, or deficiencies in the validity suppositions, abusive use of dominating contractual power, abusive clauses, etc. CORPORATE GOVERNANCE IN FAMILY OWNED COMPANIES IN LIGHT OF THE COLOMBIAN GUIDE OF CORPORATE GOVERNANCE FOR CORPORATIONS 2009 OF THE SUPERINTENDENCE OF CORPORATIONS, CONFECAMARAS AND THE BOGOTA CHAMBER OF COMMERCE By: Diana Surez Barbosa In 2009, the Superintendence of Corporations, Confecamaras and Bogotas Chamber of Commerce issued the Colombian Guide for Corporate Governance for Corporations looking to present a series of measures aimed at promoting the sustainability of companies, especially family companies. This document highlights the importance of family owned companies both for the corporate environment as well as for the economy of the countries. Likewise, the Superintendence of

Corporations9 concluded that the viability of a company is greatly linked to its governability issues. The first of the five document guide modules is related to management control issues within the company. The second of the guide modules refers to the way the maximum social organ of the society should optimally operate. Regarding the third guide module, this one recommends the creation of tools that limit and give clarity to the specific functions and roles of the administrators, as well as of the members of the boards of directors and the legal representatives. The fourth module is related to the handling and the disclosure of information to the partners or shareholders, which must be done truthfully and completely. Finally, the fifth module is dedicated exclusively to the family companies and the specificities that must be taken into account for the elaboration and implementation of its good corporate governance. Based on this, the first thing that is proposed in this module to harmonize the relation between the company and the family is the structuring and implementation of a family government, which, in principle, is composed by three bodies or instruments: (i) the
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Family Assembly (ii) the Family Council and (iii) the Family Protocol. An important aspect to highlight in family companies is that most of them are overwhelmed by similar problems, which in general terms can be simplified in the lack of running of robust bodies and an inability to prepare for the future through human capital arising from the family itself. There are many solutions, however, the most important one is that the corporate family sits down to have a conversation that brings the specific problem out to the open and to elaborate the game rules that everybody has to follow in a participative manner and that must be elaborated based on some values and principles that guarantee the sustainability of the company, the family and the familys patrimony in the long term. 10 TAXPAYER IDENTIFICATION NUMBER (RUT): NEW PROCESSING REQUIREMENTS TO TAKE INTO ACCOUNT By: Ana Gabriela Garca The National Government, through its decrees 2645 and 2820 of 2011, modified the requirements to register or update the RUT, creating some additional requirements that must be directly processed in the DIAN offices by the legal representative, in the case of corporations, or directly by the
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Superintendence of Corporations, Causes for the Mandatory Liquidation of Companies in Colombia. Strategies to prevent the crisis, Bogota 2004, pages 52 and 53.

The complete article can be consulted in the firms website: www.rodriguezazuero.com

individual if that is the case, unless the interested party issues a special power of attorney to undertake this procedure. The additional requirements are:
Companies Original certificate of incorporation and legal representation, issued by the Chamber of Commerce of the place of domicile of the company, issued no more than one (1) month before Photocopy of the identification document of the person undertaking the procedure, presenting the original, whether this person is the legal representative of the company or its legal counsel Holders certificate of current or savings account issued no more than one (1) month before Individuals Photocopy of the identification document of the person undertaking the process, presenting the original, whether it is the individual or his/her legal representative IF the individual is responsible for presenting VAT, or is registered as an importer or exporter, holders certificate of current or savings account with issue date no greater than one (1) month Photocopy and presentation of an original of a public utility bill, different from land line or internet bills, dated no more than two (2) months and corresponding to the address reported in the RUT If the case is that of an individual that has no current or savings

from land line or internet bills, dated no more than two (2) months and corresponding to the address reported in the RUT.

account, and that must register as responsible for VAT, or as an importer or exporter, the other documents must be presented before the DIAN to request a preRUT, which must be presented before the banking entity in order to open an account. As soon as the bank account certificate is made available, the interested party must return with all the previously mentioned documents and with the pre-RUT for the issuance of the definite RUT.

Photocopy and presentation of original public utility bill, different

If its for a recently created company that has no current or savings account, the other documents must be presented before the DIAN to request a pre-RUT, which must be presented before the banking entity in order to open an account. As soon as the bank account certificate is made available, the interested party must return with all the

previously mentioned documents and with the pre-RUT for the issuance of the definite RUT.

1. Parties equivalent to the natural persons (individuals) regime are subject to reporting information. 2. The limit of gross income obligated to report decreases, currently five hundred million (COP$500,000,000) of the fiscal year. to be being pesos 2010

It is crucial to take into account that as requirements have increased, so have the times and difficulty to conduct the procedure, given that if the process is not directly performed by the interested party, it must be done through a legal representative that must be a lawyer. MAGNETIC MEDIA: RULINGS 11424 TO 11431 OF 2011 OBLIGATED AND INFORMATION TO REPORT NOVELTIES By: Lucas Antonio Solano The Taxes and National Customs Agency - DIAN, issued Rulings 11424 to 11431 of October 31, 2011, through which it points out the new subjects obligated to send information through electronic means, and the requirements that must be fulfilled. Ruling 11429 declares the parties subject to and the information requirements to be reported according to that contained in article 631 of the Tax Law. Parties subject to report 2011 fiscal period

3. Companies and de facto associations, beneficiaries of the progressivity in the payment of income tax established in Law 1429 of 2010 (job formalization and generation law) and beneficiaries of tax discounts to which articles 9, 10, 11 and 13 of the same law refer to, are included, regardless of the income during the 2010 fiscal year. 4. Individuals in the highest tax bracket must report information regardless of the amount of income received in the respective 2011 fiscal period. 5. People receiving income for third parties must report information, when the sum of their own income plus the income received from third parties in the year 2011 is greater than five hundred million pesos (COP$500,000,000). Information to report 1. Natural persons and equivalents that exceed the income limit must report: applied withholdings; withholdings applied to them; tributary discounts benefits; beneficiaries of payments or installments, that constitute cost, deduction or give right to tax

discounts; persons from which incomes greater to one million were received; information of people who received income on behalf of third parties and of the third parties on whose behalf the income was received; creditors for liabilities of any kind, debtors for concept of active loans; and the total or partial discrimination of the items consigned in the forms of the tributary declarations established in article 631 of the Tax Law. 2. The people beneficiary of graduated income and beneficiaries of the discounts of Law 1429 of 2010 mentioned above, must also report the information described in the previous numeral, according to the content of article 631 of the Tax Law. 3. Public law entities, investment funds, equity funds, mutual investment funds, collective portfolios, retirement and invalidity pension funds, consortiums, organized communities that have practiced at source tax withholding during the 2011 fiscal year, and the remaining individuals and corporations, illiquid successions and de facto associations when they have performed at source tax withholding for a total (accumulated) value equal or greater to three million pesos (COP$3,000,000) during the 2011 fiscal year, must report besides literal b) of article 631 (practiced withholdings) of the Tax Law, and literal e) (beneficiaries of payments or installments, that constitute cost,

deduction or discounts).

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4. The consortiums and temporary unions that, during the 2011 fiscal year, would have performed economic transactions (regardless of the amount of the received income) must additionally report for the year 2011 literals h) (creditors) and i) (debtors) of article 631 of the Tax Law. 5. People who receive income from third parties must report literal g) (people or entities from which income for third parties was received and of the third parties on whose behalf the income was received) of article 631 of the Tax Law. Method of reporting the information The information must be presented virtually using the IT services of the tax administration, using the digital signature, backed up with a digital certificate issued by the DIAN. THE DIAN DEFINED THE TAX VALUE UNIT (UVT) VALUE FOR THE YEAR 2012 By: Ana Gabriela Garca According to ruling 011963 of November 17, 2011, issued by the DIAN, the value of the UVT for the 2012 fiscal year is COP$26,049. Thus, it is important to consider the following values for 2012: The minimum sanction 2012 is COP$260,000. for

Individuals that want to classify for simplified regime cannot have contracts exceeding COP$85,962,000 during the year. The sanction for not presenting, or for presenting late, or for presenting with errors the exogenous information (magnetic media) in 2012, will be up to COP$390,735,000. The minimum amount from which an employer will practice at source tax withholding on the wages using the first procedure, is of COP$2,475,000.

The withholding established in article 173 of Law 1430 of 2010, regulated by decree 3590 of 2011, will be applied to independent workers who in 2012 receive payments under COP$7,815,000 monthly. The minimum value for at source tax withholding for general purchases will be of COP$703,000. The minimum value for at source tax withholding for general services will be of COP$104,000.