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Restructuring and insolvency law in Colombia provides a legal framework for companies and individuals facing financial difficulties. The Colombian system aims to help debtors reorganize their business operations, preserve jobs, protect creditors, and if necessary, wind down operations in an orderly manner. The key piece of legislation in this area is Law 1116 of 2006, which establishes formal processes for both corporate restructuring and insolvency (liquidation). Special regimes also exist for specific entities such as financial institutions. The Colombian approach balances the interests of debtors needing relief and creditors seeking repayment.
Legal help is often necessary in restructuring and insolvency cases due to the complexity of the procedures and the high stakes involved. Typical situations where a lawyer is essential include:
Colombian restructuring and insolvency law centers around Law 1116 of 2006. The law distinguishes between two primary procedures:
Key aspects include:
The primary goal is to allow a financially distressed business to negotiate new terms with its creditors, continue operating, preserve jobs, and return to financial health while being protected from lawsuits or asset seizures during negotiations.
Any individual or legal entity that is domiciled in Colombia and is unable to pay its debts as they come due, or whose liabilities exceed its assets, may apply. This includes companies, individuals (with some differences), and non-profits.
While it varies by case complexity, most restructuring procedures last between 6 and 18 months, including negotiation of the restructuring agreement and court approval.
Most commercial companies are eligible, but entities like banks, insurance companies, and partially state-owned enterprises may have different regulations administered by other authorities.
Generally, contracts continue unless the court or the parties determine that ending them is in the best interest of the process. Essential service providers cannot stop providing services because of the insolvency filing.
Yes, under Colombian law, creditors can request the opening of an insolvency or restructuring process if the debtor meets certain criteria suggesting insolvency.
Priority typically goes to expenses related to the process, secured debts, labor claims, alimony, tax debts, and then unsecured creditors, following strict legal order.
If the process involves a business, personal debts (not related to the company) are not included. Personal guarantees provided by third parties may or may not be affected, depending on the court's findings and the restructuring agreement.
Directors are generally not personally liable unless they have engaged in fraud, gross misconduct, or breached their duties. However, misuse of company assets or concealment of information may trigger personal claims.
If the debtor does not comply with the approved restructuring plan, or creditors do not approve one, the process will often move to liquidation, where assets are sold to pay creditors according to legal priorities.
If you need further information or guidance, consider these resources:
Guides and publications from these organizations provide up-to-date overviews of procedural rules and rights for both debtors and creditors.
If you believe you need assistance with a restructuring or insolvency matter in Colombia, take the following steps:
Remember, early legal advice can help you preserve assets, minimize liability, and improve your chances of a positive outcome, whether you are a debtor or a creditor in Colombia.
