A foreign company cannot establish more than one branch in Colombia

Under applicable law, foreign companies wishing to permanently establish their business in Colombia must incorporate a branch. Now then, even though the foreign company is entitled to open as many commercial establishments as it deems necessary, it can only establish one branch with a single domicile in Colombian territory.

The Superintendence of Companies recently clarified this issue through a legal Concept No. 220-046746 of March 25th , 2015; reminding foreign companies this requisite remains unchanged and valid in Colombia for the following reasons:

i) The branch is a subsidiary of the parent company, which is in and of itself a unique legal entity. Accordingly, no other branch of the same parent company could be established in Colombian territory for it would imply that such company would be in capacity of severally acquiring and exercising rights and obligations, which in fact is impossible given that this attribute is indivisible and non-transferable.

ii) From an equity perspective, whether owners’ or stockholders equity, there is but a single equity account, which belongs to the foreign company. Consequently, the establishment of two branches would affect neither the structure nor the equity account of the parent company, which are, in fact, one and the same.

iii) If a foreign company were to establish more than one branch, it would not only create uncertainty among third parties with regard to their corporate names -which would necessarily have to be the same as their parent company-, but also inhibit their registration before the relevant Chamber of Commerce based on homonymy controls.

iv) Likewise, it would be impossible to submit independent accounting records for more than one branch of the parent company in the corporate books registered before the relevant Chamber of Commerce, given such records must be unique and integral.

v) Finally, given their special nature, insofar as regulations applicable to foreign companies and their branches significantly differ from those applicable to national corporations.

Conclusion
This report aims to help foreign companies willing to permanently establish their business in Colombia, which under applicable law are required to establish a branch in the national territory. Notwithstanding the fact that a parent company may not open more than one branch for the abovementioned reasons, it shall be entitled to open as many offices and/or commerce establishments as it deems necessary to carry out its business activities.