NEW DECREE 046 OF 2024 IN COLOMBIA: A SIGNIFICANT CHANGE FOR ADMINISTRATORS AND AUDITORS

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Decree 046

The Decree 046 of January 30, 2024, issued in Colombia, has arrived to revolutionize the country’s corporate legal regime. This regulation introduces a legal definition of “conflict of interest” and establishes clear rules regarding acts of competition, which has a significant impact on transparency and legal certainty for company administrators. Below, we outline the key implications of this decree for administrators and auditors.

Definition of conflict of interest

One of the main novelties of Decree 046 is the legal definition of “conflict of interest,” which was previously non-existent in Colombian legislation. According to the decree, a conflict of interest arises when administrators have a direct or indirect interest that may compromise their judgment or independence when acting in the best interests of the company. This broad definition is beneficial as it encompasses various situations that could compromise the objectivity of administrators, ensuring greater protection for shareholders.

Legal consequences of conflict of interest

Decree 046 also establishes clear legal consequences for operations involving a conflict of interest. These include:

  1. Absolute Nullity: Acts carried out in conflict of interest are null and void, requiring them to be reverted to their previous state.
  2. Restitution of Benefits: Administrators and other beneficiaries of the operation must return the benefits obtained.
  3. Damages Repair: Administrators must repair the damages caused to the company and third parties. This introduces an important novelty in the liability regime, facilitating shareholders to sue for damages on behalf of the company.

Introduction of the derivative action

The decree introduces the “derivative action,” a legal tool that allows shareholders to sue on behalf of the company for damages caused by administrators in tainted operations. Previously, this figure did not exist in Colombian legislation, complicating the application of the liability regime.

Benefits and future of decree 046

Decree 046 of 2024 promises greater transparency and legal certainty, improving the protection of minority shareholders and strengthening the liability regime of administrators. This new legal framework facilitates shareholders to claim damages, something that was previously very difficult to achieve. This decree also represents a significant advancement in corporate jurisprudence, introducing innovative mechanisms that will allow for a fairer and more effective application of the law.

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