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The Evolution of Corporate Law in the Global South: Some Evidence from Colombia

The Evolution of Corporate Law in the Global South: Some Evidence from Colombia

Juan Pablo Amaya
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February 14, 2025

The Evolution of Corporate Law in the Global South: Some Evidence from Colombia

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A growing body of literature, spearheaded by Mariana Pargendler’s pathbreaking scholarship, explores the role of Global South countries in fostering innovation in corporate law and governance. While recent studies have primarily focused on Brazil, India, China, and South Africa, important lessons in corporate law can also be drawn from elsewhere in the Global South.

One such example is Colombia—a jurisdiction often overlooked in comparative legal studies—where corporate law and its enforcement have evolved substantially over the past two decades. The primary force driving the evolution of Colombian corporate law has been the country’s ‘Delegatura de Procedimientos Mercantiles,’ a specialized business court launched in 2012 that quickly became a powerhouse for innovative and groundbreaking decisions in this area of law (hereinafter, the ‘Colombian Business Court’ or ‘Court’). Following in the footsteps of the Delaware Court of Chancery and the Israeli Business Court, the Colombian Business Court has produced an extensive body of corporate law precedents unmatched by the country’s traditional court system, having issued over 1,000 opinions to date.


Over the years, the Colombian Business Court has developed enduring principles and rules to address various types of corporate disputes, with a special focus on conflicts between minority shareholders and powerful controllers. The Court’s decisions could help shape developments in corporate law abroad, particularly in other jurisdictions dominated by controlling shareholders. In an effort to highlight some of the Court’s notable work—well deserving of extensive study—this summary reviews some of its key contributions in four areas of corporate law: related-party transactions, minority freeze-outs, directors' duties and liabilities, and piercing the corporate veil.

  • Related-party transactions. Some of the Court’s most renowned decisions focus on controller self-dealing through related-party transactions. In the landmark Handler opinion of 2015, the Court introduced a game-changing rule, asserting that dealings between a company and its controlling shareholder inherently constitute a ‘conflict of interest’ for the managers executing them. This conflict—which arises from the controlling shareholder’s ability to appoint and remove managers—automatically triggers a demanding cleansing process that, among other safeguards, grants minority shareholders a voice in the transaction and access to the information needed to make an informed decision. The Handler ruling has been pivotal in protecting minority shareholders in Colombia, where large-scale abuses and expropriation by the proverbial ‘800-pound gorilla’ are commonplace and often slip under the radar. This decision has strongly influenced subsequent caselaw, regulations, and legislative proposals, paving the way for better policing of controlling shareholder transactions.

    In the Gyptec ruling of 2016, the Court further held (in obiter) that controlling shareholders owe a fiduciary duty of loyalty to their fellow stockholders, rooted in the principle of good faith that governs contractual performance. This dictum was groundbreaking for two main reasons: first, Colombian corporate statutes and prior caselaw were silent on whether shareholders qua shareholders have a reciprocal duty of loyalty, granting wide leeway to controllers in exercising their corporate powers. Second, the Court stated that a breach of this fiduciary duty of loyalty entitles the aggrieved minority shareholders to bring a direct liability claim against the controller. This created a legal avenue previously unavailable in Colombian litigation, as claims arising from breaches of fiduciary duties had traditionally been limited to managers and directors (or, at most, to controllers declared de facto or shadow directors). Together with Handler, the Gyptec ruling has fostered a more pro-minority shareholder environment in Colombia and contributed to higher (though still not optimal) levels of shareholder litigation in the country.

  • Freeze-outs. In the Embohuila case, the Court sowed the seeds of a new framework for judicial review of freeze-out transactions in Colombia. Drawing on well-known Delaware precedents—such as Tanzer, Weinberger, and MFW—the Court advocated for the application of a stringent standard of review to minority freeze-outs, given the inherently coercive nature of these transactions. Under this standard, the Court will conduct a substantive scrutiny of the transaction’s fairness to the corporation and its shareholders, in accordance with Colombian rules governing cleansing of related-party transactions. Additionally, the Court introduced novel guidelines allowing the burden of proof to shift to the plaintiff when controllers deploy procedural safeguards that mirror arm’s-length transaction terms, echoing, to some extent, the approach of the Delaware Supreme Court in Khan v. Lynch. Apart from its contributions to the treatment of minority freeze-outs, Embohuila underscores the Court’s ability to discern standards from common law systems and tailor them to Colombia’s distinct legal and procedural framework.

  • Directors’ duties and liabilities. In the Pharmabroker case, the Court delivered another groundbreaking ruling, elegantly weaving the business judgment rule (BJR) into Colombian corporate law. The BJR was introduced in a concise two-page opinion in 2013, where the Court dismissed the plaintiff’s liability claims against a former manager of Pharmabroker, stating: ‘It is not within this Court’s authority to scrutinize business decisions made by managers, except in cases where illegal, abusive, or conflict-of-interest-tainted actions are proven.’ By adopting the BJR, the Court parted ways with entrenched caselaw and academic literature that had long posited the unlimited liability of managers and directors for any damages caused to the corporation. In doing so, the Court laid the groundwork for a modernized regime on directors’ duties and liabilities in Colombia. Over the decade following its introduction in Pharmabroker, the BJR was consistently applied by the Court, gained acceptance from the Colombian Supreme Court of Justice, and by 2024, had made its way into regulation and an ongoing legislative initiative.

  • Piercing the corporate veil. The Court has gone to great lengths to punish fraudulent uses of corporations and their core attributes, under the doctrine of ‘piercing the corporate veil.’ The Colombian formulation of the doctrine, as developed by the Court, encompasses two main variants distilled from common-law jurisprudence. First, the Court will disregard a corporation’s separate legal personality when it is used to evade an existing prohibition or obligation, as seen in ‘impropriety’ cases predominantly developed in the UK. A salient example is the landmark Monica Colombia ruling of 2013, in which the Court set aside the legal personality of several corporations used to circumvent Colombian agricultural laws. Second, when a corporation is employed to defraud its creditors, the Court will remove the protection of limited liability and hold the shareholders directly liable for the entity’s debts. While most of these claims have been unsuccessful—primarily due to plaintiffs’ failure to meet their ‘heavy evidentiary burden’—the Court has made a significant effort to outline the situations and prerequisites that may justify lifting the corporate veil. By doing so, it has provided conceptual coherence and clarity to a doctrine that, like in other jurisdictions, is often fraught with ambiguity and ‘enveloped in the mists of metaphor’, as noted by Judge Cardozo in the US context.

To be sure, the Colombian Business Court has not been exempt from criticism, particularly regarding its incorporation into an administrative agency within Colombia’s executive branch, which has raised independence-related concerns. Furthermore, the evolution of Colombian corporate law has also been driven by the introduction in 2008 of the ‘simplified stock corporation’—a business entity that has largely displaced traditional forms of association and brought about a wide range of protections for minority shareholders, marking a highly successful ‘regulatory dualism’ experiment that other jurisdictions have sought to replicate. That said, the Court has undeniably revolutionized Colombian corporate law, embodying the qualities of ‘good corporate law judges’ as described by Luca Enriques, and continues to hold substantial promise for the future. In a country well versed in the traditional challenges of emerging markets in corporate governance (antiquated laws, failed legal transplants, and weak judicial enforcement), the importance of the Court cannot be overstated, as it has played a pivotal role in bridging the gap between law on the books and law in action. In doing so, the Court has positioned Colombia as a key innovator in corporate governance in the Global South.

Juan Pablo Amaya is a Partner at Martinez (Colombia-based law firm) and a Professor of Corporations at Universidad de los Andes.

Los invitamos a leerla en este enlace: https://lnkd.in/dXMvjrHh

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