Colombia: Restitution Of Tenancy Of Goods Subject To Financial Leases And Colombian Insolvency Proceedings (Law 550 Of 1999)

Law 550 of 1999 established new temporary insolvency proceedings for Colombian companies (named under Colombian law as "acuerdo de reestructuración") to be applied between December 30, 1999 and December 30, 2004.

These proceedings will be applied instead of the previous insolvency proceedings (concordato proceedings established by Law 222 of 1995) during the above mentioned term.

Law 550 does not expressly prohibit the restitution of tenancy of goods leased under financial leases to Colombian companies that become subject to acuerdo de reestructuración.

However, the Superintendency of Companies recently rendered and published an opinion whereby they confirmed that the above mentioned restitution of tenancy is not possible if the reason for requesting it is the relevant company´s failure to make payments that became due before the initiation of the acuerdo de reestructuración process.

The Superintendency considered that allowing the restitution of tenancy of these assets would be contrary to Law 550 of 1999 since the procedure contained therein is "universal and collective"¹ and is aimed at the economic recovery of the relevant company.

Therefore, the same regime existing under concordato proceedings for restitution of tenancy of goods subject to financial leases is applicable under Law 550 of 1999.

Payments that the company failed to make before the initiation of the proceedings are subject to the restructuring agreement (acuerdo de reestructuración) reached by the creditors of the company, which may even change the general system of priorities established in the Colombian Civil Code.

Footnotes

1 Superintendency of Companies, Rad. 428.659.00 and Opinion 400-30034