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Mutual identity associations will be solidarity companies

Mutual identity associations will be solidarity companies

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On August 10, 2021, Law No. 2143 of 2021 was published in the Official Gazette of Colombia, giving mutual associations identity, autonomy, and linkage to the country’s economy as solidarity companies and establishing other provisions.

1. Nature of mutual associations

Mutual Associations are solidarity economy companies under private law, whose nature is non-profit inspired by solidarity with purposes of social interest, freely, and democratically constituted by the association of natural persons and non-profit legal persons, who undertake to contribute to the mutual social fund to help each other for meeting their needs, and those of the community in general, always in the social interest or collective welfare.

2. What is the mutual agreement?

A mutual agreement is an association contract whereby natural or legal persons of a non-profit nature agree to form a legal person distinct from its members, capable of contracting obligations, and exercising rights.

The association contract is formalized with the general assembly of incorporation, where the founding members approve the statutes that will govern the mutualist association and elect the members of the administrative and supervisory bodies.

3. The mutual act

The mutual act is the legal business that creates, modifies, or extinguishes an obligation, carried out by the mutualist association in compliance with its corporate purpose, other legal entities, or natural persons determined by law.

4. Prohibitions

No mutual association shall be allowed:

  • To establish agreements with commercial companies making them participate directly or indirectly in the benefits the laws grant to mutual associations.
  • To establish restrictions or carry out practices involving social, economic, religious, or political discrimination.
  • To grant advantages or privileges to promoters, employees, and founders.
  • To grant privileges to its administrators being detrimental to the fulfillment of its corporate purpose.
  • To develop activities different from those established in its statutes.
  • To become a trading company.

5. Assets of mutual associations

The assets of mutual associations are irreparable and made up of: the mutual social fund, the permanent funds and reserves, and the donations received.

6. Bodies, administration, and statutory auditor

The administration of mutual associations shall be in charge of the general assembly, the board of directors, and the legal representative.

The mutual association shall have a statutory auditor with his respective deputy, elected at the General Assembly with his assignment.

7. Tax regime

In tax matters administered by the General Directorate of National Taxes, the mutual associations belong to the Special Tax Regime under the tax statute.

8. Effectiveness date

The law is effective as of August 10, 2021, and repeals Decree No. 1489 of 1989 and other contrary provisions.

Source: Diario Oficial 20/08/21

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