Be Careful When Using a Local Legal Representative
2 DECEMBER 2020
Alan Gongora / Maria Camila
We are now dealing with yet another unfortunate situation involving one of our foreign clients. In what is a fairly common occurrence, our client hired a Colombian national to serve as a legal representative for a local SAS company, only to see their relationship with the Colombian national sour and the Colombian national use their authority as leverage in order to extract money/concessions from the company.
By way of background:
- local companies need to have a legal representative (a mix of “manager,” registered agent, tax matters partner, etc…) in order to sign documentation on behalf of the company on a regular basis:
- while a foreigner can serve as a legal representative, many foreigners are not in Colombia on a regular basis to serve in this capacity.
- in addition, many local banks will insist that foreign legal representatives have a “cedula” (national ID card that is issued after securing a visa), which severely limits the ability of foreign owners to do business in Colombia
- because of the above, many companies appoint locals as legal representatives to manage their companies from abroad.
Bottom line, before you appoint someone as a legal representative to manage your business:
- make sure you conduct a comprehensive due diligence review on the new legal representative
- ensure that the legal representative has a solid employment agreement that outlines their obligations and any limitations on their authority
- draft appropriate restrictions to the authority of the legal representative in the company bylaws
- consider hiring an independent lawyer/law firm to serve as legal representative; and
- make yourself a secondary legal representative to add an additional level of protection.
Stay safe business owners!
© Langon Law Group LLC 2020 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with your own counsel to determined how the law applies to your own specific situation.