Minor as majority shareholder: control belongs to the parents

A minor with more than 50 % of the capital does not exercise control: those who hold parental authority do. Can a baby be the majority shareholder of a simplified stock company (S.A.S.) and, for that reason, its controlling party? Colombia’s Superintendence of Companies (Superintendencia de Sociedades) answered in Official Letter 220-130026 of July 4, 2023: the minor can be a shareholder, but control belongs solely and exclusively to those who exercise parental authority (patria potestad). It is a general, abstract opinion, not binding according to the letter itself.

The inquiry

The question was whether a minor, under one year old, can exercise control of an S.A.S. by owning more than 50 % of its capital, with the parents acting through parental authority. The petitioner argued that the presumptions of subordination in article 261 of the Code of Commerce set no restrictions on who may be a controlling party. The letter clarifies that it does not rule on the specific case and answers in general and abstract terms.

The rules the letter cites

Civil Code, article 288: parental authority is the set of rights the law grants parents over their unemancipated children; they exercise it jointly and, in the absence of one, the other exercises it. Article 307: the rights to administer the child’s property, the legal usufruct and the child’s out-of-court representation are exercised jointly by the father and the mother.
Code of Commerce, article 103: persons lacking legal capacity may not be partners in general partnerships nor managing partners in limited partnerships; in all other cases they may be partners, provided they act through their representatives or with their authorization.
Law 222 of 1995, article 26 (article 260 of the Code of Commerce): a company is subordinated when its decision-making power is subject to the will of another person or persons, the parent or controlling party.
Law 222 of 1995, article 27 (article 261 of the Code of Commerce): presumptions of subordination, among them that more than 50 % of the capital belongs to the parent; that the parent and its subsidiaries hold the votes making up the minimum decision-making majority at the partners’ or shareholders’ meeting, or the votes to elect the majority of the board; or dominant influence through an act or transaction. Paragraphs 1 and 2 extend control to natural persons and non-corporate legal entities.

The letter’s answer: no

When a minor holds more than 50 % of a company’s capital, control of the legal entity belongs solely and exclusively to those who exercise parental authority over the minor, because they are the ones who hold the decision-making power over the company, which takes shape in the right to cast the votes making up the minimum decision-making majority at the general shareholders’ meeting.

In the letter’s words: “control of the legal entity belongs solely and exclusively to those who exercise parental authority over the minor, because they are the ones who hold the decision-making power over the company”.

Control and persons: article 26 recognizes that control may be exercised by any person, natural or legal, corporate or not.
Decision-making power: it is what determines a situation of control or subordination. The presumptions of article 27 are not exhaustive and admit evidence to the contrary; they serve to determine who holds the decision-making power.
Two ends: every control situation has a controlling party and a controlled company.

The earlier rulings the letter recalls

Official Letter 125-244964 of December 24, 2021: regarding a company that disclosed a minor holding more than 50 % as its controlling party, the authority noted that such a stake is, in principle, indicative of control, but is limited by the minor’s inability to fully exercise legal capacity and develop political and economic rights. Those who represent the minor are the parents, who, exercising parental authority, have the power to impose their will on the corporate bodies. The disclosure of control was deemed incorrect or incomplete.
Resolution 302-004590 of March 24, 2022: in a similar case, the authority held that, since the minor’s capacity to act is temporarily limited, the parents, jointly, are the minor’s legal representatives and the administrators of the minor’s property; the status of controlling parties is attributed to them, under articles 260 and 261, paragraph 2, of the Code of Commerce.

An example: a baby as majority shareholder

Hypothetical case with illustrative figures. Inversiones Aurora S.A.S. has as its majority shareholder Camila, eight months old, with 60 % of the capital. Her parents, Andrés and Lucía, exercise parental authority.

Can Camila be a shareholder? Yes. Under article 103 of the Code of Commerce, persons lacking capacity may be partners in all other cases, provided they act through their representatives or with their authorization.
Who represents and administers her shares? Her parents, jointly, under articles 288 and 307 of the Civil Code.
Who controls Aurora? Solely and exclusively Andrés and Lucía, who hold the decision-making power: the right to cast the votes of the minimum decision-making majority at the meeting.
Is Camila disclosed as the controlling party? Official Letter 125-244964 deemed the disclosure of a minor as controlling party incorrect or incomplete.

Fidelis Advisories’ recommendations

Fidelis Advisories’ own criteria, going beyond the text of the letter:

Review the disclosure of control: check in the certificate of existence and legal representation that the disclosed controlling party is the holder of parental authority, not the minor.
Document the representation: record in the minutes that the parents act jointly for the minor and keep the documents proving parental authority.
Other presumptions: remember that the presumptions of article 27 admit evidence to the contrary and are not exhaustive; analyze each company’s situation.
Family structures: when planning the entry of minors as shareholders, study in advance the effects on control and governance of the company.
Specific case: the letter does not resolve specific cases; consult a corporate lawyer before deciding.
Currency: the letter dates from 2023; check whether it remains current and whether later rulings exist, and consult the original text.

Consolidated opinion

Can a minor holding more than 50 % of the capital exercise control of an S.A.S.? No. The minor may be a shareholder, but control is exercised solely and exclusively by those who hold parental authority, because they are the ones with the decision-making power: casting the votes of the minimum decision-making majority at the meeting, under articles 26 and 27 of Law 222 of 1995. In the example, control of Aurora S.A.S. belongs to Andrés and Lucía, not to Camila. This is a general, abstract opinion, not binding according to the letter itself, and issued on July 4, 2023.

This article is for information purposes only and does not constitute legal advice. Contact us about your specific case.