If WhatsApp was a Colombian company

– by María Lucia Castrillón Simmonds –

Recently WhatsApp, a U. S. company developer of instant messaging software for smart phones, with less than 50 employees and annual sales of USD$20 million, was acquired by Facebook for 19.000 million dollars. The amount paid by Facebook equals almost three times the amount paid by SABMiller in the year 2005 when it purchased Bavaria, the biggest company in Colombia after Ecopetrol, for USD$7.800 million, the largest business transaction in the history of Colombia.

If WhatsApp were to be a Colombian company, under the current legislation, it would be considered a small Enterprise. Indeed, the current legislation sets though article 2 of law 590 of 2000, modified by article 2 of law 905 of 2004, that the size of the company should be established by the number of employees and the total value of assets. Therefore, currently a company with less than 50 employees and whose total assets don´t exceed approximately 3.000 million pesos will do a part of the micro and SME´s group. So then, being considered a small business, WhatsApp would receive from the government benefits designed to boost growth, such as: discounts in paying income tax (LAW 1429 of 2010), preferential access to hiring public (LAW 1150 of 2007), preferential access to calls of SENA, INNPULSA, INNOVA, among other programs. All of these government incentives are designed to create appropriate conditions that level the competition so that smaller companies may compete with large national and international companies.

Does it make sense that a company with a market value of 19 billion dollars is considered by our legislation as a small company and therefore can be accessed to all benefits designed for micro and SME´s? In the new economy, as demonstrated by WhatsApp, the size of a company is not determined by the number of employees or total assets.

This case illustrates the need to update the current Colombian legal framework of classification of enterprises according to its size in order to really identify smaller companies and head them state support. Why is this relevant? Because smaller companies are the largest employers of labor and on them rests the possibility of growth promotion and development, because they are more flexible and dynamic, and sometimes more productive than larger firms.

This discussion of the variables that determine a company’s size is neither new nor unique to Colombia. In fact it is a current discussion in multilateral bodies to which many countries already found a way out. Indeed, based on a study from Propais, of the 91 countries with this classification, 67 have included some type of financial indicator such as its sales rankings. These international experiences with local revisions made since 2009, among others, by ASOBANCARIA and ACOPI, agree that the proposed criterion for determining the optimal size of a company is sales. Even more, in the Colombian law 1450 of 2011 (article 43) sales are pointed out as the classification criterion for micro and SME´s. However, this indicator has not yet been set out to establish the different rating grades.

Do to the above, and with the electoral process taking place this year, it is necessary to resume this discussion and definitely resolve so that the institutions count with suitable tools to best identify the micro, small and medium companies, and make sure the support tools will reach the companies that actually require them.

María Lucia Castrillón Simmonds. Economist specialized in finance. Training in international cooperation and planning. With experience in management positions at institutions that promote national development. In addition, she has served as professor in superior education institutions. She has led event analysis on key issues for business development in the regional, national and international context. She has been linked to PROPAIS for over 20 years, institution in which she serves as manager since 2003.