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Legal Framework: Corporate, Mergers and Acquisitions

Business Companies and Branches

There are three main types of legal entities through which commercial activities may be carried out in Argentina: corporations (sociedades anónimas), limited liability companies (sociedades de responsabilidad limitada) and branches of foreign companies (sucursales de sociedades extranjeras). The regime applicable to such legal entities is regulated by Law on Business Organizations (Ley de Sociedades Comerciales) No. 19550 (the LSC). 

Corporations

Corporations in Argentina have the following main characteristics:

Shareholders

A minimum of two shareholders is required. The LSC does not establish minimum or maximum amounts of capital or any percentage that a person should hold in a corporation in order to be considered a shareholder. However, the current criteria of the Office of Business Organizations is that the maximum participating interest that may be held by one shareholder is 90% of the capital stock. Shareholders can be local or foreign companies, as well as individuals of any nationality or residence.

Shares

The capital stock is represented by shares. Shares must be registered, non-endorsable and may or may not be represented by certificates.

Capital

The minimum capital stock required is at least AR$ 100.000. However, by virtue of the provisions of Resolution No. 9/2004 issued by the Office of Business Organizations, the capital stock must be appropriate for performance of the corporate purpose.

Shareholders’ Meetings

They are the governing body of the corporation. Unless the shareholders’ meetings are unanimously held, meetings should be notified by means of notices. Shareholders may authorize a person other than a director, employee or surveillance officer to act on their behalf at the meetings by means of a proxy.

Board of Directors

The Board is in charge of the management of the corporation’s business. There is no requirement for a minimum number of members, as a consequence of which the Board may be only one director, with the exception of certain corporations. However, the absolute majority of directors must reside in the Republic of Argentina.

Surveillance Officer

The Surveillance Officer is an officer of the corporation entrusted with the task of supervising that the corporation’s acts are in accordance with the law and the by-laws. The surveillance officer is required to be an attorney or accountant. Appointment of a Surveillance Officer is not mandatory, except as provided for in the law or when the capital stock exceeds AR$ 10,000,000. 

Limited Liability Companies

The limited liability company is one of the most commonly used legal structures after corporations. Its main characteristics are as follows:

Members

There must be a minimum of 2 and a maximum of 50. The same criteria explained for corporations regarding the maximum percentage of capital to be held by one member is applied by the Office of Business Organizations to the limited liability company. Members can also be local (except for corporations) or foreign companies, or individuals. From a US taxation perspective, limited liability companies are considered pass through entities in relation to “check-the-box” rules.

Capital

The capital stock is represented by quotas. There is a minimum capital requirement of AR$ 10,000. However, by virtue of the provisions of Resolution No. 9/2004 of the Office of Business Organizations, the capital stock must be appropriate for performance of the company’s purpose.

Management

The management of the limited liability company is under the charge of one or more managers, acting individually or jointly as set forth in the articles of incorporation. The absolute majority of all managers appointed by the members must reside in Argentina.

Surveillance Officer

Although it is not common, a surveillance officer may be appointed. Should the limited liability company have a certain minimum capital –currently AR$ 10,000,000– the appointment of a surveillance officer is mandatory.

Foreign Companies’ Share Interests

Foreign companies interested in incorporating local companies or in holding participating interests in local companies must, in accordance with Article 123 of the Law on Business Organizations, be previously registered with the Office of Business Organizations.

Pursuant to the provisions of Resolution No. 7/2003 of the Office of Business Organizations, foreign companies shall also inform whether the company is subject to prohibitions or legal restrictions to develop the activities related to its corporate purpose in its place of origin; and prove that the foreign company satisfies any of the following conditions outside Argentina:

   (i)    the existence of one or more agencies, branches or permanent representations; 

   (ii)   the ownership of participating interests in companies which qualify as non-current assets; or 

   (iii)  the ownership of fixed assets in the country of origin.

On an annual basis, foreign companies registered under Article 123 of the LSC shall prove that they meet such requirements by submitting the supporting documents or by means of a sworn statement.

Branches

Foreign companies may use a branch to do businesses or perform activities in Argentina.

Capital

There is no need for the branch to have a specific amount of capital stock, with the exception of branches acting in certain industries such as banking.

Management

At least one legal representative must be appointed who shall be duly authorized to operate the branch.

Accounting

The branch must have accounting records separate from its head office, and it must file annual financial statements with the Office of Business Organizations.

Branches must also comply with the provisions of Resolution No. 7/2005 issued by the Office of Business Organizations. Consequently, the same documentation must be filed with such entity at the time of registration and on an annual basis. From a US taxation perspective, limited liability companies are considered pass through entities in relation to “check-the-box” rules.


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