CHAPTER 1
Argentina
Tomás M Araya Iván Bovio Marenco M&M Bomchil
1. Introduction
The legal system governing companies in Argentina is to be found primarily in Law 19,550 of 1972 which was widely amended by Law 22,903 of 1983 and – more recently – by Law 26,994, which renamed it the Ley General de Sociedades (General Companies Law).
In the first part of this chapter we outline the types of companies most commonly used, namely:
• the corporation (sociedad anónima) and its variant the one-member corporation (sociedad anónima unipersonal);
• the limited liability company (sociedad de responsabilidad limitada); and
• the recently introduced simplified corporation (sociedad por acciones simplificada).
2. Principal types of business associations
In addition to the most commonly used legal forms mentioned above (the corporation, the simplified corporation and the limited liability company), the General Companies Law does provide for other legal forms which are rarely used for business purposes and therefore are not described in this chapter.
2.1 Corporation
The corporation (SA) is the most commonly used legal entity in Argentina, and is the form normally adopted by all kinds of businesses.
Traditionally, at least two shareholders were needed to incorporate an SA (and any other corporate form). However, since August 2015, the general Companies Law has provided that an SA can be incorporated by one person, which can be either a corporate entity – except another one-member corporation – or an individual. The liability of the shareholders is limited to the full payment of the equity subscribed.
The SA's stock capital is divided into shares that must be denominated in pesos, the Argentine legal currency. Except for certain cases provided for by specific laws,3 there are no nationality or residence requirements; foreign individuals (whether resident in Argentina or not) or foreign companies may hold up to 100% of the stock capital.
Classes of shares are permitted and shares must grant equal rights and have the same value within each separate class. Generally, there are no restrictions on transferring shares, although it is possible to establish limitations in the by-laws.
A minimum stock capital of at least one ARS100,000 (approximately $5,700) is required to register an SA. Resolution 7/2015 enacted by the General Inspectorate of Justice (IGJ) provides that the stock capital must be appropriate for the development of the corporate purpose. At least 25% of the stock capital must be paid in at the time of incorporation, and the remaining amount within the next two years. Contributions in kind must be made in full at the time of subscription.
The SA is managed by a board of directors, and may be subject to the internal supervision of statutory auditors) or a supervisory committee if the by-laws so provide or in those cases required by the law. There is no nationality requirement, but the majority of the board members must have their domicile in Argentina.
The SA must keep the accounting books required by applicable laws and the following corporate books:
• the share registry book;
• an attendance record book for shareholders' meetings;
• board meetings minute book;
• shareholders' meetings minutes book; and
• if applicable, a supervisory committee minutes book.
The one-member corporation ('SAU') is a variant of the standard corporation, in which one shareholder holds all the shares representing 100% of the stock capital. The General Companies Law requires that an SAU s stock capital must be fully subscribed and paid up upon incorporation and that the corporate name must include the expression "sociedad anónima unipersonal" or its abbreviation 'SAU'. Furthermore, the law prohibits one SAU from being the sole shareholder of another SAU.
SAUs are subject to permanent state control and must appoint a statutory auditor.
Whenever a corporation or a limited liability company ends up with only one member, it should, within a period of three months:
• incorporate a new member;
• transform into an SAU, which would require the modification of its by-laws and the addition, in its corporate name, of the expression "sociedad anómina unipersonal" or the abbreviation 'SAU'; or
• approve its dissolution and liquidation.
2.2 Limited liability company
The limited liability company ('SRL') is the second most commonly used corporate legal structure in Argentina.
A minimum of two and a maximum of 50 partners (either individuals or corporate entities) are required for the setting up an SRL. No nationality or residency requirements apply. The liability of the partners is limited to the full payment of the equity subscribed.
The corporate capital of an SRL is divided in 'quotas'. Unlike the position with an SA, in an SRL there is no minimum capital requirement. The corporate capital must be subscribed in full and 25% shall be paid in at the moment of incorporation. The remaining amount must be paid in within two years. If the quotas are paid in by means of contributions of property other than cash, then all the quotas must be paid in full at the time of incorporation.
Any transfer of quotas implies an amendment to the SRL's by-laws and must be registered with the Public Registry of Commerce in order to have effect in respect of third parties.
The management of an SRL may be undertaken by one or more managers, acting individually or jointly as specified in the articles of incorporation. There is no nationality requirement. Where there are two or more managers acting as a board, then the majority of the managers must reside in Argentina. The same rule applies where only one manager is appointed.
The appointment of a statutory auditor (or a supervisory committee) is not mandatory unless the SRL s corporate capital reaches a certain minimum figure, currently ARS10 million.
Resolutions are adopted in accordance with the provisions specified in the bylaws. Unless the by-laws provide otherwise, resolutions may be passed in writing without the need to hold a meeting.
However, in those cases when the SRL s corporate capital reaches a certain minimum figure, currently ARS10 million, a partners' meeting must be held annually in order to consider the annual financial statements.
In order to amend the by-laws, where a single partner holds a majority vote, the affirmative vote of another partner will be required.
2.3 Simplified corporation
Recently, Congress enacted Law 27,349, which introduced a new corporate form: the simplified company by shares or simplified corporation (SAS), which is subject to its own legal rules, notwithstanding being also subject to the general provisions set out in the General Companies Law whenever applicable. It is expected that in the coming months new projects run by entrepreneurs and also other businesses will adopt the SAS model as a legal form.
An SAS can be incorporated by one or more shareholders, which can be either corporate entities – except another SAS – or individuals.
As in the case with ordinary corporations, the shareholders' liability is limited to the full payment of the shares subscribed.
An SAS may be incorporated by private instrument and, once certain administrative rules which are still in the process of discussion are enacted, it will be capable of being incorporated by digital means within a short period of time.
An SAS's minimum stock capital shall be that equal to two minimum wages (approximately ARS17,720 or $1,000) and its corporate name shall include the term "sociedad por acciones simplificada" or the abbreviation 'SAS'.
The SAS's corporate purpose may include more than one activity, which must be clearly specified in the by-laws.
SASs are not authorised:
• to make a public offer of their shares or debt securities;
• to carry out transactions of capitalisation or savings or in any other way to require funds or securities from the public with the commitment of providing future services or benefits; or
• to operate concessions or public services.
Furthermore, SASs may neither be controlled by, nor be owned with regard to more than 30% of their capital stock by a company subject to permanent state control, which are those described in Section 299 of the General Companies Law.
During any period in which an SAS has only one single member, that single member shall be entitled to exercise all the rights and attributions of the corporate bodies (basically, the board of directors and the shareholders' meetings), including and not limited to being the legal representative of the SAS.
Board meetings and shareholders' meetings may be self-convened. The decisions of a self-convened meeting of the board of directors will be binding as long as all members attend and the agenda is approved by the majority specified in the by-laws. A self-convened shareholders' meeting will only be binding as long as shareholders representing 100% of the share capital are present and the agenda is unanimously approved.
In contrast with the provisions of the General Companies Law (which provides for a maximum of three terms), the new rules governing the SAS enable board members to be appointed for an indefinite term.
The law authorises existing companies incorporated under the General Companies Law to be converted into simplified corporations, which would require a decision of the shareholders' meeting.
3. Corporations: stock capital and classes of shares
A corporation's stock capital is divided into shares, each of which grants different rights and duties to their holders.
Shares must have a nominal value (also called par value) and must be non-endorsable. They may be book-entry shares or represented by certificates whose issuance and ownership stems from records in the company's shares registry book or from the records of a third party commissioned for that purpose (such as Caja de Valores SA).
3.1 Classes of shares
The by-laws may provide for different types or classes of shares and may grant different rights to each class, provided that within each class they grant equal rights. In order to restrict the rights granted to a certain class of shares, a majority decision adopted in a special shareholders' meeting of that particular class of shares is required.
The by-laws may require that certain matters (called 'supermajority matters') require the approval of all (or of certain) classes of shares, thereby providing a veto right to the shareholders holding a majority in each class of shares.
(a) Ordinary shares
Generally, corporations issue ordinary shares which grant with equal economic and political rights. As a general principle, each share gives the right to one vote; however the by-laws can authorise the issue of 'privileged vote' or 'multiple vote' shares, which may grant up to five votes per share.
The ordinary shareholders have the right to vote at general meetings and the right to receive a dividend if one is declared. However, they are only entitled to a dividend after preference shareholders receive theirs. Therefore, the holders of ordinary shares are the first to suffer if problems affect the corporation's ability to pay dividends or its solvency.
(b) Preference shares
Preference shares are those that entitle their holders to receive a preferential distribution, whenever the corporation decides to distribute dividends.
The precise scope of the preferential distribution may encompass the right to receive a certain amount of dividends (or up to a certain percentage) prior to the holders of ordinary shares and/or a preferential payment in the event of liquidation, as provided for in the by-laws. Preference shares may not grant voting rights, except in respect certain fundamental matters which are outlined in the fourth paragraph of Section 244 of the General Companies Law.
In addition to granting rights to vote when a fundamental matter is decided, preference shares also entitle their holders to vote whenever the company is not paying them the preferential dividends.
(c) Privileged voting shares
Privileged voting shares may grant up to five votes per share. Such shares cannot grant any type of preferential rights in the distribution of dividends. In addition, once the corporation is authorised to offer its shares publicly on listed markets, it cannot issue new privileged voting shares and all new shares must be one-vote shares. Multiple vote shares are normally used by the controlling shareholders to ensure that they can maintain control of the corporation even after new share issues.
4. The corporate bodies of the corporation
According to the General Companies Law a corporation may adopt a one-tier structure of management with a board of directors, or a two-tier structure of management with a management board (board of directors) and a supervisory board (supervisory committee).
Large and medium-sized corporations normally adopt a two-tier structure, in which case the following bodies co-exist:
• the shareholders' meeting (which is the governing body);
• the board of directors (which takes care of the corporation's administration); and
• a supervisory committee (which is in charge of supervising the legality of the other two corporate bodies' performance).
The decisions of the shareholders' meeting are binding on all shareholders and must be complied with by the board of directors.
4.1 Shareholders' meeting
As mentioned, the shareholders' meeting is the governing body of the corporation. The shareholders' meeting shall be either ordinary or extraordinary, depending on the matter to be addressed. The agenda of an ordinary shareholders' meeting includes the discussion and approval of the annual financial statements, the appointment of directors and their compensation, and the distribution of profits or a decision about losses, while all other issues, such as the amendment of the by-laws, mergers or spin-offs, must be decided at extraordinary shareholders' meetings.
In theory, shareholders are not expected to play an active role in the corporation's day-to-day management. However, in practice, controlling shareholders (particularly in closed corporations) are normally the ones that adopt all of the major decisions.
(a) Summoning a shareholders' meeting; number of calls; quorum; majorities
The shareholders' meeting must be summoned by a resolution of the board of directors, which must also specify the agenda of topics to be addressed in the meeting.
Unless shareholders' meetings are held by unanimity, which means that shares representing 100% of the capital stock are present at the meeting and that all resolutions are approved by all shareholders holding voting rights, meetings shall be summoned by means of publication of a notice for a period of five days in the Official Gazette, and in specific cases, in a nationwide newspaper, at least for 10 days and no more than 30 days before the date on which the meeting is scheduled to be held.
In case of an SAS, both the board of directors and the shareholders' meeting can self-convene without prior notice. Furthermore, in the case of an SAS, a unanimous shareholders' meeting (which is permitted without prior publication) may be held provided that all shareholders representing 100% of the stock capital are present and the agenda is unanimously approved.
Shareholders may authorise another person to attend the meeting on their behalf, provided that the attendee is not a director, employee or statutory auditor of the corporation.
The quorum and the voting rules for ordinary and extraordinary shareholders' meeting are shown on the following page.
Generally, the meetings shall take place at the corporate domicile of the corporation or at another place chosen by the board of directors within the jurisdiction in which the legal domicile is located.
(b) Special shareholders' meeting
As mentioned, the by-laws may provide that different classes of shares exist, in which case a particular class of shares may have specific rights such as, for instance, the right to appoint certain board members. In this case, whenever a special class of shares has to decide a certain issue, a special shareholders' meeting shall be summoned by the board and the same rules for an ordinary shareholders' meeting apply (in terms of quorum, majorities, proxies and so on).
