AuthorMarcelo Bombau - Pablo Ferraro-Mila
Marcelo Bombau
M. & M. Bomchil*
Pablo Ferraro-Mila
Gonzales & Ferraro-Mila
Argentina is the eig hth largest countr y in the world and the second largest count ry
in Latin America in terms of surface are a, covering some 1.5 million squa re miles,
with a population of approximately 41 million. It is organi zed as a federal repub-
lic with a democratic politica l system and a government consisting of a n executive
branch headed by the president, a legislative branch, a nd a judiciar y. The president is
elected by direct vote and m ay serve a max imum of two consecutive four-year terms.
Argentine Congre ss is composed of two houses, the S enate and the Chamber
of Deputies, and has exclusive power to enact laws concerni ng federal legislation—
including international a nd interprovincial trade, im migration and citizenship, and
patents and trademarks— and to enact the civil, com mercial, criminal, mini ng,
labor, and social securit y codes, which are applicable nationwide.
The judicial system is divided i nto federal and provincial cour ts, with each
system having lower courts, cou rts of appeals, and supreme cour ts. The supreme
judicial power of Argentina is veste d in the Supreme Court of Justice.
Each of the 23 provinces enact s its own constitution, elect s its own governor
and legislators, and appoints its own judges to the provi ncial courts.
* Contributors to this chap ter: J. Felipe Arlía Goyeneche (Brons & Salas); Alejandro Polet to
(Estudio Beccar Varela); Pablo Crescimb eni (Curutchet—Odriozola); Juan Del Sel (Fontan
Balestra & Asociados); Ignacio Acedo (Go nzalez & Ferraro-Mila); Marcelo Den Toom
(M. & M. Bomchil); Hernán Slem enson (Marval, O’Farrell & Mairal); Gustavo Cedrone
(Mitrani, Caballero, O jam & Ruiz Moreno); Jorge Ortiz (Ortíz & Asociados); Diego Se rrano
Redonnet (Perez Alati, Grondo na, Benites, Arntsen & Martinez de Hoz); Roberto B auzá
(Rattagan, Macchiavello, A rocena & Peña Robirosa); Hernán Camarero (Richards, Cardi nal,
Tützer, Zabala & Zaefferer); Julio César R ivera Jr. and Santiago Michel (Rivera & Asociados);
Alexia Rosenthal (Tanoira Ca ssagne Abogados); Gerardo Viramonte Jr. (Viramonte &
Asociados); and Vanesa Balda (Vitale , Manoff & Feilbogen).
2 Chapter 1
Permanent Structures
To conduct business on a permanent basis, a foreign company can eit her (i)incor-
porate or participate in a local ent ity or (ii)qualif y a representative or a branch.
Foreign companies wishing to participate in local compan ies must file and reg-
ister with the Public Reg istry of Commerce (PRC) (i) a copy of their articles of
incorporation and bylaws, (ii)proof that they validly exist ac cording to the laws of
the country where they were formed , and (iii)the corporate resolution appointing
legal representatives and establi shing a local domicile. T hey shall also (i)inform i f
they are subject to business prohibitions or rest rictions in their plac e of origin and
(ii)demonstrate that, outside of Argent ina, they either (a) have one or more agen-
cies, branches, or perm anent representations; (b) hold a participation in companies
that qualifies as noncu rrent assets; or (c) own fixed assets i n their country of ori-
gin. In case a foreign company was incorporated for the sole purpose of bei ng a
vehicle for investing in other companies, compliance of the above requisites by its
controlling entity suf fices.
Suitable Corporate For ms
Commercial activities in Argentina a re usually carried out th rough one of the fol-
lowing: the corporation (sociedad anónima or SA), the li mited liability company
(sociedad de respon sabilidad limitada or SR L), or the branch of a foreign com-
pany. The first two are the most com mon, since they limit t he liability of the par-
ent company to the extent of its interest in the loc al company. Applicable rules are
comprised in the Argenti ne Commercial Compan ies Act (ACCA) 19,550, which
is applied nationwide. Provincial laws set fort h rules for registration a nd other
The structure and rules for SAs and SR Ls are quite simi lar although the latter
has slightly less operational cos ts. Certain ac tivities, such as banking and insur-
ance, require that the company be incorporated as an SA. T he minimum stock
capital required for SAs is equivalent to some USD 12 ,500. There is no m inimum
requirement for SRLs. However, the stock capital needs to be consistent with the
corporate purpose. SAs a nd SRLs can be ma naged and represented by one or more
individuals, in which c ase decisions shall be adopted by a majority vote. T he board
shall hold meetings at least qua rterly, and the majority of directors need to be
Argentine residents (there being no nationa lity requirements). The direc tors must
also register with t he tax and social sec urity authorities.
Resolutions on matters that go beyond day-to-day decisions are to be decided
by the stockholders and, unle ss a unanimous mee ting and vote are expec ted, all
others need to be summoned. SA sto ckholders shall be notified by means of a notice
in the Official G azette with in a specific time frame. Companies under permanent
governmental supervision as well as specific situations also require notices in a
Argentina 3
nationwide newspaper. The summoning r ules for SRLs are more f lexible. There
are certain spe cific statutory quorum and majority requirements dependi ng on the
kind of meeting (ordinary or extraordinary).
Wholly Ow ned Entities
ACCA rules require at least t wo stockholders. According to the regu lations and
policies in force in the cit y of Buenos Aires, the minority holder shall own no less
than 5 percent of the stock capital. I f stockholders are foreigners, the y shall own
no less than 10 percent to avoid the mandatory deposit (encaje) established by the
Central Bank. T he two stockholders may belong to the same g roup; thus, ulti-
mately, the local company may be a wholly owned entity.
Joint Ventures
The ACCA provides for contractual joint ventu res, which are not granted legal
personality and thus do not have a legal existence separate from their m embers.
These agreements need to be registered with the loc al PRC in order to have effects
vis-à-vis third pa rties and must contain term of duration, name, domicile , liability
of each of the members, and the deta ils on the decision-mak ing process, among
other specifications.
Investments in Merge rs with Existi ng Entities
There are basically t wo ways of participating in or acquiri ng a local business:
(i)purchase of shares: the continuity of the legal entity entails risks as sociated with
hidden liabilities, par ticularly tax a nd social secur ity ones, and (ii)asset purchas e:
this option provides reasonable protection aga inst hidden liabilities i f executed
through the Transfer of Going Concer ns Act and federal and provincial tax regula-
tions. This altern ative is more expensive than a “share” deal.
Merger processes are quite com mon in Argentina. Subjec t to compliance with
certain fis cal requirements, corp orate reorganizations (mergers included) can be
carried out in a tax-free fashion. Corporate reorganiz ations encompass a number
of agreements, valuations, and st ages and must be registered w ith the PRC.
Agency/Reseller/Franchising/Distribution Networks
Agency, distribution, and franch ising agreements lack speci fic regulation by law
in Argentina. T hus, their main cha racteristics and those of other distribution net-
works (commercial agents, licenses , etc.) have been shaped by doctrine and case
law. As such, the parties can , in principle, freely regulate t heir relationship.
In an agency agreem ent, the principal entrus ts the agent with the promotion
and marketing of the former’s business. T he agent sponsors a principal busi-
ness and receives a commission from the sales of the products or serv ices.
The agent can either simply intermed iate in the sale of goods by marketi ng

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