Argentina

AuthorMarcelo Bombau - Pablo Ferraro-Mila
Pages1-35
1
Argentina
Marcelo Bombau
M. & M. Bomchil*
Pablo Ferraro-Mila
Gonzales & Ferraro-Mila
CHAPTER 1
COUNTRY OVERVIEW
Argentina is the eighth largest country in the world and the second largest country
in Latin America in terms of surface area, covering some 1.5 million square miles,
with a population of approximately 41 million. It is organized as a federal repub-
lic with a democratic political system and a government consisting of an 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 Congress is composed of two houses, the Senate and the Chamber
of Deputies, and has exclusive power to enact laws concerning federal legislation—
including international and interprovincial trade, im migration and citizenship, and
patents and trademarks—and to enact the civil, commercial, criminal, mining,
labor, and social security codes, which are applicable nationwide.
The judicial system is divided into federal and provincial courts, with each
system having lower courts, courts of appeals, and supreme courts. The supreme
judicial power of Argentina is vested in the Supreme Court of Justice.
Each of the 23 provinces enacts its own constitution, elects its own governor
and legislators, and appoints its own judges to the provincial 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
ESTABLISHING A BUSINESS PRESENCE
Permanent Structures
To conduct business on a permanent basis, a foreign company can either (i)incor-
porate or participate in a local entity or (ii)qualify a representative or a branch.
Foreign companies wishing to participate in local companies must file and reg-
ister with the Public Registry of Commerce (PRC) (i)a copy of their articles of
incorporation and bylaws, (ii)proof that they validly exist according to the laws of
the country where they were formed, and (iii)the corporate resolution appointing
legal representatives and establishing a local domicile. They shall also (i)inform if
they are subject to business prohibitions or restrictions in their place of origin and
(ii)demonstrate that, outside of Argentina, they either (a) have one or more agen-
cies, branches, or permanent representations; (b) hold a participation in companies
that qualifies as noncurrent assets; or (c) own fixed assets in their country of ori-
gin. In case a foreign company was incorporated for the sole purpose of being a
vehicle for investing in other companies, compliance of the above requisites by its
controlling entity suffices.
Suitable Corporate Forms
Commercial activities in Argentina are usually carried out through one of the fol-
lowing: the corporation (sociedad anónima or SA), the limited liability company
(sociedad de responsabilidad limitada or SRL), or the branch of a foreign com-
pany. The first two are the most common, since they limit the liability of the par-
ent company to the extent of its interest in the local company. Applicable rules are
comprised in the Argentine Commercial Companies Act (ACCA) 19,550, which
is applied nationwide. Provincial laws set forth rules for registration and other
requirements.
The structure and rules for SAs and SRLs are quite similar although the latter
has slightly less operational costs. Certain activities, such as banking and insur-
ance, require that the company be incorporated as an SA. The minimum stock
capital required for SAs is equivalent to some USD 12,500. There is no minimum
requirement for SRLs. However, the stock capital needs to be consistent with the
corporate purpose. SAs and SRLs can be managed and represented by one or more
individuals, in which case decisions shall be adopted by a majority vote. The board
shall hold meetings at least quarterly, and the majority of directors need to be
Argentine residents (there being no nationality requirements). The directors must
also register with the tax and social security authorities.
Resolutions on matters that go beyond day-to-day decisions are to be decided
by the stockholders and, unless a unanimous meeting and vote are expected, all
others need to be summoned. SA sto ckholders shall be notified by means of a notice
in the Official Gazette within 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 rules for SRLs are more flexible. There
are certain specific statutory quorum and majority requirements depending on the
kind of meeting (ordinary or extraordinary).
Wholly Owned Entities
ACCA rules require at least two stockholders. According to the regulations and
policies in force in the city of Buenos Aires, the minority holder shall own no less
than 5 percent of the stock capital. If stockholders are foreigners, they shall own
no less than 10 percent to avoid the mandatory deposit (encaje) established by the
Central Bank. The two stockholders may belong to the same group; thus, ulti-
mately, the local company may be a wholly owned entity.
Joint Ventures
The ACCA provides for contractual joint ventures, which are not granted legal
personality and thus do not have a legal existence separate from their members.
These agreements need to be registered with the local PRC in order to have effects
vis-à-vis third parties and must contain term of duration, name, domicile, liability
of each of the members, and the details on the decision-making process, among
other specifications.
Investments in Mergers with Existing Entities
There are basically two ways of participating in or acquiring a local business:
(i)purchase of shares: the continuity of the legal entity entails risks associated with
hidden liabilities, particularly tax and social security ones, and (ii)asset purchase:
this option provides reasonable protection against hidden liabilities if executed
through the Transfer of Going Concer ns Act and federal and provincial tax regula-
tions. This alternative is more expensive than a “share” deal.
Merger processes are quite common in Argentina. Subject to compliance with
certain fiscal requirements, corporate reorganizations (mergers included) can be
carried out in a tax-free fashion. Corporate reorganizations encompass a number
of agreements, valuations, and stages and must be registered with the PRC.
Agency/Reseller/Franchising/Distribution Networks
Agency, distribution, and franchising agreements lack specific regulation by law
in Argentina. Thus, their main characteristics 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 their relationship.
In an agency agreement, the principal entrusts 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 services.
The agent can either simply intermediate in the sale of goods by marketing

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