Main Argentine Investment Vehicles for Doing Business in Argentina in 2020
Law No. 26,994 amended and unified the Argentine Civil and Commercial Codes, and also amended Argentine Companies Law No. 19,550 (Ley de Sociedades Comerciales), among other laws. The amended Argentine Companies Law applies to all types of companies, and so it has been renamed the General Companies Law (LGS).
Principal Types of Business Entities
Foreign companies may conduct business in Argentina on a permanent basis, or they can appoint a local commercial representative, set up a branch, incorporate a local corporate entity (subsidiary), or acquire shares in an existing Argentine company.
The main investment vehicles used by non-resident individuals and foreign companies are branch, corporation (Sociedad Anónima) and limited liability company (Sociedad de Responsabilidad Limitada).
The LGS recognizes single-shareholder corporations (Sociedades Anónimas Unipersonales, or SAU) as a corporate entity that can be adopted.
In addition, the LGS has introduced a new type of legal entity called the simplified corporation (Sociedad por Acciones Simplificada, or SAS).
The basic characteristics of the branch, corporation, single-shareholder corporation, simplified corporation and limited liability company, as per Argentine law and the regulations of the Inspección General de Justicia
(IGJ) of the City of Buenos Aires, are provided below.
Branch of a Foreign Entity
Any company duly organized and existing in accordance with the laws of its country of origin can set up a branch in Argentina. However, the registration of foreign offshore companies in the City of Buenos Aires has
been restricted by the IGJ. In principle, it is not necessary to allocate capital to the Argentine branch.
The branch must keep separate accounting records in Argentina and file annual financial statements with the IGJ. The branch must comply as well with a number of obligations related to the external supervision of the IGJ.
1. Corporation (Sociedad Anónima, or SA)
Capital and Shareholders – At least two shareholders, which can be corporate entities or individuals, are
required to set up an SA. The minimum capital is ARS 100,000, – approximately USD 6,600 at the exchange
rate at the time of writing this report. While the share capital must be fully subscribed at the time of
incorporation, only 25% need be paid up on such shares, with the balance to be paid within two years
thereafter. Contributions in kind of real estate, equipment or other non-monetary assets must be made in full
at the time of subscription.
Capital is divided into shares that must be in registered form and denominated in Argentine currency. Except for specific cases provided by the law, there are no nationality or residency requirements. Foreign
individuals, whether residents in Argentina or not, and foreign companies may hold up to 100% of the capital.
Shares must be of equal par value and have equal rights within the same class. However, different classes of shares may be created. Transfers of shares are generally unrestricted, but restrictions may be included in the by-laws provided that they do not effectively prevent the transfer of shares.
Management and Representation – A board of directors elected at a shareholder meeting manages the SA.
The directors, even the president of the company, may be foreigners. Even so, the majority of the board members must be Argentine residents.
Shareholder Meetings – A shareholder meeting must be held at least once a year to consider the annual financial statement, the allocation of the results of the fiscal year, and the appointment of directors and statutory supervisors.
Shareholder resolutions must be recorded in an appropriate minute book.
SAs must keep a share registry book as well as books on attendance at shareholder meeting and the minutes of boardroom and shareholder meetings. Accounting books must be kept, and, if applicable, a supervisory committee minutes book.
Supervision – Argentine companies are subject to the external supervision of the IGJ and the internal supervision of controllers or supervisors (síndicos / comisión fiscalizadora) appointed by the shareholders, if required by law.
Shareholder Liability – Shareholders who have fully paid up their subscribed shares are in general not liable for the company’s obligations beyond their capital contributions. Shareholders with are partly paid up in their shares are required to pay any outstanding balance within a maximum of two years from the date of subscription.
Any shareholder with a conflict of interests with those of the company has a duty to abstain from voting on any matter relating to that conflict. The shareholder who fails to comply with this provision will be responsible
for any damages resulting from a final resolution of the matter in conflict if their vote contributed to the majority vote necessary to adopt the resolution. Shareholders who vote in favor of a resolution that is subsequently declared null must be jointly and severally liable for any consequences.
The Liability of Directors and Managers – All directors and managers of an SA are subject to a standard of loyalty and diligence. Noncompliance with these standards results in unlimited joint and several liabilities for
any damages that may arise.
2. Single-Shareholder Corporations (Sociedades Anónimas Unipersonales, or SAU)
Incorporation Requirements – As SAU are a type of SA, they have the same incorporation requirements of an SA, with these additional requirements:
(i) SAUs can only be incorporated as corporations (sociedades anónimas).
(ii) SAUs cannot incorporate another SAU.
(iii) SAUs share capital must be fully subscribed and paid up upon incorporation.
(iv) SAUs corporate name may include the name of one or more individuals, and must include the expression “sociedad anónima unipersonal,” or its acronym “S.A.U.”
Capital – If the capital is increased, the capital contribution must be fully subscribed and paid up simultaneously once approved by the shareholders.
Supervision – The Argentine Civil and Commercial Code establishes that SAUs are subject to permanent government supervision, as provided in Section 299 of the LGS. In this regard, SAUs must:
(i) appoint a board of directors composed of at least three members;
(ii) appoint a statutory supervisory committee of at least three members and always having an odd number of members; and
(iii) comply with the filings required from companies subject to permanent government supervision by the Public Registry of Commerce (PRC) of the jurisdiction where the SAU has its domicile registered.
This includes information on the holding of ordinary and extraordinary shareholder meetings, and financial statements.
As SAUs are subject to permanent government supervision, this makes them a costly type of corporate entity, so they are not convenient for small-scale businesses. However, SAUs may be a convenient alternative for foreign investors to set up a subsidiary in Argentina, given that only one shareholder is required (previously, the Argentine Companies Law required investors to register two foreign companies with the PRC to set up a subsidiary in Argentina because a minimum of two shareholders was required).
3. Simplified Corporations (Sociedades por Acciones Simplificadas, or SAS)
Incorporation – Within 24 business hours from next day of the filing, as long as the filings are made electronically with a standard form. The incorporation or any amendments may be made by public deed, a duly legalized private instrument, or electronically with a digital signature. This procedure includes digital notices for IGJ observations.
SAS can obtain a tax ID within 24 hours of being filed to the AFIP, and with no need for providing evidence of domicile at the beginning of the filing.
Board of Directors – The simplified corporation must have at least one effective and alternate director when the statutory supervisors are disregarded. These posts may be appointed for certain or uncertain terms. With effective directors, at least one must have residency in Argentina. This new type of entity also allows meetings of the board of directors to be held electronically and outside the company’s premises.
Shareholders – One or more corporate entities or individuals as shareholders. The limited liability is subject to the integration of the shares. Shareholder meetings may be held electronically and outside the company’s
Corporate Purpose – May be multiple and without any connection between the chosen activities.
Limitations – SAS cannot incorporate or participate in another SAS. SAS cannot be controlled by or connected in more than 30% of its corporate capital with a company in the terms of 299 ACL
Initial Capital – At first, corporate capital cannot be less than two times the minimum salary. Capital is divided into shares with singular or plural vote. Capital integration is based on the terms and conditions of the bylaws.
Capital Increase – Up to 50% of the registered capital does not need to be registered. The issuance of shares with different prime are allowed.
Contributions – The value of in-kind contributions may be unanimously set by the shareholders, or by market value as a default. Irrevocable contributions may maintain such nature for 24 months.
Shares Assignment – The assignment of shares will be done according to the by-laws and may require shareholder approval. If it is not determined in the by-laws, any assignment must be notified to the company
and registered within the Shares Registry Book in order to be effective to third parties. Limitations may be included in the by-laws for a prohibition of up to 10 years of shares assignment.
Transformation – All companies incorporated based on LGS may be transformed into SAS.
Digital Records – SAS companies must have digital minutes book as well as books for share registry, logs, inventory and the balance sheet, The company’s by-laws, its amendments and power of attorneys may be granted through digital notarial protocol.
4. Limited Liability Companies (Sociedad de Responsabilidad Limitada, or SRL)
Capital and Partners – An SRL may be set up by a minimum of two and a maximum of 50 partners, who may be individuals or corporate entities. Foreign individuals or corporate entities can been admitted as partners of
SRLs provided that they are empowered to participate in such companies by the laws of their jurisdiction of incorporation.
The capital must be fully subscribed on incorporation, denominated in Argentine currency and divided into partnership quotas. A quarter (25%) of the capital must be paid up by the partners at the time the SRL is
formed, and any balance must be paid up within two years thereafter.
When quotas are issued for contributions in non-monetary assets, they must be fully paid in. Partnership quotas must be of equal par value and entitle the holder to one vote each. Partners in an SRL are entitled to
preemptive rights with respect to new issues of quotas.
Management and Representation – The partners may appoint one or more managers to manage the company, who may be partners, employees or third parties. The managers represent the company, either
individually or jointly, as deemed in the by-laws.
Partners’ Meetings – SRL by-laws contain the rules for adopting resolutions. Unless the by-laws state otherwise, resolutions may be passed in writing without the need for holding a meeting. The exception is for
those companies with a capital of ARS 10 million or more: they must hold meetings to review the annual financial statements. If one partner holds the majority vote, the vote of another partner will be necessary for
the partners´ meeting to be considered valid.
Supervision – The appointment of a statutory supervisor or the creation of a supervisory committee is optional for SRLs unless their capital amounts to ARS 10 million or more, in which case one or more statutory supervisors or a supervisory committee must be appointed. When statutory supervisors or a supervisory committee are appointed, the rules for SAs generally apply.
The Liability of Partners and Managers – In general and with few exceptions, similar rules for the liability of partners and managers apply to SRLs and SAs. However, when there is more than one manager, liability will
depend on the provisions of the by-laws.
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