Bill: “Foundations and Starting Points for the Freedom of the Argentineans”: Amendments to the Civil and Commercial Code (obligations and contracts)
The “Foundations and Starting Points for the Freedom of the Argentineans” Bill (the “Bill”), which was referred in our previous publications (see link), includes several amendments to the Federal Civil and Commercial Code approved by Act N° 26,994 (the “CC&C”) with respect to obligations and contracts statutory rules (as well as to certain rules applicable to certain contracts in particular), to which we make reference below:
▪️ Exceptions to the automatic default provisions. Contrary to the current Section 887 CC&C, obligations without any specific term of performance contained in contracts requires a notice from the performing party to declare the default of the defaulting party whether the default is implied under the nature and circumstances of the obligation or not. In addition, the Bill revokes the presumption contained in the last paragraph of the Section 875 CC&C which stipulates that, in cases of doubt whether if an obligation has an implied or undefined term, it deemed to be subject to an implied term.
▪️ Preliminary contracts. The Bill revokes the one-year maximum term of the second paragraph of Section 994 CC&C which is applicable to all the preliminary contracts, including agreements to negotiate contracts and option contracts.
▪️ Long-term contracts. The Bill includes the amendment of Section 1,011 CC&C and, therefore, revokes the obligation to renegotiate long-term contracts when a party seeks for a unilateral termination.
▪️ Hardship (imprevisión). The Bill set forth that a party who is claimed for adequacy in the light of unforeseen events may be entitled to request the termination of the contract and that neither the termination nor the contractual adequation may proceed if the affected party is in default or incurred in gross negligence.
▪️ Contracts.
(i) Sale and Purchase Agreement. Preferential rights. The Bill amends Section 1,165 CC&C, which set forth that preferential rights in sale and purchase agreements are not assignable, establishing that the parties are entitled to agree for the non-assignability; which means, contrario sensu, that preferential rights are assignable.
(ii) Supply. The Bill stipulates that the provisions of the CC&C are applicable to supply agreements except otherwise is agreed by the parties and, in addition, it set forth a 20-years maximum statutory term (renewable or subject to the option of total or partial renewal) when the supply consist on natural produce of the soil, with or without a manufacturing process applied to them.
(iii) Agency. The Bill revokes the mandatory nature of the minimum notice term prior to termination without cause set forth in Section 1,492 CC&C and clarifies that this prior notice term shall be of one month for each year of the term of the contract only if the parties have not agreed any other term.
(iv) Concession. The Bill stipulates that the provisions of the CC&C are applicable to concession agreements except otherwise agreed by the parties and revokes the mandatory nature of the four-years minimum statutory term, which shall be applicable only if the parties have not agreed any term.
(v) Franchise. The Bill revokes the legal requirement for the franchised system to be a “proven system” of Section 1,512 CC&C. Furthermore, the prohibition for the franchisor to have any interest on or direct control over the franchisee’s business is released and survives the legal requirement for the franchisor to be the exclusive owner of (or at least being entitled to use and transfer to the franchisee) the intangible assets mentioned therein. The 4-years minimum statutory term applicable by reference to the franchise agreement is revoked, except the parties have not agreed any term. Last, the Bill revokes Section 1,519 CC&C which set forth a list of covenants that are null and void by law.
(vi) Loans. The Bill revokes the cross reference to Section 874 CC&C, which have impact in case the parties have not expressly agreed on the place of payment of the loan, and furthermore revokes the subsection c) of Section 1,531 which stipulates the provisions of the loans are applicable even if the contract stipulates a specific destination of the funds.
(vii) Lease/Bailment. The Bill revokes subsection 1,539:c CC&C but Section 1,539 has only two subsections. A clarification is expected from the Houses of the Congress or lege ferenda.
(viii) Settlement. It is proposed to amend Section 1,614 CC&C referred to the settlement agreement to waive the requirement of “mutual concessions” (the Bill only require mutual extinction of rights and liabilities), without requiring such rights or liabilities to be under discussion or controversy. It is further stated that the settlement agreement must be in writing “with the same formalities used in the contract”, which may imply that the settlement agreement must subject to the same formalities required to the main contract from which the settled rights and obligations arise.
(ix) Arbitration. The legal requirement of the disputes to be “of a private nature in which public order is not affected” contained in Section 1,649 CC&C and applicable to arbitration is released.
Should the abovementioned amendments under the Bill be enrolled by the Federal Congress, they will be complementary to the amendments already in force under the Emergency Decree No. 70/2023, e.g., regarding the foreign currency obligations, electronic domicile, lease agreements, credit card agreements or health insurance.
For additional information, please contact corporate@trsym.com.
Bill: “Foundations and Starting Points for the Freedom of the Argentineans” - Amendments to the General Companies Act
Following our previous publications about this topic (see link), we hereby inform briefly the main amendments proposed under the so called “Foundations and Starting Points for the Freedom of the Argentineans” Bill (the “Bill”) submitted by the President with the Federal Congress on December 27, 2023 on the General Companies Act N° 19,550 (the “GCA”).
Should the amendment under the Bill be enrolled by the Federal Congress, they will complement other amendments already in force as per the Emergency Decree N° 70/2023, i.e., abrogation of regulations of the business organizations in which the Federal Government is a member (e.g. mixed private-public ownership companies, or state-owned enterprises and companies), amendments of sections 30 and 77 of the GCA in relation with the ownership of shares of any corporation by nonprofit organizations, or the amendment of subsection 299:3 GCA, with respect to the permanent governmental auditing over the state-owned business organizations.
The Bill, among others, includes the following amendments to the GCA:
▪️ Single Member Limited Liability Companies (S.R.L.U.). In addition to the single shareholder corporations (sociedades anónimas unipersonales or “S.A.U.”), admitted under Act N° 26,994, the Bill introduces the single member limited liability companies (sociedades de responsabilidad limitada unipersonales or “S.R.L.U.”). As the Bill also includes the abrogation of subsection 299:7 GCA, sole member business organizations (whether they are S.A.U. or S.R.L.U.) will not be subject to permanent governmental auditing anymore provided, however, the activity of the business organization is not included in any of the other subsections of section 299 GCA.
▪️ State-controlled corporations (SAPEM). In accordance with the amendments under Decree 70/2023, the Bill abrogates the regulations of the state-controlled corporations (sociedades anónimas con participación estatal mayoritaria or “SAPEM”) and, as per the amendment of Section 1 of the GCA, it includes the principle of equal treatment in corporate matters, even if is a state-owned business organization and a public interest is invoked.
▪️ Employee stock ownership and corporation’s acquisition of its own shares. The Bill adds section 221 bis to the GCA, by which corporations might issue shares in consideration with performance bonuses or, with the express and sole consent of the employee, a below pair payment. Those shares may be acquired by the corporation under the new subsection 220:4 GCA added in the Bill and, as per the new subsection 13:5 GCA, by-laws may include an acquisition price different from the actual value of the shares without being construed as an abusive provision. The abovementioned amendments are complementary to amendments in force under Decree 70/2023, in relation with the Employee Stock Ownership Plan under Act N° 23,696.
▪️ Dividend right. Pursuant to the amendment of section 1 GCA, by-laws may include any provision, without any limitation, with respect to the final profit distribution, including a non-distribution provision, subject to unanimous consent of the members.
▪️ Objects with multiples activities. Contrary to the regulations of certain Public Registries (cfr. section 67 of General Resolution N° 7/2015 as amended of the Superintendency of Companies), pursuant to the amendment of Section 11 and the addition of Section 6 bis to the GCA, by-laws may include multiples activities in the objects in the extent they are permitted by law.
▪️ Subordination of the member’s credits. The Bill stipulates the subordination of the credits of the members against the business organization, which shall be paid after the third parties’ credits are fully paid.
▪️ Right of members to appraisal. Members of any business organizations may be entitled to a right of appraisal (derecho de receso) without invoking any cause and only subject to a 90-days expiration term. As the abovementioned amendment would be added under the new section 55 bis in Chapter 1 of the GCA “General Provisions”, the appraisal right may be applicable to any business organizations, irrespective of the business organization type.
▪️ Mandatory appraisal. Under the Bill, Members that hold at least 2% of the capital stock and do not participate at the member’s meetings or do not collect dividends during the last five consecutive fiscal years shall be excluded by the business organization under a mandatory appraisal (receso forzoso).
▪️ Undefined term of office of the directors of corporations. By-laws of the corporations (sociedades anónimas) may include provisions which set forth whether a specific or an undefined term of office of the directors or may delegate to the shareholders meeting the determination of the term of office. Except otherwise provided, the term of office shall be undefined.
▪️ Nominative shares regulations. Several sections of the GCA, e.g., sections 208, 213, 215, 263 and 335, are amended in accordance with Nominative Private Shares Regulations Act N° 24.587 (Official Gazette, 11/22/1995).
For further information please contact us at corporate@trsym.com.
Limits on the Duration of Commercial Companies
On February 1, 2022, the public registry of commerce (the "IGJ") published General Resolution No. 1/2022 (the "Resolution"), by means of which established that the maximum duration term for commercial companies will be of 30 years.
The Resolution established that all articles of incorporation to be registered with the IGJ must include the term of duration of the company, which may not exceed 30 years from the date of its registration with such entity. According to customary and usual practices, said term used to be for a maximum period of 99 years, therefore, the Resolution forces the corporate renewal in a substantially shorter term.
The Resolution applies to all companies organized in the jurisdiction of the Autonomous City of Buenos Aires after the publication of the Resolution in the Official Gazette.
For further information, please do not hesitate to contact corporate@trsym.com.
New limitations to Foreign Companies
On May 17, 2021, the Superintendence of Corporations (“Superintendence”) published General Resolution No. 8/2021 ("RG IGJ 8/21") which establishes limitations in reference to foreign companies registered or applying for registration pursuant to Section 118 and 123 of the General Corporations Law No. 19,550 ("GCL"), especially in relation to special purpose vehicles ("SPVS"), which are basically companies incorporated abroad for the purpose of holding shares of local companies.
Following the restrictive criterion that the IGJ had already set out in Resolutions No. 530/2020 (“SFSC”) and 33/2021 ("MERCADOPAGO"), RG IGJ 8/21 provides that:
- the status as SPV of the entity must be declared at the time of its registration in the Argentine Republic (and not afterwards).
- the registration of more than one vehicle company per group is not allowed.
- the registration of SPVs will not be allowed if their direct or indirect controlling company is registered in the Argentine Republic pursuant to Sections 118 or 123 of the GCL.
- the registration of SPVs resulting from a chain of control between successive sole proprietorships will not be admitted.
- the registration of sole proprietorships whose shareholder is only a company incorporated abroad as sole proprietor, whether it is a vehicle or not, will not be allowed.
Likewise, and with special practical consequences on the activity of Argentine companies owned by foreign companies, RG IGJ 8/21 establishes that companies incorporated abroad that have a principal shareholding stake in local companies with headquarters in the City of Buenos Aires must be registered with the Superintendence. Registrations in other jurisdictions of the Argentine Republic will not be enforceable in such case.
The new regulation also requires that for the purposes of the registration of a foreign company under the terms of section 123 GCL, an investment plan must be submitted along with the list of companies in which it intends to participate or incorporate in the Argentine Republic.
In case the foreign company states that there is no ultimate beneficial owner, documentary evidence must be provided to show that: a) the head of the group company has all of its shares admitted to public offering; or, b) the ownership of the shares is so dispersed among the persons holding the capital stock that none of them holds the minimum percentage of shares (currently 20%).
RG IGJ 8/2021 abolished sections 212, 217, 219, 222, 239, 240 and 249 and amended sections 215, 218, 245, 255 and 256 of the General Resolution No. 7/2015 ("RG IGJ 7/15") to reflect the aforementioned changes. These amendments entail that the Superintendence will not register companies incorporated abroad that:
- lack the capacity and legal standing to act in the place of their incorporation.
- are incorporated, registered or incorporated in countries, domains, jurisdictions, territories, associated states and special tax regimes, considered non-cooperative for tax transparency purposes and/or categorized as non-cooperative in the fight against Money Laundering and Financing of Terrorism, or of low or nil taxation, according to the criteria of the Central Bank of the Republic of Argentina, of the Financial Investigation Unit, of the Ministry of Justice and Human Rights or of organizations governed by international public law standards, such as the United Nations, the Organization of American States, the Financial Action Task Force (FATF), OECD, or, which in the reasonable opinion of the Superintendence, do not meet such standards.
Finally, as a result of the amendment to section 255 of RG IGJ 7/15, the abbreviated annual information regime of foreign companies may only be filed for a maximum of one (1) consecutive financial year.
RG IGJ 8/2021 came into force on the same day of its publication, May 17, 2021.
For further information, please do not hesitate to contact Juan Pablo Bove, Federico Otero, Julián Razumny, Pablo Tarantino, Agustín Griffi, or corporateteam@trsym.com.
The Superintendence of Corporations Continues to Tighten Controls on Simplified Companies
Following the trend adopted by the Superintendence of Corporations (“Superintendence”) this year regarding Simplified Companies (“SAS”), on May 6, General Resolution 22/2020 (“RG IGJ 22/2020”) was published in the Official Gazette, which tightens the level of supervision for this type of company.
The RG IGJ 22/2020 provides mechanisms for obtaining information and measures to determine the business development of the SAS, registered both in the public registry of the City of Buenos Aires ("CABA") and other local jurisdictions, in relation to the ownership by this type of companies of property rights over real estate located in the CABA. The intention of the regulator would be to be able to determine if said ownership is alien to the corporate purpose. For this, the resolution provides for collaboration between the Superintendence and the Registry of Real State of the City of Buenos Aires, to obtain information on the existence of transactions regarding real estate rights in which the acquirers, creditors or assignees, fully or acting as trustees, are SAS.
If, based on such information, the regulator determines that those properties are not related to the development or financing of an organized economic activity of production of goods and services conducted by the SAS, the Superintendence will promote -or entrust the Public Ministry Prosecutor- the corresponding legal actions to declare the disregard of the legal entity. In turn, the Superintendence will be empowered to adopt additional measures if it deems it necessary.
In the same sense, note that on May 4, the Superintendence published General Resolution 20/2020, through which it modified article 38 of General Resolution 6/2017, establishing that for the registration of the appointment of administrators, those who are domiciled abroad must file the powers-of-attorney granted to their representatives, which may only be granted in favor of the directors of the residing in the Argentine Republic.
We also refer to our other Newsletters (see General Resolution IGJ 9/2020 and General Resolution IGJ 17/2020) in relation to the latest regulations applicable to SAS.
For further information, do not hesitate to contact Juan Pablo Bove, Federico Otero, Julián Razumny, Pablo Tarantino, Agustín Griffi, or corporateteam@trsym.com.
In the following link, you can access the Firm’s statement on COVID-19.
For information concerning COVID-19 legal implications, please refer here.
The Superintendence of Corporations Tightens Requirements for Simplified Companies
On April 23, 2020, the Superintendence of Corporations (“Superintendence”) published General Resolution No. 17/2020 (“RG IGJ 17/2020”) in the Official Gazette, by which Section 2 of the General Resolution IGJ No. 8/2017 on Simplified Companies ("SAS") was repealed.
The repealed rule expressly provided for the possibility of incorporating the SAS through an “electronic document with electronic or digital signature of its grantors, where only the last of the partners to be signing should execute the document with a digital signature in order to finalize the document with all the properties and assurances provided by said digital signature.” Regarding the differences between electronic and digital signature, we refer to the Newsletter published on March 23, 2020.
On the contrary, RG IGJ 17/2020, construing that RG IGJ 8/2017 contradicted both the provisions of Law No. 27,439 and the National Civil and Commercial Code, established that all partners must digitally sign the incorporation of the SAS. Also, for SAS already registered -without any digital signature of all its members-, provided a maximum period of 90 days to comply with said requirement, under notice of proceeding in accordance with what current regulations enable.
In order to carry out said regularization, all partners must digitally execute a private instrument together with the legal representative of the SAS -whose signatures must be certified- in which those who have electronically signed the instrument establishing the company together with whoever has done it digitally: (i) expressly and reciprocally acknowledge their status as partners and their shareholding in the company, along with the individualization of the shares corresponding to each one of them; and (ii) ratify the provisions of the incorporation instrument and, when appropriate, those of any subsequent social agreement (in both cases with retroactive effect to the date thereof). Additionally, a one (1) day notice must be published in the Official Gazette, expressing the identification of its grantors and their shareholdings.
Finally, it should be noted that the Superintendence will not register any act without the prior or simultaneous registration of the required rectification.
Despite RG IGJ 17/2020 regulation, also on April 23, 2020, Provision 86/2020 was issued by the National Directorate of National Registers of Automotive Property and Pledge Credits, which extended the term of suspension for granting digital signatures until May 31 of the current year.
For further information please do not hesitate to contact Juan Pablo Bove, Federico Otero, Julián Razumny, Pablo Tarantino, Agustín Griffi, or corporate@trsym.com.
In the following link, you can access The Firm’s statement on COVID-19.
For information concerning COVID-19 legal implications, please refer here.
Legal issues related to the execution of documents and social distancing
It is public knowledge that the preventive and mandatory social distancing established by Presidential Decree No. 297/2020 due to the COVID-19 (Coronavirus) pandemic limits the mobility of people in Argentina and affects operative issues related to the execution of documents, including contracts.
With technology as a key ally and due to the inability to execute documents or contracts on site, it is worth mentioning that digital signatures have been regulated in Argentina by section 288 of the Argentine Civil and Commercial Code, the Digital Signature Law No. 25,506 (the “Digital Signature Law”), as regulated by Decree No. 182/2019.
The Digital Signature Law provides for two different signatures: (i) digital signatures (section 2 of the Digital Signature Law) and (ii) electronic signatures (section 5 of the Digital Signature Law).
A digital signature is the result of applying mathematic procedures to a digital document with information known to the signatory only, information which will later be verified by a third party (certifying licensee) licensed to verify digital signatures.
The requirements for a digital signature to be valid are set forth in section 9 of the Digital Signature Law. In order to use an Argentine digital signature, the signatory must be previously registered with a certifying licensee (by means of a personal interview that requires a scheduled appointment). In turn, the certifying licensee must be previously authorized by the Argentine Government.
An electronic signature is any electronic data associated to other electronic data produced by a signatory in order to identify itself that does not meet all the requirements of a digital signature.
Electronic documents signed with a digital signature are presumed to have been signed by the signatory. The enforceability of electronic documents signed with electronic signatures is weaker, as the enforcing party will be required to prove the authorship of the signature.
Although both tools are extremely useful to continue with business activity during the pandemic, if a party denies the authorship of an electronic signature, the enforcing party will be required to prove the validity of that signature.
Those digital tools are additional alternatives to execute documents.
Should you need further advice on the requirements to execute documents remotely using alternative methods, please do not hesitate to contact Juan Pablo Bove, Federico Otero, Julián Razumny, Pablo Tarantino, or Agustín Griffi, or also corporate@trsym.com.
The Superintendence of Corporations reinstates control regime of foreign companies
On February 21, 2020, the Superintendence of Corporations of the City of Buenos Aires (“IGJ”) issued General Resolution 02/2020 (“RG IGJ 02/2020”) which expanded the registration and information requirements in connection with the companies incorporated overseas.
RG IGJ 02/2020 repeals General Resolution IGJ 06/2018, reinstating the articles of the General Resolution IGJ 07/2015 (“RG IGJ 07/2015”) included under provisions of Title III, Book III regarding companies incorporated abroad. In that regard, the resolution restores the obligation to prove that the main economic activity of the company is carried out outside of the Argentine Republic through the submitting of documentation signed by a company officer, for all companies that intend to register in the Argentine Republic under Articles 118 or 123 of the General Companies Law No. 19,550 (“LGS”).
In turn, as provided in article 218 of the RG IGJ 07/2015, the prohibition of the registration of an offshore company from jurisdictions of that nature is also restored.
In addition, the RG IGJ 02/2020 incorporates the obligation of foreign companies registered in Argentina to submit the Annual Information Regime (“AIR”), within 120 calendar days after the closing date of the financial statements of the corresponding branch or representation office.
Finally, the RG IGJ 02/2020 establishes that the legal representatives of the companies incorporated abroad must keep until the cancellation of their registration as representatives plus an additional term as from such cancellation equal to that of the statute of limitation applicable to claims for non-contractual liability (i.e., three years), a guarantee in accordance with the provisions of subsections 2 and 3 of article 76 of the RG IGJ 07/2015. The amount of such guarantee for each legal representative will be five times the minimum capital required for corporations, which would correspond to AR$500,000. Legal representatives in office at the time of issuance of the RG IGJ 02/2020, must file the aforementioned guarantee with the next immediate filing of the AIR of the company.
For further information, please contact Juan Pablo Bove, Federico Otero, Julián Razumny, Pablo Tarantino or Agustín Griffi.
Amendments to the Regime for the Promotion of Knowledge Economy in Argentina
On January 20th, 2020, the Argentine Ministry of Productive Development issued Resolution N° 30/2020 ( “Resolution 30”), that amended the Regime for the Promotion of Knowledge Economy created by Federal Law N° 27,506 (the “Law for the Promotion of Knowledge Economy”). Said regime, effective for a period of ten years starting on January 1st, 2020, substituted the pre-existing Software Industry Promotion Regime, effective until December 31st, 2019.
Resolution 30 appointed the Secretary of Industry, Knowledge Economy and External Commercial Management (under the authority of the Ministry of Productive Development), as enforcement authority of the Law for the Promotion of Knowledge Economy.
Additionally, Resolution 30 suspended the existing deadlines for the analysis and processing of requests to be accepted under the Regime for the Promotion of Knowledge Economy, under which the beneficiaries of the pre-existing Software Industry Promotion Regime could be provisionally accepted on the Registry of Knowledge Economy until full and final compliance no later than June 30th, 2020, with the requisites set forth in the new regulation.
The date of issuance of the regulation reestablishing the suspended process, as well as its content, is yet to be defined.
For more information, do not hesitate to contact Gastón A. Miani, Juan Pablo Bove, Federico Otero, Julián Razumny, Agustín Griffi, or Pablo Tarantino.
Update in Annual Sales Limits in Order to Be Considered as Small and Medium Size Company
On December 10th, 2019, the Secretaría de Emprendedores y de la Pequeña y Mediana Empresa issued Resolution No. 563/2019 (the “Resolution”) in order to update the annual sales amounts applicable in order to qualify as small and medium size company.
Please find bellow the updated annual sales limits (expressed in Argentine Pesos), listed for each activity/sector:
| Category | Activities/Sector | ||||
| Construction | Services | Commerce | Industry and Mining | Agricultural | |
| Micro | 15,230,000 | 8,500,000 | 29,740,000 | 26,540,000 | 12,890,000 |
| Small | 90,310,000 | 50,950,000 | 178,860,000 | 190,410,000 | 48,480,000 |
| Medium size tier 1 | 503,880,000 | 425,170,000 | 1,502,750,000 | 1,190,330,000 | 345,430,000 |
| Medium size tier 2 | 755,740,000 | 607,210,000 | 2,146,810,000 | 1,739,590,000 | 547,890,000 |
Finally, please note that the Resolution has become effective today.
For more information, do not hesitate to contact Juan Pablo Bove, Federico Otero, Julián Razumny, Agustín Griffi, Pablo Tarantino, or to corporate@trsym.com.