The Government of Argentina releases the implementation rules of the RIGI

On August 23, 2024, the Government of Argentina published Decree 749/2024 (“Decree 749”) which contains the implementation rules of the recent large-investment regime bill approved by Law 27,742 (for its Spanish acronym, “RIGI”) (for additional comments in connection with the RIGI and other aspects of the Foundations Law, please access here).

Further implementation rules from other governmental entities are to be published no later than 30 days following the publication of Decree 749.

The key takeaways of Decree 749 are summarized below:

1. Eligible Sole Purpose Vehicles

Existing sole Purpose Investment Vehicles (“SPVs”) may adhere to the RIGI. These include corporations (sociedades anónimas), sole proprietorships (sociedades anónimas unipersonales), Limited Liability Companies (sociedades de responsabilidad limitada), branches (sucursales), and joint ventures (uniones transitorias).

2. Minimum amount of investment

The Minimum Investment Amount (the “Minimum Amount”) remains at two hundred million United States dollars (US$ 200,000,000) (net of VAT) for most of the RIGI sectors, including Preexisting Projects subject to an Expansion (as such terms are defined below).

As to oil and gas transportation and storage, the Minimum Amount is set at three hundred million United States dollars (US$ 300,000,000). For offshore oil and gas exploration and production, and gas exports, the amount is set at six hundred million United States dollars (USD 600,000,000).

Finally, for Strategic Long-Term Export Projects (“SLEP”) the Minimum Amount is raised from one billion united states dollars (US$ 1,000,000,000) to two billion United States dollars (US$ 2,000,000,000).

3. Expansion of Preexisting Projects

Decree 749 defines an “Expansion” as the group of investments in qualifying assets that will result in the increase of the productive capacity of a project adhered to the RIGI, or a Preexisting Project (not adhered to the RIGI).

In this way, Preexisting Projects that comply with the requirements set by the RIGI, e.g., the Minimum Amount, may be eligible to adhere to the RIGI, but the benefits provided by the RIGI will solely apply to the Expansion (i.e., not to the Preexisting Project).

4. Qualifying Assets

Investments made before to the enactment of the RIGI in qualifying assets (including, in this definition, mining, oil & gas concessions, real estate, etc.) are not eligible for purposes of the Minimum Investment Amount, as Decree 749 further clarifies that only those made following the approval of the RIGI may be considered as Qualifying Assets.

5. Essential services

Decree 749 states that essential services, accountable up to 20% of the Minimum Amount, are defined as those without the RIGI project could not have been executed. Approval from the Enforcement Authority is required. Services provided by affiliates are excluded.

6. Strategic Long-Term Export Projects

To be considered as a SLEP project, Decree 749 further indicates that the following criteria must be met (apart from those provided in Decree 749 and in the RIGI):

  1. The SLEP will result in the international positioning of Argentina as a new long-term supplier in the global market.
  2. Each stage of the project shall involve a minimum investment amount of one billion United States Dollars (US$ 1,000,000,000).
  3. 20% of two billion United States Dollars shall be investment in the first and second year of the SLEP’s term.
  4. The components associated to the SLEP shall be interconnected, within a maximum radius of 200 km, provided that such radius shall not apply if the components are located at a greater distance but are physically integrated.

7. Tax and Customs Incentives

7.1. Income Tax

7.1.1. Income Tax Rate

The Decree 749 stipulates that the benefit of the 25% rate established by Section 183 of the Foundations Law will apply over net income subject to tax derived from SPVs’ activity, as of the SPVs’ adherence to the RIGI.

7.1.2. Special Amortization Regime

SPVS may choose to apply the amortization regime foreseen in the Income Tax Law or the accelerated amortization mechanism specifically foreseen by Section 183 of the Foundations Law. The Decree 749 specifies that in case the SPV opts for the latter, it shall be applied to all assets, of the SPV, and the assets must remain in the SPVs’ possession until the end of its activity or their lifespan, whichever occurs earlier. If this requirement is not met, the SPVs must reinstate the amortization previously deducted in its tax balance, considering it as taxable income and applicable interests shall accrue. Once the option is exercised, it must be reported to the Enforcement Authority and to the tax authority, and the assigned lifespan of the depreciable assets must be reported annually.

7.1.3. Transfer of Tax losses

Tax losses incurred by the SPVs can be transferred to third parties under the conditions specified by Section 183 of the Foundations Law. Decree 749 states that such third will be able to apply the assigned tax losses in the fiscal period in which they are assigned, even if this occurs after the end of that period (but before the due date for filing the Income tax return). Further, tax losses can be carried forward for 5 years.

Transferred losses will be considered general losses of Argentine source for the recipient.

The transfer is subject to approval from AFIP, which must issue a resolution within 45 business days.

If the AFIP rejects the transfer for formal reasons, the taxpayer may amend the inconsistencies, and AFIP must thereafter issue a new resolution within the following 10 business days. The third subject will be exempt from any liability if AFIP challenges the transferred loss, and the claim will be directed to the original SPV that generated it (except in cases where the SPV qualifies as a sole purpose branch, and the deduction of tax losses has been done by the parent company).

7.1.4. Dividends

Dividends will be subject to tax at a 7% rate if distributed to individuals or undivided estates. Decree 749 provides that after 7 years from the end of the tax period of SPVs’ adherence to the RIGI, a reduced tax rate of 3.5% will apply, as it is specified by Section 185 of the Foundations Law, regardless of the income origin.

7.1.5. Payments from Strategic Long-term Export Projects to foreign beneficiaries

30% of the amounts paid will be presumed as net income (unless a more favorable treatment or exemption under current regulations applies) and the withholding tax must be applied.

7.1.6. Transactions between affiliates

Transactions or operations that an SPV performs with affiliates (either located within the country or abroad) will be subject to the Transfer Pricing rules established by the Income Tax Law.

The transactions or operations that an SPV carries out with their related parties located in the country and abroad will be subject to the Income Tax Law’s rules.

Conversely, with regards to entities residing in Argentina, they will be considered as affiliates in case that the following requirements, established by the Decree 749, are met:

  • A subject holds all or most of the stock capital of another.
  • Two or more subjects have a common entity holding all or most of their stock capital.
  • A subject holds the necessary votes to form the corporate will or prevail in the shareholders' or partners' assembly of another subject.
  • The members of a joint venture, or any other associative agreements or the entity that created sole purpose branches, or the foreign companies’ branches and resident subjects in Argentina are related as per the points above.
  • There are agreements, circumstances, or situations granting the direction to a subject, whose participation in the stock capital is minor.

The AFIP must amend the Transfer Pricing regime foreseen by the Income Tax Law in order to make it applicable to transactions performed between SPVs and related parties which reside in Argentina.

Section 186 second paragraph of the Foundations Law states that to determine if the cost-sharing agreements signed between SPVS and their related parties are aligned with market practices between independent parties, the value of contributions or inputs made by each participant must be equivalent to what an independent company would accept under comparable circumstances. In this regard, Decree 749 stipulates that:

  • A subject is considered to be a participant in the agreement if they have a reasonable expectation of benefiting from the result of that agreement.
  • Contributions and expected benefits should be valued as if they had occurred between independent parties.
  • This contributions valuation should be made without considering the benefits obtained within the RIGI framework.
  • In specific cases, the AFIP may determine the correct valuation of the participations and benefits attributable to each participant and may also create an information regime over the operations of SPVs.

7.2. Value-added Tax (“VAT”)

The amount of VAT invoiced to SPVs for the purchase of fixed assets or infrastructure investments and/or necessary services for their development and construction, or the VAT for definitive imports, will be applied to a Tax Credit Certificate, without requiring the AFIP’s authorization.

The SPVs must report to the AFIP the certificates issued on a monthly basis, and, if the AFIP detects inconsistencies, VAT must be paid along with its applicable interests and fines, and it will be computable by SPVs as a VAT credit against VAT debits in the following period.

7.3. Tax Treatment of Joint Ventures or other associative contracts

Decree 749 states that these subjects will be able to adhere to the RIGI as SPVs if they are formed by independent companies that are duly registered in the relevant Public Registry and whose economic activity is orientated to third parties (e.g., projected to market).

7.4. Imports

7.4.1. Exemptions

Section 109 of the Foundations Law establishes that Imports of capital goods, spare parts, components, among others, carried out by SPVs will be exempted from import duties, certain fees (including destination verification), and any regime of collection, payments in advance or withholding of national and/or local taxes.

Decree 749 specifies that exemptions will apply to imports directly related to the approved investment plan and, for that purpose, at the time of approving the SPVs’ adherence to the RIGI, the following information must be provided to the Enforcement Authority:

  • Details of the goods for which the incentive is requested.
  • Identification of the adhering SPVs and the respective RIGI project to which the goods will be allocated.
  • An affidavit certifying that the goods will be allocated to the RIGI project.
  • Additionally, a guarantee must be posted as provided in Section 182 of the Foundations Law.

The goods will be subject to destination verification and must be allocated to the RIGI project until the end of the goods’ lifespan, the project or SPVS’ termination, the re-exportation of such goods, the payment of taxes that should have been paid if the benefit had not been granted, and/or the resolution of the Enforcement Authority.

The SPVs cannot change the declared destination of the goods, and they may only be transferred to another SPVs which has previously adhered to the RIGI, with the prior authorization of the AFIP.

7.5. Tax Treatment of Sole Purpose Branches

The taxpayer who creates the sole purpose branch may opt for:

  • Transfer tax benefits proportionally to the value of the net worth transferred to the branch, as transferable losses of Income Tax and VAT balances. In this case, there are two alternatives:
    • Allocate tax credits proportionally to the net worth transferred.
    • Transfer tax credits directly obtained from the purchase or manufacture of the transferred asset.
  • Transfer the assets, which will keep the same value that they had for the entity who creates the sole purpose branch, without transferring tax benefits.

7.6. Tax and Customs Stability

Section 201 of the Foundations Law established the tax and customs stability for SPVs, regarding the incentives mentioned above, which cannot be affected by the repeal of existing regulations or the creation of a more burdensome or restrictive new law. Additionally, the Decree stipulates that stability will apply to taxes, tax rates, and contributions payable by SPVs, as well as to rights, fees, or other charges on imports or exports. The SPVs may oppose the imposition of additional taxes or higher tax rates than those previously established, and also have the right to benefit from any elimination or exemption of taxes of the general tax regime, as well as from a possible reduction in tax rates.

Consequently, SPVs adhered to the RIGI will have the right, for a period of 30 years from the date of adherence, to pay exclusively:

  • Taxes with the incentives offered by the RIGI; and
  • Taxes not covered by the RIGI that were in effect at the time of their adherence, until they are eliminated from the general tax regime.

7.7. Tax for an Inclusive and Solidarity Argentina

The Decree establishes the suspension of the payment of this tax (as established by Section 35 of Law No. 27.541, subsection a), which applies to the purchase of foreign notes and currencies and other currency exchange transactions made by Argentine residents for the import of goods which are subject to the incentives mentioned in Section 190 of the Foundations Law.

8. Foreign Exchange Incentives

8.1. Collections from exports of goods and Start-Up Date

According to Section 198 of the Foundations Law, collections from exports of goods made by the SPV are exempted from the obligation to enter and settle foreign currency by a percentage equivalent to 20%, 40%, and 100% starting from the second, third, and fourth year, respectively, counted from the “Start-Up Date” of the SPV.

Decree 749 defines Start-Up Date as the date falling on the earlier of: (a) first export of the RIGI project; or (b) 40% of the Minimum Amount in qualifying assets is completed (net of accountable investments that can only be counted up to 15% and 20% according to Sections 38 and 39 of Decree 749).

The Start-Up Date must be reported by the SPV to the Enforcement Authority, specifically detailing the manner in which one of the two conditions outlined in the first paragraph has been fulfilled (e.g., the date of the first export, disbursement, the amount and eligible asset to which it was applied, etc.). This information will be forwarded by the Enforcement Authority to the Central Bank of Argentina (“BCRA”)

8.2. Incentive Percentage

Decree 749 also clarifies that the percentages indicated in the previous point will be calculated based on the amount received according to the agreed sales terms of the exported goods, shipped after the period corresponding to the Start-Up Date has elapsed.

8.3. Export Financing

Decree 749 provides that the incentives set forth for the export of goods (i.e., the possibility of not settling collections up to certain percentages) will be applicable to advances, pre-financing, and post-financing of exports, to the same extent that the incentive applies to the financed export.

8.4. Local Financing

Decree 749 clarifies that, for the purposes of the foreign exchange incentives under the RIGI, local financings in foreign currency shall include financial indebtedness with local financial institutions, issuance of securities in the local market, or promissory notes and other instruments approved by the BCRA.

8.5. Prepayment of Debt and Absence of Minimum Stay Period

Decree 749 establishes that access to the foreign exchange market by the SPV for the repayment of the principal of financial indebtedness with foreign creditors can occur at any time before the due date of the service, provided that such financing has been entered and settled through the foreign exchange market.

In the case of direct investments by non-residents, the SPV may access the foreign exchange market for the repatriation of the investment at any time, provided that the investment has been entered and settled, without the need to comply with any minimum stay period.

8.6. Limits for Accessing the Foreign Exchange Market

Decree 749 establishes that, as long as the provisions of the general foreign exchange market regime impose the obligation to enter and settle all or part of the proceeds from exports, the BCRA may require that the SPV only be allowed to access the foreign exchange market for any purpose to the extent that the total amount of foreign currency entered from abroad and settled in the foreign exchange market by the participating VPU is, at the time of each access, greater than or equal to the amount of foreign currency demanded by that date for the project, including the requested access.

It is also clarified that the above will not apply to the payment of interest on financial indebtedness and/or dividend payments.

8.7. Contributions in Kind and Commercial Debt

Investments by the SPV made through direct foreign investment contributions of capital goods in kind or the importation of capital goods financed by the supplier or another foreign creditor with direct disbursement to the supplier will receive the same benefits as those entered and settled, provided that such investments have been duly registered following the procedures established by the Enforcement Authority and/or the BCRA.

8.8. Partial Entry and Settlement

In cases where the SPV has partially entered through the foreign exchange market amounts corresponding to capital contributions or other direct investments, or loans or other financial indebtedness with foreign creditors, access to the foreign exchange market for the payment of profits, dividends, or interest to non-resident entities may not exceed the proportional part of the capital contributions or other direct investments, and the loans or other financial indebtedness with foreign creditors that have been entered and settled through the foreign exchange market.

8.9. Collections in Pesos by Foreign Creditors

Non-resident creditors of the SPV, including related parties, who have received pesos in Argentina as a result of a collection against the SPV due to a breach by the SPV (e.g., in the case of the enforcement of collateral), as well as guarantors of the SPVs obligations -including related parties- whose collateral is expressly established in the debt agreements for the payment of said granted collateral, will have access to the foreign exchange market for the repayment of principal and interest under the same terms and conditions that would have applied to the SPV.

8.10. Collateral for Foreign Creditors

Decree 749 establishes that the BCRA may: (i) approve mechanisms for accessing the foreign exchange market to allow the SPV to establish collateral in Argentina or abroad for the payment of principal and interest on foreign indebtedness that has been entered and settled through the foreign exchange market; and (ii) allow to accumulate collections from exports of goods and services in accounts within the country or abroad for the purpose of securing the repayment of such indebtedness, for example, onshore and offshore reserve accounts.

8.11. Impact on the Normal Development of the Project

Decree 749 sets forth that if a SPV adhering to the RIGI verifies that the normal development and execution of its project has been affected by actions or omissions of public bodies and/or private entities involved in administrative procedures related to compliance with the formal and/or substantive requirements and/or conditions established in the foreign exchange regulations, the SPV may notify the Enforcement Authority about the existence of such a situation with a detailed explanation of the case, providing any evidence in its possession, if any, and identifying the public bodies and/or private entities and their respective officials, agents, or employees involved, so that, if applicable, the Enforcement Authority can immediately take the necessary measures to restore the normal development and execution of the SPVs project adhering to the RIGI.

Such measures must be taken by the Enforcement Authority within five (5) business days of receiving the SPVs notification, including sending a notice to all parties identified by the SPV requesting explanations regarding the reported situation. This is notwithstanding any administrative, civil, and criminal consequences that may arise from the situation reported by the SPV.

8.12. Additional Regulations by the BCRA

Within 30 calendar days of the publication of the Decree 749, the BCRA must issue the necessary complementary regulations to enable, with respect to foreign exchange regulations, the effective use of the rights recognized under the RIGI.

The aforementioned regulations will also address cases of contributions of goods by foreign entities and the mechanisms for handling collaterals for local and foreign financing, including the application of the SPVs own exports, up to the amount of foreign currency that the SPV has entered and settled through the foreign exchange market in relation to the foreign indebtedness, plus its interest.

8.13. Accumulation of Benefits

With respect to foreign exchange incentives, the benefits provided under the RIGI in this matter cannot be accumulated with the incentives of other existing or future promotional regimes, including, but not limited to, the following: (i) Decree No. 929/13; (ii) Decree No. 234/21; (iii) Decree No. 892/20; (iv) Decree No. 277/22; (v) Decree No. 679/22; and (vi) Decree No. 28/23, or any regulations that may replace them in the future.

9. Procedure to adhere to the RIGI

The filing of the application must contain the documentation required by the Decree 749, and shall be submitted to the Enforcement Authority, signed by the legal representative and notarized. The Enforcement Authority must issue its decision on the adherence of the SPV to the RIGI within forty-five (45) business days. If the Enforcement Authority decides to request additional information to analyze the feasibility of the project or to call the legal representative to a hearing, this term shall be suspended.

Once this term has been resumed, the Enforcement Authority shall issue a decision within the remaining days of the established term, or within the following fifteen (15) business days, the longer of the two. The lack of pronouncement shall not be interpreted as an acceptance.

In case of rejection of the application, an adjusted filing may be submitted up to two (2) times during the same calendar year in which the notification of the first rejection was received.

10. New Registries

Decree 749 creates the “Registry of Sole Purpose Vehicles”, the “Registry of Strategic Long-Term Export Projects”, and the “Registry of Suppliers of the Incentive Regime for Large Investments”.

11. Enforcement Authority

The Ministry of Economy is designated as the Enforcement Authority of the RIGI.

12. Jurisdiction and arbitration

The SPV may establish, together with the Enforcement Authority, at the time of the filing, the forms, procedures and other requirements to be observed to communicate the existence of a dispute. This notice shall be made to the Enforcement Authority with a copy to the Attorney General’s Office.

Likewise, the Decree 749 introduces the concept of “Arbitration Contract”. The SPV adhered to the RIGI must state in writing its acceptance that both the SPV and its partners or shareholders will resolve disputes through the mechanisms set forth in the Foundations Law. Once the adherence has been accepted, the Arbitration Contract will enter come into force as of the date of the administrative act approving the adherence request to the RIGI.

Also, the filing shall provide that the calculation of the compensation shall contemplate consequential damages and loss of profit, as well as the impact on the economic and financial balance of the project.

Exceptionally, the Enforcement Authority may propose to the National Executive, with the express consent of the SPV, specific dispute resolution mechanisms for the project.

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For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Julieta De Ruggiero, Francisco Molina Portela, Gastón Miani, or Leonel Zanotto.

by trsym

Foundations Law: Renegotiation of Public Contracts

  • Scope: Public works and concession contracts entered prior to the new administration taking office may be subject to renegotiation and/or termination.
  • Procedure: The procedure may be initiated by the National Government or by request of the contractor. The renegotiation and/or termination must be approved by the National Executive Power, with the prior intervention of the Office of the Attorney General (“Procuración del Tesoro de la Nación”).
  • General provisions: the Ministry of Economy shall establish the financial or economic guidelines to determine the renegotiation or termination of the contracts within thirty (30) business days after the release of Decree 713.
  • Renegotiation provisions:

    • The contractor shall waive to any claim arising from, or in connection with, consequential damages, loss of profit, unproductive expenses and possible economic damages of a similar nature, derived from the decrease in the rate of execution or suspension of the work or service due to an emergency situation. The contractor shall also waive any administrative and/or judicial claim in connection thereof.
    • The contractor shall receive no compensation for the loss of profits for the works, goods or services which may be carved-out by the contract amendment.
    • The renegotiation agreement shall establish the terms of payment of the amounts due to the contractor, if applicable.
    • The rights and obligations of the parties arising from the renegotiation agreement shall guarantee the economic and financial balance of the contract.

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For additional information, please contact Nicolás Eliaschev and/or Javier Constanzó.

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Foundations Law: Regulation of Public Work Concessions, Infrastructure and Services

  • Tenor of the concession: Concessions may be for a fixed or variable tenor, based on the required investment, operation and maintenance costs, debt services, among other factors.
  • Enforcement Authority: Ministry of Economy.
  • Public Services: Public service concessions or licenses will continue to be ruled by their regulatory frameworks, notwithstanding the application of this regime mutatis mutandis.
  • Selection process: Concessions shall be awarded following a call for bids, locally and/or internationally.
  • Budget earmarks: Budget earmarks are required, if government funds are required for the concession.
  • Amendments to the Concession Contract – economic and financial balance: Unilateral modifications to the Concession Contract made by the grantor related to the execution of the project must be compensated to the concessionaire to maintain the economic and financial balance of the concession. Likewise, the renegotiation is allowed, having to prove, by means of technical reports, the convenience for the public interest and the due legal, economic and financial analysis of the execution of the contract to be renegotiated. The renegotiation shall be carried out within twelve (12) months from the date of economic and financial imbalance and may be extended by agreement of the parties.
  • Unilateral termination of the contract: The unilateral termination of the contract for reasons of public interest must be declared by the National Executive Power, with the prior intervention of the Ministry of Economy.
  • Dispute settlement: Disputes shall be resolved, primarily, through a technical panel. Arbitration is allowed as well.

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For additional information, please contact Nicolás Eliaschev and/or Javier Constanzó.

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Foundations Law: Private Initiative Regime

  • Scope: The newly enacted Private Initiative Regime shall apply to public work contracts, public works, services and infrastructure concessions and PPP contracts.
  • Enforcement authority: Ministry of Economy.
  • Submission of Private Initiatives: Initiatives may be submitted (a) following a call for bids for projects considered to be of public interest; or (b) with no call for bids, in which case the promoter of the private initiative (the “Promoter”) shall provide substantiated reasons for the private initiative to be deemed as of public interest.
  • Private Initiatives Information: The private initiatives shall detail the following information:
    • Technical and financial background of the Promoter.
    • Description of the project.
    • Location, area of interest and related benefits.
    • Estimated demand and associated annual growth rate.
    • Analysis of the relevant legal aspects considering, among other factors, its area characteristics, implementation zone, and areas of interest.
    • If applicable, a description of the works to be performed and/or services to be provided, with their technical analysis.
    • Analysis of the technical, economic, and financial feasibility.
    • Estimated CAPEX and OPEX.
    • Analysis of the economic conditions associated to the contract, such as fees and tenor of the concession.
    • Financing.
    • Description of the most material risk factors related to the Private Initiative.
    • Environmental impact studies.

    The Privative Initiative shall be backstopped by a guarantee, in the form of an insurance bond or letter of credit, in a guaranteed amount equal to 0.5% of the estimated investment; provided, however, that this guarantee may not be required if the Promoter accredits that the guaranteed amount has been incurred in the preparation of the private initiative.

  • Filing of the Private Initiative – Public Interest Declaration: The Enforcement Authority is enabled to request additional information or documentation, and shall have a term of sixty (60) days, extendable for the same term according to the complexity of the project, to prepare a non-binding report on the public interest and the eligibility of the proposal, considering its technical, economic and financial feasibility. If the Enforcement Authority considers that the proposal is as of public interest, it will submit the non-binding report to the National Executive Power, who will decide whether to grant such qualification or not, within a term of ninety (90) days, extendable for the same term according to the complexity of the project. If the initiative is rejected, the project Promoter will not be entitled to any compensation.
  • Call for Bids: the call for bids shall be done within sixty (60) days following the declaration of public interest.
  • Promoter’s Rights:
    • The Promoter’s bid shall have priority with respect to other offers if the difference between each offer’s price is no greater than ten percent (10%). Tied parties shall have the right to improve their offers if the offered price’s difference is between ten (10%) and fifteen percent (15%).
    • If the Promoter is not selected as the preferred bidder, the Promoter shall have the right to be reimbursed for the direct costs and expenses from the preferred bidder (such reimbursement will not exceed 1% of the bid, increasable to 3%).
    • Assignment of rights to the private initiative is allowed for the benefit of the Promoter.
  • Abrogation of Decree 966/2005: the prior Private Initiative Regime approved by Decree 966/2005 is abrogated.

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For additional information, please contact Nicolás Eliaschev and/or Javier Constanzó.

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Regulation of Foundations Law: Government reorganization and Sale of state-owned companies

On August 5, 2024, the Government released Decree 695/2024 (the “Decree 695”) that regulates Title II “State Reform” of Law 27,742 “Foundations Law” (“Ley de Bases y Puntos de Partida para la Libertad de los Argentinos”).

A summary of the most relevant aspects on the regulations related to Government reorganization and Sale of state-owned companies are described below. Additional comments to the Foundations Law on these subjects are also available here and here.

1. Government reorganization

The Ministry of Economy shall propose to the National Executive Power the modification, transformation, unification, liquidation or dissolution of public trust funds in accordance with Section 5 a), b) and c) of Law 27,742 and other applicable provisions.

In addition, Decree 695 empowers the Ministry of Economy to issue complementary regulations to implement this procedure.

2. Sale of state-owned companies

2.1. Report

For the purposes of obtaining the National Executive Power’s authorization to proceed with the sale of state-owned companies, the Ministry or Secretary in control of the respective state-owned company (list that includes ENARSA, AYSA, Belgrano Cargas, Intercargo, Corredores Viales, among others) must submit to the National Executive Power a detailed report with a specific proposal of the most adequate procedure and modality for the sale of such any state owned company (the “Report”), after the intervention of the Agency for the Transformation of State-Owned Companies (Agencia de Transformación de Empresas del Estado).

2.2. Call for bids

Call for bids shall be published for, at least, seven (7) days, and the last publications shall be made, at least, thirty (30) days prior to the deadline for the submission of bids, according to the complexity of the procedure. Additionally, the call for bids must be published on the website of the enforcement authority responsible for the procedure.

For international call for bids, the call also must be published in at least one website that allows adequate access to foreign interested parties, for a term of three (3) days, at least forty-five (45) calendar days prior to the deadline for the submission of bids. The enforcement authority may also issue invitations to participate to all those human or legal persons, with national or foreign capital, that considers convenient.

2.3. Liquidation

In the case of sale of the above mentioned companies when the transfer of contracts under execution to the provinces is required, the Report shall also detail the amounts involved in any such contract, as well as any related agreements.

The company in liquidation, in cooperation with the Agency for the Administration of State Assets (Agencia de Administración de Bienes del Estado) must elaborate an inventory of its assets, including their valuation. If applicable, a priority order for the sale of the assets must be defined.

2.4. Other provisions

Prior to the closing of contracts, the Office of the Attorney General (Procuración del Tesoro de la Nación) and the Agency for the Transformation of State-Owned Companies may make observations and/or suggestions. In that event, the enforcement authority shall perform the referred modifications, and submit a final report to the National Executive Power for its approval. Once the procedure is completed, the enforcement authority shall draft a final report to the General Auditor Office.

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For additional information, please contact Nicolás Eliaschev and/or Javier Constanzó.

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Leonel Zanotto joins our Firm as Partner of the Tax Department


We are pleased to announce the hiring of Leonel Zanotto, as Partner of our Firm.

Leonel joins as a Partner to continue developing the Firm's Tax practice together with Gaston Miani, specifically with a tax consulting advisory focus.

Leonel is an expert in tax issues both nationally and internationally, having spent most of his career in a market-leading international consulting firm based in Buenos Aires, leading the tax team. He is a Public Accountant and has a degree in Business Administration, graduated with honors from the Universidad Argentina de la Empresa (UADE), and a postgraduate degree in taxation from the University of Buenos Aires (UBA). He is a member of the Argentine Association of Fiscal Studies and the International Fiscal Association.

Throughout his career he has advised companies in various areas such as fintech, retail, services, among others. He has also participated in M&A transactions, analyzing the tax issues in due diligence processes, identifying risks and possible opportunities for improvement, as well as evaluating the implementation of tax-free reorganizations. In addition, he has actively participated in tax audits processes at both the national and provincial levels, leading work teams for adequate compliance with tax requirements, identifying potential controversies to arise in court.

He is a professor of subjects related to the tax area at UADE, both in undergraduate and post-graduate degrees. He also collaborates as an active member in the tax commissions of various business chambers. He has been an invited speaker at numerous conferences and in different courses at universities in different regions of the country.

“I am proud to be able to join the TRS&M team, contributing with my expertise to the growth of the Firm. The current tax context in Argentina and in the world leads us to be very attentive to changes as well as identify opportunities for improvement that optimize the tax burden by making a reasoned evaluation of the impact on the business. That is the challenge and the reason why we will be close to our clients,” Leonel said.

“With the addition of Leonel, TRS&M prioritizes a comprehensive approach to the tax perspective and focused on the business, not only seen from the legal perspective but also from the economic one, supplementing the view of the tax managers of the companies that choose us,” said Marcelo Tavarone, managing partner of the Firm.

“The appointment of Leonel as a partner is great news for the TRS&M Tax Department, thus becoming one of the few multidisciplinary tax departments in the legal market in Argentina,” said Gastón Miani, partner of the TRS&M Tax Department.

Tavarone, Rovelli, Salim & Miani stands out as one of the prominent full-service law firms in the Argentine legal market, with a substantial track record for providing comprehensive advice to corporate and financial clients, as well as active participation in complex transactions and litigation. With this hiring, the Firm strengthens its presence in tax practice.

 

Media Contact: Paula Cafferata – paula.cafferata@trsym.com

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Updates to electricity spot prices

On February 8, 2024, the Secretary of Energy issued Resolution SE No. 9/2024 ("Resolution 9"), which amends Resolution No. 869/2023 ("Resolution 869").

Resolution 869 had approved the last adjustment of spot market remuneration established in Resolution SE No. 826/2022 and prior regulations.

Resolution 9 is issued within the framework of the Emergency Decree No. 55/2023, which declared the emergency of the National Energy Sector with respect to the segments under federal jurisdiction of generation, transportation and distribution of electricity, and transportation and distribution of natural gas, effective until December 31, 2024 (see our analysis of this regulation, here).

Resolution 9 is of an exceptional and temporary nature, whereby it will be applicable until the Secretary of Energy approves, no later than July 1, 2024, new regulations, with the end-goal of achieving an efficient, autonomous, competitive and sustainable energy market, in turn allowing free contracting among supply and demand, and the integration of the different generation technologies.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, Rocío Valdez and/or Victoria Barrueco.

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Changes in the Electrical Power Transmission Grid Expansions Regulation

On January 31, 2024, the National Electricity Regulatory Entity (in Spanish “Ente Nacional Regulador de la Electricidad”, hereinafter “ENRE”) published Resolution 65/2024 (“Resolution 65”), introducing changes to the regulation applicable to electrical power transmission and distribution grid expansions and connection requests, with the end-goal of simplifying each of the below processes.

To that end, Resolution 65:

  1. Eases the process for approving minor scale electrical power transmission or distribution grid expansion works.
  2. Approves a new methodology to assess requests aimed at constructing or expanding electrical power transmission or distribution grid expansions, other than those set forth in (a) above.
  3. Approves a new methodology to assess connection applications to the existing electrical power grid; and
  4. Creates two registries for expansion and connection requests to the electrical power grid.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone and/or Victoria Barrueco.

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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.

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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.

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