Choosing the right legal vehicles to do business in Argentina: a brief for foreign companies

There are different legal vehicles to do business in Argentina.  The ones most commonly used by multinational companies are:

1. Branches; and

2. Subsidiaries, with one or more partners.

The main features to ponder are:

1. Branches

a. The parent company is fully liable for all debts and liabilities the subsidiary may incur in;

b. No capital allocation is required;

c. Accounting must be kept separate from that of the parent company;

d. They need to appoint a legal representative and set a legal address in Argentina.

2. Subsidiaries

a. The whole company may be owned by foreigners, and no resident partners are needed (except for certain regulated activities and assets, such as communication media and rural lands, where certain restrictions apply to foreigners);

b. Partners may be individuals or legal entities. Foreign companies shall have to first register themselves with the Public Registry in order to incorporate or participate in a subsidiary; since this prior recording takes time, when time is of the essence of the business, the subsidiary may be constituted by individuals, who in due time assign their participation to the foreign companies once they have been registered with the Public Registry;

c. Subsidiaries may have one or more partners. Subsidiaries may have only one partner as long as they incorporate themselves under the type of either a Single-Shareholder Company (Sociedad Anónima Unipersonal) or a Simplified Corporation (Sociedad por Acciones Simplificada), although this latter type also admits two or more partners. Subsidiaries with two or more partners have been customarily set up under the type of Limited Liability Companies (Sociedades de Responsabilidad Limitada) or Corporations (Sociedades Anónimas). Small or family-held companies usually adopt Limited Limited Liability Companies.

                       1. SINGLE-SHAREHOLDER COMPANY

                       Single-shareholder companies may have only one partner.

               a. The minimum capital stock is AR$ 100,000. It is represented in shares, and the partners are only liable for the contributions they have individually committed to complying. Shares may be assigned privately, with no report to and nor registry with the Public Registry;

                       b. Management

                       It requires at least one director residing in the country. If the board has more than one partner, the absolute majority of the directors must be Argentine residents.

                       c. Audit

                       It requires one active and one alternate syndic, both residents.

For more information on single-shareholder companies, please, read our article published on http://www.mondaq.com/article.asp?articleid=549312 .

                       2. SIMPLIFIED CORPORATION

                       Simplified corporations may have one or more partners.

                 a. The minimum capital stock must be equivalent to two monthly minimum salaries, which currently amounts to AR$ 16,120. It is represented in shares. Shareholders limit their liability to paying off the shares they have subscribed. However, all shareholders also assume a legal unlimited, joint and several liability vis-a-vis third parties for the effective execution of the full contributions the other partners have committed themselves to. Shares may be assigned privately, with no report to and nor registry with the Public Registry;

                       b. Management

                     It requires at least one manager residing in the country. If the board has more than one manager, only one manager must be an Argentine resident.

                       c. Audit

                       It is optional to appoint statutory auditors. When the company lacks a statutory auditor, an alternate director must be appointed.

For more information on simplified corporations, please, read the article published on http://www.mondaq.com/article.asp?articleid=591046. The Simplified Corporation is a brand new legal vehicle, effective as of April 2017, and its regulatory decree and additional provisions to make it operative are to be issued within the following sixty days.

                       3. LIMITED LIABILITY COMPANIES

                       Limited Liability companies may have two or more partners.

                       a. If incorporated under the federal jurisdiction, the minimum social capital must be at least 30 % of the minimum stock capital required for a corporation. Today it would amount to AR$ 30,000. It is represented in quotas. Since the assignment of quotas entails a by-laws´ amendment, any assignment of quotas must be registered with the Public Registry. Partners limit their liability to paying off the quotas they have subscribed. However, all partners assume a legal unlimited, joint and several liability vis-a-vis third parties for the effective execution of the full contributions the partners have committed themselves to.

                       b. Management

                       It requires at least one manager residing in the country. If the board is plural, the absolute majority of the partners must be Argentine residents.

                       c. Audit

                       It is optional to appoint a syndic. When the company lacks a statutory auditor, an alternate director must be appointed.

                       4. CORPORATIONS

                       Corporations may have two or more partners.

              a. The minimum capital stock is AR$ 100,000. It is represented in shares, and the partners are only liable for the contributions they have individually committed to complying. Shares may be assigned privately, with no report to and nor registry with the Public Registry;

                       b. Management

                     It requires at least one director residing in the country. If the board has more than one director, the absolute majority of the directors must be Argentine residents. When the stock capital is higher than AR$ 10,000,000, the board must mandatorily have at least three directors, and the absolute majority of them reside in the country.

                       c. Audit

                    It is optional to appoint a syndic. When the company lacks a statutory auditor, an alternate director must be appointed. Provided that its capital stock is higher than AR$ 10,000,000 one active and one alternate syndic, both residents, must be appointed.

For more information on How to set up a company in Argentina, you may read the article we published on Mondaq: http://www.mondaq.com/Argentina/x/532426/Corporate+Governance/How+To+Set+Up+A+Company+In+Argentina+Choosing+The+Legal+Vehicle+And+Procedure

Choosing the right legal vehicle is key not only to structure the business most smartly but also to promptly and smoothly exit the venture, especially when sharing the business with majority partners or local counterparts, the latter of which we will deal with in a future article.

Mario Eduardo Castro Sammartino

Our publications exclusively express the author´s opinion and do not purport to be legal counsel on any case. Should you need it, you must consult with your trusted lawyer or may contact us at your convenience. If you liked the article, please, share it.

 

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