Doing business Argentina choosing legal vehicle

a. To register before the Public Registry of Commerce (Registro Público de Comercio or RPC) the foreign companies that will be the shareholders of the future locally incorporated one;

In the first issue of Doing business Argentina Guide to set up and maintain a Company in Argentina, we set forth a number of steps to be followed for those wishing to incorporate a company for Doing Business in Argentina. The first one was: “a. To register before the Public Registry of Commerce (Registro Público de Comercio or RPC) the foreign companies that will be the shareholders of the future locally incorporated one;”

We will now add further explanations on this first step.

Choosing the right legal vehicle

The so-called Sociedades Anónimas (or SA), publicly or closely held, are by far the most chosen legal vehicle to do business in Argentina[1].

Under Argentine Law, SA´s requires a minimum of two shareholders. There is no cap on the number of shareholders a SA may have.

Shareholders to an SA can be either individuals or legal entities. Save for exceptional and limited cases, there are no nationality or residence requirements to become shareholders of a SA: foreign individuals (whether residents in Argentina or not) or foreign legal entities may hold the whole share capital.

To channel foreign investments, two foreign companies as shareholders usually form domestic SAs. To have interest in SAs, foreign companies must be previously registered with the Public Registry of Commerce (Registro Público de Comercio or RPC), as we have pointed out in the first part of this guide. According to the jurisdiction the foreign legal entity is incorporated, the registration process may be more or less time consuming(but in any case a period of around six month is to be expected before it is completed). Until both foreign companies are registered before the RPC, they cannot grant the public deed forming the domestic SA.

On the contrary, to become shareholders of a SA, foreign individuals need not fulfilled with any prior requirement but just to register with the tax authorities to get their fiscal identification key (Clave de Identificación or CDI).

In the next issues of this Guide, we will cover the principal features of SAs and the registration procedures to be followed by foreign companies before the PRC, prior to become shareholders of a brand new SA or an already existing one.

Please, fill free to contact us if you need further information about any of the issues dealt with up to now.

 

[1] They are similar to corporations or companies limited by shares in common law countries. Another options of legal vehicles would be Branches and the so-called Sociedad de Responsabilidad Limitada (or SRL). Following, we will outline some differences of these vehicles compared to SAs.

Branches

As Pros:

–       They do not need any minimum allocation of capital, with the exception of certain regulated industries (such as banking or insurance);

–       They just require a legal representative registered before the RPC (no board or any other officers are required).

As Cons:

–       They cannot raise capital;

–       The parent company is fully liable for the branch´s debts.

SRLs

As Pros:

–       Easier to form and maintain.

As Cons:

–       Maximum of fifty partners;

–       SAs – or similar foreign legal entities – cannot be partners of SRLs;

–       SRLs have many provisions thought more for a family company;

–       Unlike SAs, SRLs are not allowed to be listed on a stock exchange;

–       To assign rights over the shares is far easier than doing the same over cuotas of a SRL. Further, any change of partners in a SRL involves also changing by laws.

 

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