The choice of the best legal vehicle for doing business in Argentina will depend on a case-by-case analysis of the needs, size and risks of each business. We will now outline some characteristics of the two most commonly used: the branch and the subsidiary.

1) Corporate legal vehicles to do business in Argentina

Although there are several corporate vehicles under Argentine law, foreign companies usually do business in Argentina through a branch or a subsidiary company.

2) The branch

The branch does not provide a limitation of liability.

A branch of a foreign company is treated as a separate legal entity from its head office only for accounting and tax purposes. Therefore, the parent company remains liable for all the branch’s debts.

To sum up, if a subsidiary company is chosen to do business in Argentina, the partners’ liability is limited to the assets owned by that subsidiary company. In contrast, if a branch is utilized, all the foreign partners´ assets may be subject to potential liability.

3) The subsidiary

Setting up a subsidiary company means that one or more foreign companies register in Argentina with the Public Registry for, in turn, incorporating a domestic company as its shareholders or partners. We would call this domestic company the NewCo.

Among the several domestic corporate forms, the one most chosen by foreign companies to serve as NewCo is a Sociedad Anónima (an S.A. by its acronym in Spanish. The S.A. is a legal entity of the akin to a US Corporation). However, some US companies choose to set up a Sociedad de Responsabilidad Limitada (an S.R.L. by its acronym in Spanish. The S.R.L. is a legal entity similar to the US LLC)[1].

A local partner is not required to form a NewCo. NewCos may be fully owned by foreign individuals or companies (having individuals as partners is not advisable and is rarely done by multinational companies).

The NewCo may have one or more partners. A NewCo with only one foreign company as a partner must choose a single-shareholder corporation (Sociedad Anónima Unipersonal, or SAU. SRLs may not be formed by only one partner).

 The SAU is an SA with just one partner. The differences are: a) It requires an additional corporate body called Sindicatura: it is a statutory auditor position that may only be filled in by an Argentine lawyer or accountant.[2]; b) The share capital must be fully paid upfront when signing the articles of incorporation and bylaws (see 6) below).

4) Registration with the Public Registry

Before establishing a branch or forming a NewCo, the foreign companies must register with the Public Registry.[3].

However, setting up a NewCo is a two-step process:

(i) First, you have to register one or two foreign companies with the Public Registry to be the partner (s) of the NewCo; and

(ii) Second and once the foreign (s) company (ies) is (are) registered, it (they) may form the NewCo, granting the articles of incorporation and bylaws to registering also the NewCo with the Public Registry.

5) Management, syndics, and registered office requirements

The branch, the foreign (s) company (ies) partner (s) of the NewCo, and the NewCo domestically incorporated, have certain residency and professional requirements for the management and Sindicatura:

(i) The branch: needs at least one active legal representative legally residing in Argentina (it is advisable to appoint an alternate resident legal representative). The legal representatives must take out an insurance policy with a local insurance entity;

(ii) The foreign (s) company (ies) partner (s) of the NewCo: same requirements as the branch;

(iii) The NewCo: calls for an absolute majority of active members of the board or management body legally residing in Argentina (it is also advisable to appoint alternate directors or managers).

The branch, the foreign (s) company (ies) partner (s) of the NewCo, and the NewCo domestically incorporated, also require a legally registered office with the Public Registry to receive potential agency or third-party´s notifications.

SAUs require an additional corporate body: the statutory auditors or syndics. Only Argentinean lawyers or accountants may fill up the positions of syndics.

6) Capital contributions

Further to the above, depending on the form of the legal entity chosen, there are different capital requirements.

Branches may or may not have an assigned capital.

The SA and the SAU require a minimum share capital of AR$ 30,000,000. However, SAU´s partners must contribute the share capital in full when signing the articles of incorporation and bylaws (if it is an SA with two or more shareholders, only 25% of the share capital must be contributed upfront, and the balance within the two following years).

The SRL has no minimum legal capital requirement. However, it must be reasonable according to the corporate purpose and activities to be carried out and financially sufficient if future financing by capital increases is to be avoided.

7) Corporate operation and taxes

If you want a brief on operatives aspects of a NewCo (such as how is represented the paid-in capital, how shares or membership-interests are assigned, quorum, majorities and function of corporate bodies, capital increments, rules to distribute dividends, custom-made stipulations to be introduced to bylaws to try to avoid conflicts, regulate tag-along and drag-along rights, resolve disputes, etc.), or on the corporate taxation scheme both for branches and subsidiaries, please, let us know.

Mario E. Castro Sammartino

[1] Before choosing and setting up a foreign legal entity, global companies  must evaluate how that foreign legal entity will be treated under their local tax law. Further, if it is the case of a multinational foreign group with legal entities in different countries, tax experts must also consider the international treaties to avoid double taxation that could be effective between Argentina and the relevant countries,

[2] To avoid the Sindicatura, the NewCo must have at least two partners, in which case you may choose between an SA or an SRL.

[3] On applying for registration, foreign companies must submit several documents and corporate resolutions coming from abroad, such as a certificate of good standing, certified copies of the articles of incorporations and bylaws, management´s affidavits on the inexistence of certain legal and operation restrictions, the company´s decision to register the company in Argentina, the purpose of the registration, the appointment of the legal representatives, etc. All foreign documents must be sent certified by a public notary and legalized with the Hague Apostille. They must be translated locally in Argentina by a national registered translator.

For additional information on these or any other issues related to doing business in Argentina, please, sign up for our Legal Blog or contact us at any time. 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.​

More publications on companies