Mandatory capital reduction and dissolution for loss of capital in Argentina: emergency suspension

by 22 Jan 2020Companies, Corporate, Doing business in Argentina

Recession, high inflation, currency devaluation and application of the accounting adjustment for inflation, among other causes, may provoke that many companies in Argentina must expose on their balance sheets relations that make them be incurred in the causes of mandatory capital reduction (Section 206 of the General Companies Law N 19,550, the Ley General de Sociedades or LGS, as amended) or dissolution for loss of capital (Section 94, subsection 5, of the LGS).

In line with similar measures taken on other occasions of macroeconomic crisis in Argentina, the Law of Solidarity and Productive Reactivation Law No. 27,541, published in the Official Gazette on 23 December 2019, established the suspension of the aforementioned rules of the LGS until December 31, 2020.

Therefore, companies will be allowed to file their balance sheets with the controlling authorities even if the losses have consumed its reserves and 50% of its share capital or caused a negative net worth.

They may also continue to operate without generating liability for the board of directors and statutory auditors.

Mario E. Castro Sammartino

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.

 

Follow us on social media

More publications on companies

Contact us

It will be a pleasure to meet you personally at our offices, or to take your call.

Tte. Gral. Juan Domingo Perón 679, 3rd. floor
C1038AAM - Buenos Aires

Argentina

Follow us

Send us an email

14 + 2 =