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This brief deals with corporate governance in Argentina with a focus on the management of corporations, governed in general by the General Companies Law Number 19,550 (Ley General de Sociedades<\/em>\u00a0or LGS by its Spanish acronym).<\/p>\n 1. Management body of corporations<\/strong><\/p>\n Corporations are managed by a board of directors, which may be comprised of one or more individuals, as set out by the by-laws (LGS, Article Number 255, first paragraph). By-laws may also organize an Executive Committee formed by directors in charge only of the company\u00b4s ordinary business (LGS, Article Number 269, first paragraph).<\/p>\n When a corporation is subject to permanent state auditing, a board of at least three directors shall be appointed (LGS, Article Number 255, second paragraph), with the exception of single-shareholder corporations that, in any case, may have a one-director board (LGS, Articles Number 255, second paragraph, and Number 299, Section 7)<\/a>[1]<\/span><\/a>.<\/p>\n Directors may be Argentine citizens or foreign nationals. However, the absolute majority of the directors must be Argentine residents (LGS, Article Number 256, fourth paragraph)<\/a>[2]<\/span><\/a>.<\/p>\n The appointment of the board of directors shall be registered with the Public Registry (LGS, Article Number 60).<\/p>\n Certain individuals are not legally allowed to act as directors, such as, those who may not exercise commerce; those gone bankrupt or directors of the company gone bankrupt until their re-qualification; those sentenced with accessories of disqualification to exercise public positions, sentenced for pilferage, theft, fraud, bribery, issue of checks without funds and infringements against public good faith; those sentenced for offenses committed in the constitution, working and liquidation of companies. In all cases until after ten years have elapsed after completing the sentence; and those officials of the public administration whose tasks are related to the purpose of the company until two years after they cease in their positions (LGS, Article Number 264). Additional restrictions and eligibility conditions may apply to certain regulated activities, such as banking.<\/p>\n Public companies and financial entities are also required to have as members of the board individuals who gather specific independence conditions for eligibility.<\/p>\n 2. Appointment and removal of the board of directors<\/strong><\/p>\n Directors are appointed and removed by an ordinary shareholders\u2019 meeting (LGS, Article Number 234, Section 2). By-laws shall set out the period for which the board is elected, which may not exceed three fiscal years except when appointed by the Executive Committee in which case the tenure may extend to five years. In any case, directors shall remain in their positions until replaced (LGS, Articles Number 257 and Number 281, section d). Directors need not be shareholders and may be indefinitely re-elected (LGS, Article Number 256, first paragraph).<\/p>\n When a corporation\u00b4 by-laws provide for different classes of shares, it may also establish that the relevant shareholders\u00b4 classes have the right to appoint one or more directors per class, setting forth the appointment procedure (LGS, Article Number 262, first paragraph).<\/p>\n As a protection to minorities, any shareholder may exercise cumulative voting rights to try to secure representation on the board of directors of a corporation, up to one-third of the positions to be elected (LGS, Article Number 263)<\/a>[3]<\/span><\/a>.<\/p>\n Alternate directors, in an equal or lesser number than the active directors, may also be appointed. However, when the corporation lacks an auditing body (syndics or statutory auditors), the appointment of an alternate director is mandatory (LGS, Article Number 258, first paragraph).<\/p>\n Directors may be removed at any time, with no need for a cause, by the shareholders\u2019 meeting (LGS, Article Number 256). Having been appointed by a class of shares, directors shall be removed by a shareholders\u00b4 meeting of such class of shares, except in the cases of incompatibilities or liability (LGS, Article Number 262, second paragraph).<\/p>\n 3. Board\u00b4s operation<\/strong><\/p>\n The Board of Directors is to meet at least once every three months \u2013 unless the by-laws provide for more frequent meetings -. However, any director may request at any time the call for a board\u00b4s meeting. In this latter case, the summons shall be made by the chairman for a meeting to be held within five days of the request having being received. In its defect, any of the directors may call the meeting. The summons must indicate the subjects to be dealt with (LGS, Article Number 267).<\/p>\n By-laws may regulate the operation of the board. However, the board\u00b4s meetings\u00b4 quorum may not be less than the absolute majority of its members (LGS, Article Number 260).<\/p>\n Specific functions may be assigned to certain members of the board under the company\u2019s by-laws and internal regulations or by shareholders\u2019 meeting\u00b4 decision (LGS, Article Number 274, second paragraph). If registered with the Public Registry, such allocation of such duties and functions will limit the liability of a particular director only to the task he\/she has performed. For public companies, in addition to registering the assignment of functions with the Public Registry, the allocation must also be reported to the market the shares are listed on (Capital Markets Law Number 26,831, Article 77).<\/p>\n The board may also appoint general or special managers, either directors or not, freely revocable, whom executives functions may be delegated to. Managers answer to the company and third parties for the performance of their duties to the same extent than directors. The appointment of managers does not discharge the board\u00b4s liability (LGS, Article Number 270).<\/p>\n Corporations\u00b4 legal representation is vested in the chairman of the board, who binds the company for all acts not notoriously beyond the company\u2019s corporate purpose (LGS, Articles Number 268 and 58).<\/p>\n In a future second part of this brief, we will cover directors\u00b4 duties and liabilities, conflict of interests and forbidden acts, remuneration, guarantee and insurance and code of conducts.<\/p>\n For additional information on these or any other issues related to doing business in Argentina, please, sign up for our\u00a0Legal Blog<\/a>\u00a0or\u00a0contact<\/a>\u00a0us at any time.<\/p>\n \n \n \n Mario E. Castro Sammartino<\/p>\n <\/a>[1]<\/span><\/a>\u00a0For more information on single-shareholder corporations, please, read the specific post on our\u00a0Legal Blog<\/a>.<\/p>\n <\/a>[2]<\/span><\/a>\u00a0This requirement applies to all company types, excepting for simplified corporations where only one manager must reside in Argentina (Law Number 27,349, Article Number 51, first paragraph). To know about simplified corporations, please, read our article\u00a0Simplified Corporations in Argentina: a new and streamlined legal vehicle to do business<\/em><\/a>\u00a0published on our Legal Blog.<\/p>\n <\/a>[3]<\/span><\/a>\u00a0For a review of the protection of minority shareholders, please, read our Legal Blog\u00b4s article\u00a0Minority shareholder rights in Argentina: the need for prevention and dispute resolutions methods<\/em><\/a>.<\/p>\n \n <\/p>\n For additional information on these or any other issues related to doing business in Argentina, please,\u00a0sign up<\/a>\u00a0for our Legal Blog or\u00a0contact us<\/a>\u00a0at any time.\u00a0Our publications exclusively express the\u00a0author\u00b4s opinion and do not purport to be legal counsel on any case. 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