{"id":2312,"date":"2017-08-06T18:02:54","date_gmt":"2017-08-06T21:02:54","guid":{"rendered":"https:\/\/cspabogados.com.ar\/?p=2312\/"},"modified":"2026-08-19T12:54:58","modified_gmt":"2026-08-19T15:54:58","slug":"corporate-governance-in-argentina-corporations","status":"publish","type":"post","link":"https:\/\/cspabogados.com.ar\/en\/corporate-governance-in-argentina-corporations\/","title":{"rendered":"Corporate Governance in Argentina Corporations. Part 2: director\u00b4s duties, guarantees, insurance, and fees. Conflict of interests, transactions with the company and competitive activities"},"content":{"rendered":"

Corporate Governance in Argentina Corporations. Part 2: director\u00b4s duties, guarantees, insurance, and fees. Conflict of interests, transactions with the company and competitive activities<\/h1>

by Mario Eduardo Castro Sammartino<\/a><\/span> | 6 Aug 2017<\/span><\/p><\/div><\/div><\/div>

Following with our series of articles on Corporate Governance in Argentina Corporations<\/a>[1]<\/span><\/a>, we will now deal with the board\u00b4s duties, guarantees, insurance, and fees, as well as with different acts and activities the directors must refrain from engaging in.<\/p>\n

1. Directors\u2019 duties<\/strong><\/p>\n

Director\u2019s general fiduciary duties are set out by Article Number 59 of the General Companies Law Number 19,550 (Ley General de Sociedades<\/em>\u00a0or LGS by its Spanish acronym): they must perform their tasks loyally and with the diligence of good business people. Failing to meet these duties or infringing the law, the articles of association or by-laws, causing damages by fraud, abuse of authority or gross misconduct, make directors unlimited, jointly and severally liable\u00a0vis-\u00e0-vis<\/em>\u00a0the company, its shareholders and third parties for the damages arising out of the relevant acts or omissions (LGS, Articles Number 59, and Article Number 274, first paragraph, specifically providing for corporations).<\/p>\n

Nonetheless, the imputation of liability shall be made taking into consideration the individual performance when duties have been assigned on a personal basis by what is laid down in the articles of association, the bylaws, or decided by a shareholders meeting. In the latter case, the decision of the shareholders \u00b4meeting, and the appointment of the persons who are to fill the positions must be registered in the Public Registry as a requirement for the application of the said individual liability (LGS, Article Number 274, second paragraph).<\/p>\n

A director may exempt himself \/ herself from liability as long as he\/she objects in writing to the resolution \u2013 and gives notice to the syndic if any \u2013 before his liability be reported to the board of directors, the syndic, the shareholders meeting, the competent authority or a judicial action be initiated (LGS, Article Number 274, last paragraph).<\/p>\n

The liability of the directors and managers with respect to the corporation may be extinguished on approval of their performance, or through express resignation or transaction, resolved by the shareholders meeting, if such liability is not on account of the infringement of the law, the articles of association or by-laws and provided there were no opposition from five percent of the share capital, at least. The extinguishment shall be innefective in the case of bankruptcy (LGS, Article Number 275).<\/p>\n

Further to the above, directors of public companies are subject to additional and tougher loyalty\u00b4s duties (Capital Markets Law Number 26,831 \u2013\u00a0Ley de Mercado de Capitales\u00a0<\/em>or LMC by its Spanish acronym -, Article Number 78).<\/p>\n

Additional liabilities may befall under specific circumstances, such as those provided for in bankruptcy, criminal, tax, labor and social security, customs, antitrust, environmental, health laws, and case law.<\/p>\n

2. Codes of conduct for public companies and certain regulated activities<\/strong><\/p>\n

The Argentine Securities Commission (Comisi\u00f3n Nacional de\u00a0<\/em>Valores) and the Argentine Central Bank (Banco Central de la Rep\u00fablica Argentina<\/em>) have approved specific governance regulations for companies under their relevant supervision.<\/p>\n

3. Guarantee and insurance<\/strong><\/p>\n

Directors of corporations must set up a guarantee consisting of bonds, public securities, or national or foreign currency deposited in financial entities or securities depository, to the order of the corporation, banking guarantees, surety insurances, or civil liability insurances in favor of the company. Under the jurisdiction of the Autonomous City of Buenos Aires, the amount of the guarantee shall be equal for each director, and altogether never below the 60% of the capital stock. In no case may the guarantee be higher than AR$ 50,000, or lower than AR$ 10,000, per each director (LGS, Article Number 256, and General Inspectorate of Justice\u00b4s General Resolution N\u00ba 7\/2015, Article Number 76).<\/p>\n

Directors & Officers (D&O) liability insurance may be purchased, but such policies do not release the board\u00b4 s liabilities. Further, indemnity agreements may be entered into by and between directors and shareholders.<\/p>\n

4. Board\u00b4s remuneration<\/strong><\/p>\n

The corporation\u00b4s by-laws may establish the remuneration of the board of directors; otherwise, it should be established by the annual general meeting or the supervising committee, where appropriate.<\/p>\n

The maximum amount of fees which the members of the board of directors may receive under any heading, including salaries and other remunerations for the carrying out of technical or administrative tasks on a permanent basis, may not exceed 25% percent of the profits of the relevant fiscal year. This maximum amount is to be limited to five percent when dividends are not distributed to the shareholders and should be increased proportionally to the distribution until it reaches the limit when all the profits are distributed. For these purposes, the reduction of distribution of dividends arising from deducting the fees of the board of directors and the supervising committee shall not be taken into account. The remuneration\u00b4s cap may be exceeded when one or more directors perform special technical or administrative duties or functions, and provided the annual general meeting of shareholders approve of the excess as a special issue on the agenda (LGS, Article Number 261).<\/p>\n

5. Conflict of interests, transactions with the company and competitive activities<\/strong><\/p>\n

As a derivation of the directors\u00b4 general fiduciary duties, any director having an interest contrary to that of the corporation must make this known to the board of directors \u2013 and to the syndics if any \u2013 and abstain from participating in the discussions, under pain of incurring in liability for the damages arising thereof (LGS, Article Number 272).<\/p>\n

Directors may enter into contracts with the corporation as long as the transactions are related to the activity in which the company operates and always provided that they are closed at arm\u00b4s length (LGS, Article Number 271, first paragraph). Contracts not meeting said requirements may only be entered into after approval of the board of directors, or with the agreement of the syndics if the board\u00b4s quorum were not to exist. The shareholders meeting must be informed of these transactions (LGS, Article Number 271, second paragraph). Should the shareholders meeting disapprove of the transaction, the contract is void and the directors \u2013 or the syndics where appropriate- shall be unlimited, jointly and severally liable for the damages incurred by the company (LGS, Article Number 271, third and fourth paragraphs).<\/p>\n

A director may not participate, for his\/her account or that of third parties, in activities competing with those of the company, except with the express authorization of the shareholders annual meeting. Failing to comply with this duty make the director liable for the damages arising out of the competitive activity (LGS, Articles Number 273 and Number 59). The framework for the liability assessment will be given by the corporate\u00b4s purpose, and the activities effectively carried out by the company, even on a sporadic basis.<\/p>\n

As to public companies, confidentiality and trading abstention duties are provided for under Article Number 102 of the Capital Market Law Number 26,831.<\/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

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Mario E. Castro Sammartino<\/p>\n

<\/a>[1]<\/span><\/a>\u00a0See our publication \u201cCorporate Governance in Argentina: corporations. Part 1: management body, appointment and removal directors and operation of the board\u201d, on\u00a0http:\/\/www.mondaq.com\/article.asp?articleid=598910<\/a><\/p>\n

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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. Should\u00a0you need it, you must consult with your trusted lawyer.\u200b<\/p>\n

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