Emergency Decree No. 27/2018: Corporate Matters

A. Emergency Decree No. 27/2018 – Reducing Bureaucracy and Simplification

1. Introduction

On January 12, 2018 the Argentine Emergency Decree No. 27/2018 (the “Decree”) entered into force with the main purpose of promoting the dynamic and efficient functioning of the public administration. According to the whereas of the Decree, its final objective is to reduce bureaucracy in public administration, to simplify processes and to develop efficient regulations in order to eliminate bureaucratic barriers. All these measures are expected to favor investment, productivity, employment and social inclusion.
 

2. Amendments in corporate matters

The Decree introduced amendments to various provisions in the corporate area, in particular, to laws No 19,550 (Argentine Companies’ Law) (“ACL”), 22,615 (Public Registry of the City of Buenos Aires’ Organic Law) (“PROL”), 26,047 (National Registries’ Law) (“NRL”) and 27,349 (Entrepreneurship Capital Support Law) (“ECSL”).

In the main part the amendments are focused on reducing bureaucracy and on the simplification of processes, as previously mentioned, and, in some cases, are aimed at meeting requirements of certain international organizations such as the Financial Action Task Force ("FATF") and the Organization for Economic Cooperation and Development ("OECD") in matters of transparency.

The amendments include the following:

(i) The existence of apparent partners or front men and hidden partners is prohibited. In the event of infringement, same are subsidiary, joint and unlimitedly liable.

(ii) An authorization is granted for all companies to carry their corporate and accounting books through digital registries and/or through the creation of a website where the data of those records is reflected, in the same form and conditions as permitted for the Simplified Corporations (“SAS” after its acronym in Spanish) created by the ECSL. Likewise, the Argentine Securities and Exchange Commission was delegated with the issuance of the regulations to be applied to the companies subject to its control on this matter.

(iii) Regulations were amended in order to place under the Ministry of Justice and Human Rights (“MJyDH” after its acronym in Spanish) the National Registry of Corporations, the National Registry of Foreign Companies, the National Registry of Civil Associations and Foundations, the National Registry of Non-Equity Corporations and the National Registry of Insolvency Proceedings and Bankruptcy (the "National Registries"), what will be carried out through computer systems to be developed and provided by the Ministry of Modernization or, if appropriate, by whoever the National Executive Branch determines. The purpose of this amendment is to centralize the information of legal entities at a national level. Local public registries must send to the MJyDH or whoever it indicates, the data corresponding to entities registered, modified or authorized before same, and foresees that local public registries should carry out the necessary measures to gradually incorporate into the National Registries the data of pre-existing companies. Likewise, it is established that the information in the National Registries will be available for public consultation by means of the above referred computer system, without the requestor having to attest a legitimate interest.

(iv) In the case of the SAS, it is no longer required to clearly and precisely state the main activities that constitute its corporate purpose and the idea that the corporate purpose can be broad is reinforced.

(v) The public registry’s role in connection with the SAS is restricted to the verification of compliance with "formal" requirements and applicable regulatory standards, limiting the role of the public registry as supervisory and control body.

(vi) Several restrictions originally set forth in the regulations are eliminated so that certain companies included in section 299 of the ACL may adopt the SAS type, control the same or hold more than 30% of their capital. In this sense, they may adopt the SAS type, control an SAS or participate in more than 30% of the capital of the same companies included in sub-sections 1 (companies that make public offering of their shares or debentures) and 2 (companies with capital over ARS 10,000,000) of section 299 of the ACL; remaining in place the prohibition regarding the companies included in the rest of the subsections of Section 299 of the ACL.

B. General Resolution No. 1/2018 of the Public Registry of the City of Buenos Aires – 24hr filing for the incorporation of corporations and single shareholder corporations.

On February 15, 2018 the General Resolution No. 1/2018 of the Public Registry of the City of Buenos Aires was published, which will be in full force on April 4 of the current year (the “Resolution”).

Said Resolution establishes a differentiated treatment for the incorporation process of those corporations and single shareholder corporations which file the request for registration under the “urgent proceeding” modality. In these cases, provided no observations are made, the companies will be registered within a period of 24 (twenty-four) hours counted as from the presentation of the filing.

Likewise, the Resolution establishes that in order to obtain the Tax ID together with the registration certificate, the requestor must include within the registration documents pursuant General Resolution No. 07/2015 an affidavit “AFIP FORM 185” , which will have to be completed through the corresponding application from the institutional website of the Public Registry of the City of Buenos Aires.

C. Conclusions

Both the amendments introduced by the Decree, and the provisions of the Resolution, are aimed at expediting and simplifying processes before the public administration, taking advantage of the benefits of existing technological tools and focusing on transparency which is both an internal and international demand. These complement decisions in the same line adopted recently and will surely be complemented in the future by other regulations pursuing similar purposes.

In this regard, it should be noted that with the amendments introduced by the Decree and the Resolution, the various types of companies, corporations, limited liability companies, sole shareholder corporations, S.A.S., are placed on an equal standing as regards the possibility of carrying out corporate and accounting books through digital registries and regarding the term for their prompt registration with the Public Registry of the City of Buenos Aires.

It is, however, still a pending issue to expedite the process for the registration of foreign companies before the Public Registry of the City of Buenos Aires, both pursuant to sections 118 and 123 of the ACL.