Material Amendments to the Companies Law

On October 1, 2014, the Argentine Congress passed Law No. 26,994, which approved the new Argentine Civil and Commercial Code (the “Code”), and which was later signed into legislation by the Executive Branch on October 7, 2014 and published in the Official Gazette on the following day (the “Law”). The Law, and therefore the Code, enters into effect on January 1, 2016.
 
This Law lays down the amendment and unification of the Argentine Civil and Commercial Codes currently in force, as well as the amendment of certain laws, such as Commercial Companies Law No. 19,550 (“Ley de Sociedades Comerciales”; the “LSC”). The LSC as amended, becomes applicable to all companies, and is therefore renamed as General Companies Law (the “LGS”).
 
Some of the material amendments introduced to the LSC are listed below:
 
Single Shareholder Corporations. Following the international trend towards the acceptance of single shareholder corporations (“SAU”), the LGS now recognizes them as one of the types of business organization that can be adopted. SAU can only be incorporated as corporations (“sociedades anónimas”), they are subject to permanent Government control provided in section 299 et seq. of the LSC and they cannot establish another SAU. The fact that the SAU will be subject to permanent Government control would turn SAUs into a costly type of business organization that would not be convenient for small-scale business operations. In this respect, SAU shall: (i) pay 100% of the capital stock upon its incorporation; (ii) appoint a board of directors composed of at least three members; (iii) appoint a statutory supervisory committee composed of at least three members. Moreover, SAUs must comply with the filings applicable to companies subject to permanent Government control required by the Public Registry of Commerce of the jurisdiction where the company has its registered domicile.
 
Companies not established under one of the types of business organization provided by the LSC. The LGS removes the distinction among and the rules provided for companies incorporated under a type of business organization not provided by the LSC (“sociedades atípicas”), irregular companies (“sociedades irregulares”) and de facto companies (“sociedades de hecho”). The LGS introduces a single set of rules superseding the former ones applicable –pursuant to section 21 of the LGS– to any company that: (i) is not established under a type of business organization provided by the LGS; (ii) omits material requirements; and (iii) fails to comply with the formal legal requirements provided by the LGS. These companies shall be ruled by Section IV of the LGS named “Companies not established under the types listed in Chapter II and other provisions”. This new regulation creates a more favorable legal framework for the partners of this kind of company. Moreover, partners’ liability principles change to several liability unless otherwise provided by them. Some concerns raised by the new regulation are: (i) what the legal situation applicable to current de facto and irregular companies will be after the Law comes into effect; and (ii) which is the legal framework applicable to civil companies (“sociedades civiles”) and whether they should be governed by Section IV or not, since the new Code no longer rules them and the LGS does not expressly regulate them.
 
Relation between partners. The LGS: (i) eliminates current restrictions which forbid spouses from becoming partners of any type of business organization other than corporations and limited liability companies; and (ii) allows corporations to hold participation in corporations and limited liability companies (“sociedades de responsabilidad limitada”).
 
Business cooperation agreements. The specific regulation over business cooperation agreements and joint ventures, currently provided by the LSC, is removed, and included in Chapter 16 of the Code under the title “Associative Agreements”.
 
Although the changes made to the LSC are not great in number, they do introduce material amendments regarding nullities, which will require further analysis.