Bill to Replace the Argentine Companies Law: Tracking Stocks

Introduction

 

Tracking stocks are a special class of shares whose economic rights are linked to the performance of a specific business unit, activity, segment or project developed by the issuing company, without creating a segregated pool of assets and/or a separate legal entity. The Argentine General Company Law 19550 (“ACL”) does not expressly regulate them. Nevertheless, the issuance of tracking stocks is legally valid under current legislation, provided the general principles of corporate law are observed. Moreover, a detailed regulation of tracking stocks is a requirement for their proper operation.

 

The bill to amend the Argentine Companies Law—submitted by the Executive Branch to Congress on May 29, 2026—includes, in articles 201, 209, and 210, a proposed regulation for this type of shares. The express incorporation of tracking stocks into the legal regime is a response to a trend present in foreign legislation, where such shares have been used as a financing tool and as a mechanism to attract investors interested in specific segments of a business.[1]

 

 

Tracking stocks in the bill

 

According to the definition in article 209 of the bill, “tracking stocks” are those shares that grant their holders the right to receive dividends derived from liquid and realized profits generated by one or more business segments or specific projects of the issuing company. These shares comprise a special class and must grant equal rights to all shareholders within that class (articles 201 and 209).

 

For tracking stocks to be legally valid, companies’ bylaws must accurately describe and define the relevant business segment or project. The following aspects must be contractually determined at the time of issuance:

 

1. Allocation of expenses: the proportion in which the segment will share in general and indirect expenses, remuneration of corporate bodies, and creation of reserves (article 209(1)).
2. Profit regime: whether the right to the segment profits is exclusive to these stocks or shared with other stocks, and whether tracking stocks have a share in the company’s overall profits (article 209(2) and (3)).
3. Board limitations: specific matters that the board cannot resolve without prior consent from the special class meeting (article 209(4)).
4. Preemptive rights: Whether they carry preemptive rights and the right to take up unsubscribed shares in capital increases. Unless otherwise agreed, they have priority within their class (article 209(6)).

 

Regarding voting rights, the bill establishes, as a general rule, that tracking stocks have a right to speak but no right to vote at general shareholders’ meetings, unless otherwise provided in the bylaws or issuance terms. However, they always retain voting rights on matters relating to the relevant segment or project or directly affecting class-specific interests.

 

Holders of tracking stocks also have legal standing to challenge financial statements and corporate resolutions affecting their rights, by following a special class meeting procedure (article 231) in cases of general meeting resolutions affecting their class (article 210).

 

Transparency is ensured by the obligation of the company to submit, in addition to general financial statements, special financial statements for each segment or project. These must separately reflect the allocation of assets and liabilities relevant to each class (article 210).

 

The most noteworthy aspect of the tracking stocks regime is the determination of segment dividends and their interaction with general profit distribution rules. The bill expressly provides that dividends cannot be distributed to tracking stocks unless the company has realized and distributable profits, previous losses have been offset, and legal and statutory reserves have been constituted. Under this provision, the right to segment dividends is subordinated to the company’s overall financial situation, preventing distributions based on the success of a single segment when the company as a whole suffered a loss.

 

If there is liquidation, tracking stocks share in proceeds on equal terms with common shares unless otherwise provided by the issuance terms. They may also be redeemable depending on the issuance terms, adding a temporal dimension to the shares that is particularly attractive for short-term project financing.

 

Recognition of tracking stocks. Prohibition of abusive clauses

 

As mentioned above, under current laws, companies may validly issue tracking stocks. This has been expressly recognized by case law.

 

In 2022, the National Court of Appeals on Commercial Matters, in the case “Inspección General de Justicia v. Agro G (Agropecuaria Del Guayquiraro S.A.),”[2] held that, although not expressly regulated in the ACL, tracking stocks are conceptually valid and lawful under Argentine law. This conclusion is based on the broad flexibility granted by article 207 of the ACL to create “classes of shares with different rights,” and by article 11(7), which grants partners contractual freedom to agree on the rules for distributing profits. Tracking stocks are thus recognized as a legitimate and modern company financing tool. However, the Court clarified that issuance terms violating article 13 of the ACL must be deemed invalid.

 

Consistent with the bill, the Court emphasized that performing a business segment or business unit linked to the tracking stocks is not independent from the company’s overall equity. Even if the segment results in profit, dividends cannot be distributed if the company as a whole suffers losses. In such an event, the company losses must be previously covered. In other words, common risk must be maintained: tracking shareholders cannot be warrant a result or secured against general losses. The Court eventually invalidated the shares, not because of their nature, but because their issuance terms conflicted with article 13 of the ACL and general corporate law principles.

 

Although the bill does not restate article 13 of the ACL and actually establishes a different framework,[3]it preserves the structural requirements: participation in profits and losses (article 1), mandatory bylaw provisions regulating such participation (article 10(9)), and distribution of segment dividends conditioned upon liquid and realized profits, previously covering past losses and creating reserves (article 210).

 

Accordingly, even without a rule identical to article 13, the validity of tracking stocks will be determined on the basis of aspects such as:

 

• Reasonable delimitation of the segment or project.
• Transparency in expense and liability allocation.
• Absence of mechanisms directly or indirectly ensuring a specific class of shares warranting returns segregated from common risk or depriving other classes from expectation as regards profit sharing.
   

Complexities and practical issues of the bill

 

Voting rights to resolve

 

Article 210 refers to “matters relating to the sector or project to which they are linked or that directly affect interests inherent to the class.”. Following this article, the impact of a shareholders’ meeting resolution on a specific sector of the business or project may vary in scope and intensity. The reference to a “direct effect” and/or the generic mention of “matters relating to the sector” as a condition to trigger the voting rights of tracking shares will, in practice, give rise to situations where arguments may plausibly be made in either direction.

 

The evident vagueness in the wording of this provision is consistent with article 2, which establishes that the bylaws are governed by the principle of party autonomy and that statutory rules are predominantly supplementary. In other words, the bill relies on shareholders to define their own boundaries, as the absence of clear, precise, and comprehensive bylaw regulation will likely be a source of future disputes.

 

In conclusion, the bill sets forth a general principle of protection (voting rights whenever the sector is affected), but delegates to shareholders’ self-regulation the determination of specific cases, with the risk that deficient drafting may shift the final decision to a third party (judge or arbitrator).

 

Conflicts between sectors and duties of the board of directors

 

Domestic scholars have warned that one of the main issues raised by tracking shares lies in the potential conflict of interests among holders of different classes of shares and the delicate position in which this places the board of directors. The management body is unified for the entire company and must act in the interest of the corporate entity as a whole. However, certain decisions—such as those relating to investments, allocation of resources, or even internal decisions that prioritize one sector over another—may benefit one class to the detriment of another. [4]

 

The bill partially mitigates this issue by allowing the bylaws to establish matters that the board may not resolve without the prior consent of the relevant special class meeting. This mechanism operates as an institutional safeguard for tracking shareholders against decisions by the management body that may affect the activity linked to their class, although it does not entirely eliminate the inherent tension arising from the coexistence of potentially divergent interests within the same corporate structure.

 

The bill also allows the bylaws to provide for the election of directors by class, a mechanism that strengthens the representation of sector-specific interests within the management body. The provision for class-elected directors excludes the right to elect directors by cumulative voting. However, cumulative voting may still be exercised within each class if the number of directors to be elected by that class is three or more.

 

Shared costs and accounting allocation

 

An operational issue arises in the allocation of general expenses among the different sectors. The bill requires determining the proportion in which each sector participates in general expenses, indirect costs, remuneration of corporate bodies, and the formation of reserves. However, determining these percentages may prove complex and what was fixed at the time of issuance may become inadequate over time, potentially harming either ordinary or tracking shareholders who bear a disproportionate share of costs. Regulating the functioning of tracking shares therefore entails not only assessing the “present” but also considering the desirability of incorporating adjustment and updating mechanisms that allow already-issued tracking shares to adapt to changes in economic conditions and/or in the operation of the relevant project or sector.

 

Conclusions

 

Under the current regime, tracking shares are valid if their issuance terms do not infringe the corporate law principles set forth in the ACL, particularly the prohibition of abusive clauses under article 13, a criterion confirmed by case law in the “Agro G” precedent. The bill is significant, even before being passed, because it provides guidance on key issues that, with a view to preventing future conflicts, should be considered and regulated at the time of issuing tracking shares. The main challenges in implementing this mechanism include achieving an adequate bylaw-based delineation of sectors, ensuring a fair allocation of shared expenses and its future evolution, preventing conflicts of interest at the board level, and effectively protecting tracking shareholders within the company. Ultimately, the success of tracking shares will depend on the quality of the bylaw framework each issuing company adopts and on the ability of the legal system to resolve the inevitable tensions between the overall corporate interest and the differentiated sectoral interests.