Small and Medium-sized Enterprises: Access to Capital Markets

On August 26, 2015 the Argentine Securities Commission (known after its Spanish acronym as "CNV") passed General Resolutions Nos. 640 and 641 ("Resolution 640" and "Resolution 641", respectively), through which the CNV Rules (passed by General Resolution No. 622 as amended) (the "CNV Rules") regarding PyMEs and their access to financing through capital markets were amended.

In order to facilitate access to capital markets to small investors and PyMEs, and to promote the channeling of savings to finance productive projects and the development of regional economies, the CNV issued Resolution 640 which redefines the term PyMEs as used in the CNV Rules and thus expands the scope of PyMES, and establishes an alternative regime for PyMEs to access capital markets.

Resolution 640 defines "PyMEs CNV” as those companies incorporated in Argentina, whose total annual revenues expressed in Argentine Pesos do not exceed: (i) AR$ 130 million (approximately USD 13 million, at the current exchange rate) for the agricultural sector, (ii) AR$ 430 million (approximately USD 43 million, at the current exchange rate) for the industrial and mining sector, (iii) AR$ 550 million (approximately USD 55 million, at the current exchange rate) for the trading sector, (iv) AR$ 145 million (approximately USD 14.5 million, at the current exchange rate) for the Services sector, and (v) AR$ 215 million (approximately USD 21.5 million, at the current exchange rate) for the construction sector. When a company has revenues from more than one activity, the largest income will be considered. Resolution 640 establishes that banks, stock markets authorized by the CNV, public services’ providers and companies that are eligible to be considered PyMEs but are controlled by or related to other companies that do not fit in the PyMEs CNV definition, will not be considered by CNV as PyMEs.

In addition, Resolution 640 revokes the restriction for PyMEs that file for public offering -which prevents them from the concurrent usage of subsidies programs or other advantages granted by the Small and Medium-sized Enterprises and Regional Development Secretariat (“Secretaría de la Pequeña y Mediana Empresa y Desarrollo Regional”)- as long as it is compatible with access to financing through the capital markets taking advantage of a special regime; thus, this regime cannot be considered as a subsidy but as a simplified public offering authorization.

Moreover, Resolution 640 establishes that entities applying for PyMEs CNV regime cannot issue securities in excess of AR$ 15 million (approximately USD 1.5 million, at the current exchange rate) pursuant to Decree No. 1,087/1993 as amended and Decree No. 319/2008.

Through the issuance of Resolution 641, the CNV created the Office of Financial Assistance for PyMEs (“Oficina de Asistencia Financiera a PyMEs”), under both the Management of Development and Investor Protection and the Development (“Gerencia de Desarrollo y Protección al Inversor”) and Capital Markets Development and Study Office (“Subgerencia de Desarrollo y Estudio del Mercado de Capitales”), in order to provide technical assistance to companies that are interested in taking advantage of the PyMEs regime and with the purpose of spreading the benefits of capital markets access to PyMEs.

Furthermore, as part of a package of regulations aimed to improve financing for PyMEs and productive projects, the CNV passed General Resolution No. 642, implementing the negotiation of deferred checks issued by PyMEs; General Resolution No. 643, implementing the trading of promissory notes through the capital markets; and General Resolution No. 644, which obligates open ended mutual funds to invest 2.5% of their net assets in instruments to finance medium to long term productive infrastructure projects.

Finally, various agencies, such as the Argentine Superintendence of Insurance (“Superintendencia de Seguros de la Nación”), have issued different regulations in order to channel savings to finance productive projects.