New regulations regarding capital variations, financial statements and irrevocable capital contributions

General Resolution No 25/2004 (herein “Resolution 25”) applies to: (i) corporations and (ii) limited liability companies with capital equal to or above Ar$ 2,100,000.

It will be effective as from December 22, 2004. Notwithstanding the aforementioned Resolution 25 clarifies its effectiveness as follows:

a) with regards to capital variations and financial statements analysis, it takes into account the date of the callings to shareholders meetings, and it will apply to those calls dated after December 22, 2004.

b) with regards to capitalization of irrevocable capital contributions, the Resolution will apply to such agreements related thereto, when dated after December 22, 2004.

If the provisions of Resolution 25 were not fulfilled, the Public Registry of Commerce (herein “PRC”) may reject the registration of the corporate resolutions and, when appropriate, declare irregular and inapplicable for administrative effects the financial statements and corporate resolutions adopted in connection thereof.

Following is a description of the principal terms of Resolution 25.

1. Capital variations

Previously to or simultaneously with the resolution approving a capital increase or reduction, corporations will have to capitalize any pending balance in what we call “capital adjustment account” and/or “asset revaluation balance” and/or similar accounts which allow the issuance of paid-up shares. Such issuance shall be made taking into account the holdings of each shareholder in the corporation (section 189 Argentine Companies Law or “ACL”)

Requirements:

(i) Paid-up shares shall bear the same features and classes as current ones.

(ii) The effective capital increase shall be based on the amount of the capital reexpressed immediately. This, shall coincide with the issuance of paid-up shares.

(iii) Accountant certifications shall be filed.

If the issuance of paid-up shares is decided at a shareholders’ meeting dated prior to the resolution which approves the capital increase, then the following shall be complied with too:

a) The registration of the paid-up shares in the Share Registry book.

b) The registration of such in the Assistance Registry book when deciding upon the increase/reduction of the capital.

c) Legal opinion related to such shareholders’ meeting indicating quorum and majorities and their registration in the Share Registry book.

2. Financial statements analysis

As of the effective date of Resolution 25 the shareholders shall decide about the results of the fiscal year, indicating their treatment.

If the balance resulting from the Statement of Income and Retained Earnings is negative, and the institutions named as “Mandatory dissolution because of corporate capital loss” (Section 94, ap. 5 and 96 of ALC) or “Mandatory capital reduction” (section 206 ACL) are applicable, then the Board of Directors shall also convene an Extraordinary Shareholders’ meeting to decide on such matter.

If the balance resulting from Statement of Income and Retained Earnings were positive, then the shareholders shall have to indicate whether (i) dividends shall be distributed (sections 68 and 224 ap. 1 ACL); (ii) the results shall be reserved, in which case the purpose for such reserve shall have to be informed (section 70, 3th paragraph ACL); or (iii) if such cumulated reserves will be capitalized (section 189 ACL).

Notwithstanding the name or qualifications the balance in the financial statements may have, such resolutions shall be adopted according to generally applicable accounting principles and the specific regulations issued, approved or admitted by professional entities.

3. Irrevocable capital contributions

Resolution 25 regulates the so-called “irrevocable capital contributions”. Until the issuance of such Resolution, this institution was regulated by rules issued by the Argentine Federation of Economic Science’s Professionals (“Consejo Profesional de Ciencias Económicas”), by opinions of legal scholars and by court decisions. Until now, there was no specific clear resolution on this matter.

Resolution 25 casts some further light on this subject, such as:

a) An agreement between the contributor and the company receiving the irrevocable capital contribution (hereinafter the “Agreement”) shall be executed in accordance with the requirements established by the Argentine Federation of Economic Science’s Professionals Technical Resolution No 17. The Agreement shall contain the following:

(i) The identification of the persons executing the agreement, whose signatures shall be legalized by a notary public.

(ii) The term the contributor will maintain the contribution and the term for the celebration of the shareholders meeting approving the capitalization or restitution of the irrevocable capital contribution. Such term may not exceed one hundred and eighty calendar days counted as of the Board of Directors’ decision to accept them.

(iii) The quantity, features and, as the case may be, class of shares that shall be given to the Contributor in case its issuance is approved.

(iv) The current shares gross equity value as of the Agreement date, indicating as well if the new shares shall be issued with or without an issuance fee, and if applicable, the mechanism to determine such.

(v) The contribution shall not produce interest, except when having to refund them.

(vi) The contribution refund and its effective date will be subject to the so-called regime of creditors’ opposition (“régimen de oposición de acreedores”). The refund shall take place any time twenty days after the term of opposition, to be computed after the expiration of the term of fifteen days after the last publication (section 83, ap. 3, ACL).

(vii) The company’s obligation to comply with the refund without a previous extraordinary shareholders’ meeting deciding upon such, in the event the shareholders’ meeting were not held within the legal term, or if held within such term, such shareholders meeting did not decide the capitalization or refund of the irrevocable capital contributions.

(viii) The subordination of the contributor’s credit in case the company becomes insolvent. It may not be less than all the the company’s liabilities existing at the date of the holding of the shareholders which decide upon the capitalization of the irrevocable capital contributions.

(ix) The right of the contributor to the irrevocable capital contribution when it was not decided within the agreed term, or when shares are not issued in the terms provided in the Agreement.

b) If the irrevocable capital contribution was granted in foreign currency, its exchange rate vis a vis the Argentine Peso must be provided. The exchange rate to be used shall be the one published by Banco de la Nación Argentina for sales transactions at the closing of all operations on the date of the acceptance of the irrevocable capital contribution.

c) The irrevocable capital contributions shall constitute the Net Assets of the company as of the date of acceptance of the Board of Directors.

Notwithstanding, if the company does not fulfill with the terms of the Agreement, the amount of the irrevocable capital contributions will be recorded in its financial statement as a liability.

d) While the irrevocable capital contributions remain recorded in the company’s net assets, the amount will be registered in the nominal capital for the application of the rules limiting the relationship between the holdings and the corporate capital.

e) Capital increase registration with the PRC due to the capitalization of irrevocable capital contributions:

In addition to the requirements provided in the current legal and regulatory statutes, the following documents shall be filed with the PRC:

(i) The Agreement, unless it is transcribed in the Board of Directors’ meeting minute, that accepts the irrevocable capital contribution.

(ii) An authentic copy of the Board of Directors’ meeting minute whereby it expressly accepts the irrevocable capital contribution. Such copy shall be signed by the company’s legal representative and his/her signature duly certified by public notary.

(iii) An accountant’s certificate indicating the composition and quantity of the company’s net assets as of the date the irrevocable capital contribution was accepted by the Board of Directors. Such certificate shall be signed by an accountant and his/her signature duly legalized by the corresponding authority.

(iv) The entering of the funds to the company’s accounts shall result from Exhibit 3 (section 43, PRC General Resolution No 6/80) with cross entry under the cash and bank account.

f) Irrevocable capital contributions fund: The financial statements of the companies that have received irrevocable capital contributions whose refunds were resolved, shall contain a note making reference to the refund proceeding, with indication of the publications, opposing creditors, amounts, oppositions treatment and, if applicable, date and amount of the restitution.