New regulatory trends about Rep Offices of foreign banks in Argentina

According to applicable regulations issued by the Argentine Central Bank (the “Central Bank”), a foreign bank may basically structure a representation office in Argentina (a “Rep Office”), either through an individual or through a local entity incorporated in Argentina. Both structures shall require prior authorization from the Superintendence of Financial and Foreign Exchange Entities of the Central Bank (the “Superintendence”) for the Rep Office to act as the representative in Argentina of the foreign bank. Among other requirements, both the individual appointed as representative, and the persons in charge of the administration of the local entity appointed as representative (e.g. directors of a sociedad anónima), shall have to evidence to the Superintendence their background in the banking and finance business.

The authorized representative may not delegate its authority in a third party, although the regulations authorize the appointment of a co-representative, also subject to the prior authorization from the Superintendence, who shall have the same duties as the main representative.

Market practice evidences that both alternatives have been adopted by different Rep Offices registered before the Superintendence.

The Superintendence has lately been adopting a new regulatory construction in connection with the approval or continuance of Rep Offices in charge of individuals, namely, to require the registration of such representative before the local Public Registry of Commerce (the “PRC”) under Article 118 of the Argentine Companies Law (the “ACL”), which provides that in order to perform business activities within the Argentine territory on a permanent and continuous basis, a foreign legal entity must register its corporate documentation with the PRC, fix a domicile in Argentina and appoint and register a legal representative. 

Among other effects, foreign financial institutions so registered may be summoned to Court in Argentina through services made in the person of its representative registered before the PRC. Thus, given the fact that the local Rep Office is the same legal entity than the foreign financial institution, the required registration shall facilitate the summons of such foreign financial institutions before the Argentine jurisdiction.

Furthermore, the Rep Office activities in Argentina shall have to be conducted in accordance with Argentine laws and regulations such as tax, accounting, labor and social security regulations applicable to business activities developed by permanent establishments of foreign corporations in Argentina.

Consequently, at the time of structuring and/or reorganizing a local Rep Office, a foreign financial corporation should carefully analyze the pros and cons of either electing an individual or a separate legal entity (local company) as representative.