New Regulatory Framework for the Public Registry

On July 28, 2015, the “Inspección General de Justicia” (“IGJ”), the organization in charge of the recently renamed Public Registry of the City of Buenos Aires, issued  Resolution No. 7/2015 (“Resolution 7/15”) which was published in the Official Gazette on July 31, 2015 replacing current General Resolution No. 7/2005 and, with some exceptions, the General Resolutions that were issued after same, setting the new regulatory framework for that organization.

1. Grounds

The main reasons that led to the issuance of Resolution 7/15 are not only based on the need to reorganize and unify in a single regulatory legal framework the different complementary resolutions and amendments that were made throughout the 10 years of validity of the General Resolution 7/2005, but to adapt the current regulation of the IGJ to the amendments introduced by Law No. 26,994 – the Argentine Civil and Commercial Code (“CCC”) to the now called General Corporations Law No. 19,550 (“LGS”) and the consequent need to determine the rules, procedures and registration requirements for the purpose of adapting to this change.

2. Enforcement and Application

Resolution 7/15 will be enforced on November 2, 2015, replacing current General Resolution No. 7/2005 and its complementary resolutions with the following exceptions:

a. On August 3, 2015 the sections related to (i) the registration of trust agreements; (ii) the special provisions for Sole shareholder corporation (“SAU”); (iii) the procedure to remedy the companies that fall under Section IV, Chapter I of LGS; and (iv) the associations and foundations, will become effective.

b. General Resolutions: 05/2007 (joint resolution AFIP 2325/07); 2/2009; 1/2010; 12/2012; 4/2014; and 6/2015 and any other general resolutions issued by the IGJ which do not provides legislation on the matters subject to regulation in the Resolution 7/15 shall remain in force.

The provisions of General Resolution No. 7/2005 shall be applied to all the proceedings filed and ongoing up to July 31, 2015 and to those filed before November 2, 2015 up to their effective registration, even if it is after the date of enactment of the Resolution 7/15. However, Resolution 7/15 provides in Section 6 that interested parties may request the application of Resolution 7/15 that they believe are more favorable to the merits of their claims.

3. Substantial Changes

a. Incorporation:
i. Company

• Resolution 7/15 maintains the requirement of substantial plurality of partners.
• Admits the SAU, prohibiting the incorporation or participation of a SAU in other SAU.
• Resolution 7/15 requires that a Trust willing to hold participations in a local company must previously register the Trust agreement before the IGJ.

ii. Name: Resolution 7/15 modifies the requirement of distinctiveness for distinctive aptitude.
iii. Purpose: Resolution 7/15 deletes the requirement of single purpose, replacing it by the requirement that the corporate purpose must be described clearly and with specific terms. However, Resolution 7/15 does not allow a multiple purpose. In order to incorporate activities that are not related, accessory or complementary to the corporate purpose, the solicitor should base the petition on legal and economic grounds.
iv. Capital:

• The corporate capital amount still needs to have some relation with the corporate purpose.
• Resolution 7/15 brings a parameter to establish the Limited Liability Company (“S.R.L.”) minimum capital fixing same in at least 30 % of the minimum corporate capital required for S.A. Today it would amount to $30,000.

b. Directors’ mandatory Guaranty: This requirement is substantially changed. Resolution 7/15 requires that the amount of the guaranty shall be equal for all directors or managers and it cannot be less than 60% of the amount of the corporate capital jointly among all the appointed directors or managers.

c. Unregistered minutes: Only admitted for the appointment of directors/managers. Resolution 7/15 deletes the possibility of using this kind of minutes for other resolutions, whether they include the amendment of by-laws or not.

d. Non- physical meetings: These are meetings in which certain Directors are not physically present in the meeting, but communicated through any mechanism that allows simultaneous transmission of sound, images or words (such as telephone conferences or video conferences. Resolution 7/15 rules on the formalities and requirements to establish this kind of meetings for board of directors/managers meetings (administration body). It has, however, not incorporated any provision regarding the Shareholders/quotaholders non-physical meetings (governing body meetings), which are accepted under Section 158 subsection a) of the CCC.   

e. Self – called shareholders meetings: Following the incorporation of CCC under section 158, Resolution 7/15 now allows self-called shareholders’ meeting.

f. “Deadlock”: Further to Section 161 of the CCC, Resolution 7/15 has admitted that bylaws include provisions to prevent the systematic opposition or omissions of the administration body which prevents from taking valid decisions.

g. Usufruct. Voting rights: Resolution 7/15 allows for the constitution of usufruct on the quotas to include the assignment of the voting rights.

h. Irrevocable contributions: The term of 180 days to consider the capitalization and/or restitution of the irrevocable capital contribution is deleted. The irrevocable capital contribution agreement will determine the term to decide its capitalization and/or its restitution. Said term may not exceed the financial year in which the irrevocable capital contributions are accepted by the administration body of the company, unless the closing of the fiscal year and pursuant to the last paragraph of Section 234 and 237 of Law No. 19,550, the shareholders’ meeting takes place before the deadline is fulfilled, in which case the decision on capitalization of irrevocable contributions or its restitution should be adopted at the same occasion, either as a special point of the ordinary shareholders’ meeting or under an extraordinary shareholders’ meeting according to the amount of the capital increase involved.

i. Conversion and merger of Companies of Section IV, Chapter I: Resolution 7/15 admits the conversion of a company incorporated under Section IV of the Chapter I of the LGS when it adopts one of the companies types regulated by the LGS. It also admits the merger between companies of Section IV of Chapter I of LGS between them or with companies incorporated under Chapter II of LGS, that is to say, with those companies that have adopted one of the types of the LGS.

j. Remedy process: The institute of regularization is replaced by the remedy process for those companies that are included on Section IV of the Chapter I of the LGS for the adoption of a specific corporate type.

k Civil Companies: Resolution 7/15 has removed the provisions related to civil companies and admits  remediation by choosing a particular corporate type.

l. Regulation of the SAU regime: Besides the requirements of the CCC, Resolution 7/15 intends to complete the legal uncertainty of the LGS with regards to the conversion by law of certain corporate types. It therefore distinguishes between Conversion by-law and Voluntary Conversion.

• Conversion by-Law: Ruled under Section 94 bis of the LGS which provides the automatic conversion by law of “Sociedad en comandita simple”, “Sociedad en comandita por acciones” and “Sociedad de capital e industria”, Resolution 7/15 provides that once the three (3) month term without plurality of partners being recomposed has elapsed, the Company should initiate the conversion proceeding before IGJ following the requirements thereby provided, notwithstanding the automatic conversion effects provided under CCC
• Voluntary conversion: For the remaining types of corporations not included in Section 94 bis of the LGS in which the number of partners is reduced to one without being able to recompose the plurality within the three (3 ) month term, Resolution 7/15 provides that the company must resolve:
  1. voluntary conversion, complying with the requirements described by the Section 202 of the Resolution 7/15, except in the case of a SAs, in which case, as applicable the amendment of the bylaw will only be required, regarding the appointment of the board of directors and statutory supervisors commission; or
  2. dissolution and appointment of the liquidator. In case of default, the Company will be considered under the liability regime established for the companies of Section IV of Chapter I of LGS.

m. Trust Agreements registration: Please refer to article “New Regulations Regarding the Registration of Trust Agreements”, included in this edition of Marval News.

n. Civil associations and foundations: The general regime related to the authorization, operation, withdrawal of registration, dissolution and liquidation of civil associations and foundations is included.

o. Legal Opinions: Legal opinions must detail the final beneficiaries of the legal entity involved in the registration. Furthermore, they must declare that the members of the administrative body of the company are not listed as terrorists in accordance with the Security Council of the United Nations list.

Furthermore, other significant changes were incorporated as follows: (i) The corporate domicile must be the effective main center for the management and administration of the company and it is mandatory for the professional issuing the legal opinion to rule on such compliance at all stages, including when requesting the registration of the incorporation of a company. There are no major changes regarding foreign entities’ legal domicile, although Resolution 7/15 requires the legal representative of a branch (section 118 LGS) to fix a mailing address in the jurisdiction of origin and a special electronic address in the name of the parent company; (ii) Establishment of mandatory electronic address in each file filed before the IGJ; (iii) Extension of the right to information granted by the General Resolution 1/2015, incorporating the right to request the bylaws and amendments of a Company; (iv) The term “Public Registry of Commerce” is deleted and replaced by “Public Registry”.