Bill for the Establishment of a Registry of Legal Entities in the City of Buenos Aires

The bill is very similar to National Law No 22,315 which creates the Register of Commerce (Inspección General de Justicia) (the “RC”). It establishes a one year period within which legal entities registered in the RC must register with the Registry of Legal Entities of the City of Buenos Aires (“CBA”). However, the new operation of the local Registry does not mean the end of the RC, as the RC will remain in charge of:

(i)        the National Registry of Stockholding Companies[1];

(ii)        the National Registry of Foreign Companies[2];

(iii)        the National Registry of Associations and Foundations[3];

(iv)        the National Registry of Non-Stockholding Companies[4]; and

(v)         the authorization and control of capitalization and saving companies[5].

The arguments put forward by the local Executive Branch for the approval of the bill are:

(i)           the autonomy of the CBA established by Article 129[6] of the National Constitution (“NC”);

(ii)           the location of Article 129 within the second title of the organic part of the NC, corresponding to the 'Governments of Province' and references that the NC makes to the CBA along with the provinces;

(iii)          the Constitution of the CBA that gives the local legislature the power to regulate the organization and operation of the Registry of Legal Entities of the CBA; and

(iv)          the decision of the Federal Supreme Court (the “FSC”) stating that the “police power” corresponds, in principle, to local governments[7].

The jurisdiction of the CBA in this subject is controversial. Law No 24,588[8] (the “Guarantees Law”), regulating Article 129 of the NC, expressly establishes that the RC will continue to operate under the Federal jurisdiction. In turn, the text of the Second Transitional Clause of the Constitution of the CBA prevents the local legislature from contradicting the Guarantees Law prior to its amendment or prior to a court decision on the point.

Despite the location of Article 129 of the NC within the title 'Governments of the Province', the FSC decided, after 1994’s Constitutional Amendment, that the CBA is not a province[9]. However, the new composition of the FSC means that we cannot be sure that such criteria will be followed in future cases.

Nevertheless, the registration activity is a demonstration of police power that, in principle, is a local and non-delegated power. While the Nation has also been given power to fulfill the objectives for which it is responsible, either explicitly or implicitly by the NC, there does not appear to be a national interest that could justify the Nation’s withholding of the RC with all its current functions, as the Guarantees Law provides.

Accordingly, the CBA’s Government could bring the case before the FSC to seek a judgment validating the establishment of a local Registry under local law.

The FSC’s decision will largely depend on the degree of similarity that it sees between the CBA and the provinces, under its current composition. In fact, the degree of similarity that the FSC may see between the CBA and a province, will not only determine the fate of the rising controversy regarding the unconstitutionality of the Guarantees Law, but also the possibility of the FSC recognizing its original jurisdiction over deciding the claim. On this issue, as evidenced by the case law cited above, the FSC has held that, as the CBA is not considered a province, it does not enjoy the prerogative of being able to appear directly before the FSC.

The potential inter-jurisdictional conflict could also be presented before the National Commercial Court of Appeals which, according to the bill, will temporarily continue to be the court of appeals for the decisions of the local Registry. The National Commercial Court of Appeals could declare itself incompetent, on the basis that the CBA, under local law, may not decide on the Chamber’s jurisdiction at the appeal level; the Chamber could also enter into the background controversy and decide on the constitutionality or unconstitutionality of the bill.

Additionally, the National Executive Branch could bring the inter-jurisdictional conflict before the FSC, the National Commercial Court of Appeals or even before the Superior Tribunal of the City of Buenos Aires, notwithstanding the actions, including an unconstitutionality action under the Constitution of the CBA that individuals and the Ombudsman could bring by demonstrating a sufficient legitimacy and the existence of a case.

Currently, the project is being considered by the CBA’s Government Constitutional Affairs Committee; the Budget, Treasury, Administration, Finance and Tax Policy Committee and the Justice Committee and, according to its drafters, is close to being addressed by the Legislature of the CBA.