Requirements for the provision of guarantees by corporate directors

The Public Registry of Commerce (“PRC”) issued General Resolution No 20/2004, published in the Official Gazette on September 7, 2004, and General Resolution No 21/2004, published in the Official Gazette on September 10, 2004 (jointly with Resolution No 20, “the Resolutions”).The Resolutions regulate certain aspects related to the registration of members of the board of directors and/or management bodies, particularly the guarantees that they must provide to both the company and third parties.

The Resolutions apply to members of the board of directors and/or management bodies of the following types of companies: limited liability partnerships; corporations (“sociedad anónima”); and sock limited partnerships (“sociedad en comandita por acciones”).

1.Registration of members of the managing body

Once Resolution No 20 is effective (October 7, 2004), in order to register with the PRC any corporate resolution (either through a private or public document), Resolution No 20 shall require that all the members of the management body on the date of such corporate resolution be duly registered.

To this effect, Resolution No 20 requires that the professional issuing the required legal opinion include therein the following:

a) whether all the previous corporate acts that require registration are duly registered (“tracto registral”);

b) the current composition of the managing body;

c) whether the members of the managing body are duly registered with the PRC; and

d) the registration information of the managing body with the PRC.

If the managing body is not duly registered with the PRC, then such registration must be submitted along with the other corporate resolution/s being submitted.

2.Guarantees by the managers

Resolution No 20 establishes that corporate directors and/or managers must provide a minimum guarantee of A$ 10,000for the performance of their office.It should be noted that, as a result of General Resolution No 23/2004, compliance with this obligation has been deferred to December 7, 2004.

Resolution No 21 amends Resolution No 20, reducing the amount of the minimum guarantee to A$ 2,000 for limited liability partnerships with small-scale activities and whose corporate capital is less than A$ 12,000.

As regards the above mentioned minimum guarantee to be provided by directors and/or managers, the PRC requires that same be carried out as described below:

a) through the deposit of bonds, public notes, or national/foreign currency in a financial entity or depository (“caja de valores”) to the order of the company.These must not be removed during the term of the statute of limitations for civil actions.

b) through guarantees, bank surety (“aval bancario”), or insurance policy in favor of the company.In these cases, the costs must be borne by each director.

The guarantee cannot be constituted by placing funds directly into the company’s cash accounts (“caja social”).

The PRC will supervise director compliance with the constitution of these guarantees through the professionals that issue the required legal opinions and the statutory supervisors.In effect, the PRC will require the following:

(i) In initial registrations, registrations related to mergers, spin-offs, director appointments, and/or registrations relating to transformation into a corporation (from an association made up of physical persons), the professional issuing the legal opinion must mention effective compliance with the guarantee and identify the documents attesting to this.

(ii) In companies of limited supervision, the statutory supervisor must inform on compliance or non-compliance with the guarantee in or along with his report on the financial statements; if applicable, the statutory supervisor must also report on the need to modify it.In the event of silence, the PRC will consider that this resolution is complied with.

(iii) In companies under permanent supervision, in addition to informing on compliance or non-compliance with the guarantee in or along with the financial statements, the supervisory committee (“sindicatura”) must inform the PRC of the appropriate measures taken with regards to its subsistence and/or correction, detailing the situation and the requested measures, and evidencing having convened a shareholders’ meeting in order to learn and decide on the matter, within 30 days of having taken such measures.