Insurance: Prior SSN Authorization is Now Required to Transfer Shares and Contributions

On August 6, 2021, the Superintendence of Insurance (“SSN”) issued a new resolution —Resolution SSN 595/2021— amending several provisions in the General Regulation on Insurance Activity (“RGAA”).

Until September 2018, when Resolution SSN No. 989 was issued (see https://www.marval.com/archive/a_newsletters/insurance_03102018.html#es), the transfer of shares and capital contributions required prior SSN approval. In 2018, SSN Resolution No. 989 deferred their oversight to a later time, when the operation in question is actually performed, without requiring that local insurance and reinsurance entities obtain prior SSN approval. Instead, they were merely required to notify the transaction later and for information purposes only. Capital contributions were also subject to the same requirement.

But under recent SSN Resolution No. 595/2021, the SSN requires prior information for identifying the shareholders and contributors to approve or reject these operations.

In that vein, recent SSN Resolution No. 595 reformulated the wording of points 7.3. and 8.3.1 of the RGAA, imposing the obligation on local insurance and reinsurance entities to submit certain information and documents and require prior authorization for all changes in share structure, regardless of their stake and even when the acquirer is already a shareholder.

Under redrafted section 7.3.1.c), the SSN must issue its opinion on the operation and, until it does, shares cannot be transferred. In addition, until the transfer of shares is approved by the competent SSN authority, resolutions reached by the shareholder will not be enforceable against that SSN, which could unnecessarily hinder the entity’s operation, even when the shares have not yet been transferred.

Resolution No. 595 also incorporates the obligation to notify in advance any indirect change in shareholding (point 7.3.1.1) that modifies the effective control of the local entity. In addition, all the documentation and information related to the operation and identifying the shareholders must be submitted as well. Legal persons who control the local insurance or reinsurance entity and who are in high-risk countries as defined by the Financial Action Task Force will not be allowed to join the corporate structures. However, the Resolution does not establish what happens when the indirect change of shareholders does not involve the transfer of shares of local entities. Compliance with these requirements can be difficult for local entities since they do not usually have prior knowledge of operations that take place abroad. Additionally, this would require international groups to review local regulations and, ultimately, be subject to the Argentine regime to structure their business abroad.

Similarly, the Resolution requires that, prior to the completion of a capital contribution or irrevocable contribution for future subscription of shares, the entity submit to the SSN, in a single submission, certain information and documentation, indicating the reasons for the capital contributions and detailing the payroll of the contributors and the amount pertaining to each. Until the SSN issues its opinion on the operation, the Board cannot accept the contributions. Once SSN approval has been obtained, entities must also submit to the SSN, within 48 hours from the contribution, a sworn statement signed by the president of the entity reporting the operation with a special report issued by a licensed accountant. We understand that prior authorization requirements could hinder the input of contributions that entities may need to certify technical relationships.

Under the Resolution, entities have 30 business days to perform the operation once the highest authority of the SSN authorizes the transfer of shares or capital contribution.  Should they fail to perform the operation in that period, the applicant will be deemed to have abandoned the procedure. However, the SSN is not subject to a particular timeframe for issuing its opinion.

The Resolution derogated sections 8.3.2 of the RGAA, overruling the provision on “Irrevocable Contributions to Absorb Debts.” Under the new regime, shareholders can only make irrevocable contributions for capitalization and not for the purpose of allocating them to absorb negative results from the current or previous years.

The Resolution also added subsection h) to item 35.2, by which it precludes shareholders, members of the Board, statutory supervisors, and managers of the local entity from entering into lease or sale of real estate agreements with the entity to which they belong while they remain in their functions and for up to 2 years after their termination. It also precludes related or controlled entities from entering into sales agreements of any kind with the local entity.