Corporate governance and directors' duties in Argentina: overview
A Q&A guide to corporate governance law in Argentina.
The Q&A gives a high level overview of board composition, the comply or explain approach, management rules and authority, directors’ duties and liabilities, transactions with directors and conflicts, company meetings, internal controls, accounts and audit, institutional investors and reform proposals.
To compare answers across multiple jurisdictions, visit the Corporate Governance Country Q&A tool.
Corporate governance trends
Corporate governance trends in Argentina, in connection with companies authorised to make a public offering of their securities, must be understood in the context of:
Act No. 26.831 enacted in November 2012 (Capital Market Reform Act).
Decree 1023/2013 enacted in July 2013.
The new regulations approved by the National Securities Commission (Comisión Nacional de Valores) (CNV) in 2013 to implement the Capital Market Reform Act (N.T. 2013).
The Capital Market Reform Act and related regulations significantly increase the power and authority of the CNV. The likely result will be a highly regulated capital market and a greater degree of government intervention, which will affect corporate governance.
The broad powers granted to the CNV have been a source of concern among commentators and practitioners, with the constitutionality of certain powers likely to come under challenge, particularly those regarding the authority to impose sanctions ex parte and intervene in the management of issuers without a court order. Although the CNV has yet to significantly exercise this power and authority, in August 2013 two shareholders of Grupo Clarin S.A. obtained a judicial injunction. The effect of the injunction was to suspend CNV’s powers to appoint a surveillance officer with power and authority to veto any resolutions adopted by the board and to remove the board for a term of up to 180 days in connection with Grupo Clarin S.A.
For privately held companies, on 1 October 2014, the Argentine Congress approved Act No. 26.994 (New Civil and Commercial Code), which will enter into force on 1 August 2015. The original draft of the New Civil and Commercial Code included significant amendments to Act No. 19.550 (Companies Act). However, the executive branch, on presenting the draft to Congress, reduced the scope of the proposed modifications and announced it intended to propose a broader amendment in the future. No amendment has been published or submitted to the Congress up to the present date. As a result, the amendments to the Companies Act included in Act No. 26.994 are narrow in scope and do not include significant changes to corporate governance matters. The main modifications regarding corporate governance matters are the following:
Companies formed by only one shareholder is now allowed. These companies must:
Be called "Sociedades Anónimas Unipersonales";
Pay their capital in full at the time of incorporation; and
Have a committee of controllers (comisión fiscalizadora).
The regime applicable to de facto companies and other companies that do not comply with mandatory registration has been modified to recognise and enforce the terms and conditions agreed by the partners, in connection with relationships between the partners and with third parties affected by the terms and conditions.
Notifications made at a company's registered address are expressly acknowledged as valid and binding, even when the company's management is not based there.
Special provisions regarding extension of liability to directors when they cause damages to the company, in line with judicial decisions, are formally included within amendment to the Civil Code.
Virtual general shareholders meetings and board meetings are allowed when certain requirements are met.
Managers must put in place mechanisms reducing the risk of conflicts of interests.
If the board cannot make decisions due to continued failure of some of its members to observe their duties, or to continued opposition to decisions that must be considered by the board, the chairperson or other managers can take precautionary measures and notify the general meeting. The general meeting can give the chairperson, or another director, the authority to undertake urgent or necessary acts, or remove directors.
The most frequently used types of corporate entities are the:
Limited liability company (sociedad de responsabilidad limitada).
Corporation (sociedad anónima). Corporations can be privately held or listed.
This article focuses on regulation applicable to corporations. Argentina is still an emerging market for corporations publicly offering their shares and most companies are privately held with no broad shareholder base, but with significantly concentrated capital structures.
Act No. 19.550 (Companies Act) provides the general legal framework for commercial companies in Argentina. Companies must also comply with regulations issued by the agency responsible for monitoring legal compliance in the relevant jurisdiction:
For entities domiciled in the city of Buenos Aires, the Superintendent of Companies (Inspección General de Justicia) (IGJ) is the main enforcement authority (www.jus.gob.ar/igj).
For entities domiciled in any of Argentina's 23 provinces, the applicable local Public Registry of Commerce is the main enforcement authority.
Companies authorised to make a public offering of their securities are also subject to:
Act No. 26.831 (Capital Market Reform Act).
Regulations issued by the National Securities Commission (Comisión Nacional de Valores) (CNV) (www.cnv.gob.ar).
Regulations issued by the applicable stock exchanges or security exchange markets.
For these companies the main enforcement authority is the CNV (see Question 1).
Companies will also be subject to the provisions of their bye-laws.
Private pension funds (Administradoras de Fondos de Pensiones y Jubilaciones) (AFJPs) were the main institutional investors in Argentina. However, in 2008 the private pension system was nationalised and the AFJPs' assets were transferred to a public pension fund (ANSeS Pension Fund managed through the National Social Security Administration (Administración Nacional de la Seguridad Social) (ANSeS)). As a result, the main private institutional investors disappeared and the government became an increasingly significant player in the market.
Despite certain pre-existing restrictions on the voting rights of AFJPs, as a result of government regulation, the ANSeS has succeeded in appointing directors in companies where the AFJPs owned shares. Under Decree 2085/2011 and Decree 1278/2012, the exercise of both shareholders' rights held by public entities in private companies (including voting and other rights arising from the shares owned by the ANSeS Pension Fund) and authority by directors nominated by public entities in private companies (including those nominated by the ANSeS), has been given to the Secretaría de Politica Economica y Planificación del Desarrollo (Secretariat), a division of the Ministry of Economy. A special regulation applicable to directors nominated by the government has also been approved.
The underlying premise of these decrees deviates from general principles of corporate law by:
Establishing the exercise of political rights by an entity that is different from the one that owns the shares.
Establishing that directors nominated by the government must not act exclusively for the benefit of their company but also to pursue public interests.
Depriving directors nominated by the government of the right and duty to exercise their own judgement in managing the company and instead imposing the duty to act in accordance with the instructions provided by the Secretariat.
These rules have created an unprecedented form of government intervention in business with the use of shareholdings as an instrument to voice and eventually impose the government's views on the business plans and actions of these companies. Decree 1278/2012 establishes among other provisions, that directors nominated by the government:
Must vote in accordance with the instructions of the Secretariat.
Will be indemnified by the government against any liability, provided their actions complied with the Secretariat's instructions.
Must request and obtain from the relevant company monthly reports and must inform the Secretariat of their opinion as to points of concern for the management of the company or for economic development public policies.
Must inform the Secretariat of any fact, act, omission or behaviour that he has knowledge of that:
can result in damages to public property;
can harm public interests;
can constitute an omission or violation of tax, customs, social security regulations; or
can result in a criminal offence.
Even though Decree 1278/2012 aims to establish that the interest of the relevant company and the "public interests" are aligned and do not conflict, this is often not true or possible and conflicts of interest may arise, particularly as many of the companies in which the ANSeS holds participations are regulated businesses (including banks and public utility companies). Depending on the government and its officer's performance as shareholder and directors of companies where it now holds shares, these conflicts of interest can give rise to heated debate, particularly relating to the manner in which the interests of the company itself, other shareholders, workers and creditors can be affected by the governments' intervention. Many of these conflicts are currently being resolved by the companies through negotiation with the Secretariat, the costs of which are unpredictable.
Legal practitioners in Argentina are generally of the opinion that this new form of government intervention in business is tied to the term of the current administration.
The N.T. 2013, in line with regulations previously in force, includes a draft Governance Code consisting of a list of good corporate governance principles that are developed through specific recommendations and indications. The N.T. 2013 provides that companies authorised to make a public offering of their securities must include within their annual report (memoria), and file before the CNV an annex disclosing whether they comply, partially comply or do not comply with each of the recommendations and indications included in the Governance Code. Companies must also explain how they comply or the reasons for not complying (or partially complying), with express indication as to whether they intend to comply in the future and how or the reasons they consider that following the relevant recommendation would not be appropriate or applicable.
The N.T. 2013 follow the "comply or explain" approach, accordingly companies are not expressly required to comply with each of the recommendations set out in the Governance Code, but must disclose compliance, partial compliance or non-compliance, providing explanations.
The Governance Code addresses nine basic principles, as follows:
Transparency in related party transactions. This principle prompts the adoption and disclosure of policies on:
related party transactions;
conflicts of interest; and
use of privileged information.
Proper management and supervision. This principle aims to ensure that effective management and supervision of the company are vested in a competent board of directors. It includes recommendations on:
approval of certain plans and policies by the board;
shareholders' evaluation of the board's performance;
appointment of a significant number of external independent directors;
continued education of directors and managers; and
procedures for the appointment of directors and managers.
Effective risk management. This principle aims to ensure that companies adopt an adequate risk management policy and follow up on its implementation. It prompts companies to:
comply with international standards;
have a special risk management committee and a risk management officer; and
ensure that the result of risk management evaluation is duly reflected in the financial statements and the annual report.
Protection of financial information through independent audits. This principle aims to guarantee independence and transparency in the duties performed by the audit committee and the external auditor. Companies are encouraged to establish adequate internal control procedures.
Protection of shareholders' rights. This principle includes recommendations on:
the provision of adequate information;
promotion of shareholders' participation;
protection against hostile takeovers;
promotion of a diluted shareholder base; and
transparency in the dividend policy.
Relationship with the community. This principle prompts the maintenance of a direct and responsible relationship with the community and includes recommendations to have an updated website. It also promotes the issuance of a Social and Environmental Report and disclosure of the initiatives and standards adopted in connection with the company's corporate social responsibility policy.
Responsible and fair remuneration. This principle includes recommendations as to the remuneration policy for managers and directors.
Promotion of business ethics. This principle includes recommendations for companies to:
have a code of conduct and disclose its main characteristics;
encourage application of the code of conduct among clients and suppliers;
have a confidential compliance line as well as confidential procedures to manage any reports received.
Consolidation of good corporate governance practices established within the Governance Code. It is recommended to include the corporate governance provisions within the company's bye-laws.
This Governance Code has generally been considered an improvement on the pre-existing regulation and is a useful tool to assess compliance with good governance standards.
Corporate social responsibility and reporting
Board composition and restrictions
The board of directors (board) is in charge of the company's management. Control is vested on a statutory controller (síndico) or committee of controllers (comisión fiscalizadora) appointed by the shareholders' meeting (general meeting). Statutory controllers must be certified public accountants or lawyers and must reside in Argentina. If provided in the company's bye-laws, a company can replace the statutory controller or committee of controllers with a surveillance committee (consejo de vigilancia) composed of shareholders.
Privately held companies can generally elect not to appoint a statutory controller, committee of controllers or surveillance committee and have a unitary board structure.
However, companies formed by only one shareholder must appoint a committee of controllers.
Listed companies must have an audit committee appointed by the board, which must be composed of a minimum of three directors, a majority of whom must qualify as independent. The audit committee is in charge of, among other responsibilities, providing an opinion on:
The appointment and independence of external auditors.
The external auditors' audit plan and performance.
The company's internal control and administrative accounting system.
Directors' and management's compensation and option plans.
Reasonableness of conditions for issuance of shares in connection with capital increases that exclude or limit pre-emptive rights.
Significant transactions with related parties.
The audit committee is also responsible for providing the market with sufficient information on transactions in which there is, or may be, a conflict of interest and for verifying compliance with the applicable code of conduct and related rules.
As the duties and responsibilities of the audit committee sometimes overlap with those of the statutory controllers or committee of controllers, the Capital Market Reform Act allows listed companies to elect not to have a committee of controllers. This decision must be approved in a general meeting with the vote of shareholders representing at least 75% of the voting stock. In these cases the duties of the committee of controllers will vest on the audit committee.
Corporations are managed by a board. Committees and general managers can also be appointed.
Directors are individuals elected by the general meeting.
Currently, employees do not have the right to board representation.
Number of directors or members
Non-listed companies can have boards formed by a single director and can also appoint an individual statutory controller. Public companies (and other companies subject to permanent surveillance) must have a board and a committee of controllers formed by at least three members. There is no maximum number of directors or controllers on the board.
The following persons cannot serve as directors:
Persons not qualified to undertake commercial activities.
Persons that have been declared bankrupt (this applies for a five year term as of the date at which they are authorised to undertake commercial activities).
Persons found guilty of certain criminal offences.
Public officers in companies where activities are related to their duties (for a two year term as of termination of their public office). See also, Question 3.
Directors must be at least 18 years old.
There is no nationality requirement. However, a majority of the board's members must have their actual domicile in Argentina.
There are no provisions as to gender quotas.
Generally, directors are subject to a duty of loyalty that would require them to act independently from any third party interest. However, independent directors are only recognised and required in connection with companies authorised to make public offering of their securities.
Listed companies must have an audit committee, which must be composed of a minimum of three directors, a majority of which must qualify as independent directors. Accordingly, the board must have at least two independent directors. The Governance Code recommends having a significant number of independent directors that adequately reflects the capital structure of the company.
Independence and standards
The majority of the audit committee must be formed by independent directors (see above, Question 6). Generally, in order to qualify as "independent" a director must be independent from the company and its controlling shareholder and cannot serve as an officer of the company. A director is not independent when he:
Is a director or employee of a shareholder with a significant participation in the company or director or employee of other companies in which such a shareholder has significant direct or indirect participation or influence.
Is, or was during the preceding three year period, an employee of the company.
Has professional relationships with (or belongs to a company or professional association that has professional relationships with) or receives remunerations or fees from:
shareholders with significant direct or indirect participations or influence in the company;
companies in which such shareholders have significant direct or indirect participations or influence.
Has a significant participation, whether directly or indirectly, in the company or in any other company with a significant participation or influence over the company.
Directly or indirectly sells or supplies goods or services to the company or its shareholders with significant direct or indirect participation or influence, for an amount substantially exceeding the amount received as remuneration as director.
Is the spouse or relative (within the second degree by blood or second degree by affinity) of individuals that would not qualify as independent, as above.
For purposes of the above, significant participation means 15% of the share capital, or a lesser percentage when it entitles the holder to appoint one or more directors. Significant influence is determined in accordance with Professional Accounting Standards.
Duties and liabilities
General rules of directors' liabilities (see Question 18) apply to independent directors.
Appointment of directors
Generally, directors are elected by the shareholders' meeting either by direct voting or through cumulative voting (provided that only one-third of the members of the board can be elected through cumulative voting). Staggered boards are permitted to the extent they do not preclude the possibility of exercising cumulative voting. Bye-laws can grant a class or classes of shares the right to appoint a certain number of directors, in which case cumulative voting cannot be exercised. When the company has a surveillance committee, directors can be appointed directly by the surveillance committee.
Removal of directors
Directors can be removed at any time with or without cause by general meeting or, if appointed by a particular class of shares, by a special meeting of the relevant class.
Determination of directors' remuneration
Directors' remuneration is established by the bye-laws or determined by general meeting and is subject to the following limits (Companies Act):
Aggregate directors' remuneration (including wages and remuneration for permanent administrative duties) must not exceed 25% of the company's earnings.
When no dividends are distributed, aggregate directors' remuneration must not exceed 5% of the company's profits, this amount will be proportionally increased if the company distributes any dividends.
The maximum remuneration can only be exceeded by decision of a shareholders meeting (included within the agenda) when directors have performed special non-permanent administrative duties and non-existent or low profits require exceeding these limits.
These limits are mandatory and not merely advisory.
Listed Companies can compensate directors with share options. The value of share options is determined by general meeting and included when applying the maximum remuneration.
Companies authorised to make public offering of their securities must include within their annual report information on how the board and management are compensated, including reference to any option plans or other compensation structure.
Unless remuneration is established within the bye-laws, it must be approved by general meeting or surveillance committee.
Management rules and authority
The board must meet at least once every three months, the procedure for summoning meetings can be established by the bye-laws. The board must also meet whenever requested by any director, in which case the meeting must be summoned by the chairperson and held within five days. To validly meet, a quorum of at least a majority of directors is required; a higher quorum can be established in the bye-laws. Decisions are approved by the favourable vote of a simple majority of directors attending the relevant meeting. In non-listed companies directors cannot vote by mail, but can authorise another director to vote as their proxy when the required quorum is present at the relevant meeting. In listed companies the bye-laws can authorise virtual board meetings.
Under the New Civil and Commercial Code, as of 1 August 2015, virtual board meetings will also be allowed in non-listed companies provided certain requirements are met.
Generally, the board is in charge of the management of the company. Legal representation of the company is entrusted to the chairperson of the board.
Decisions concerning the following are reserved for approval by general meeting:
Final approval of the financial statements.
Appointment and consideration of the performance of directors.
Capital increases and reductions.
Issuance of bonds.
Limitation on first refusal right.
Transformation into a different kind of company.
Other matters for which the bye-laws require the shareholders' approval.
The chairperson, as legal representative, has full power and authority to take any action that is not clearly beyond the company's corporate purpose. Accordingly, acts or contracts entered into by the chairperson that are not clearly beyond the corporate purpose will typically bind the company even if he has entered them in breach of representation requirements set out in the bye-laws, provided that third parties seeking to enforce the relevant act or contract have acted in good faith and were not aware of any of the restrictions. Breach of any of the restrictions can give rise to liability of the chairperson to the company.
The board can appoint general managers to whom it can delegate the implementation of management policies, provided this is authorised within the company's bye-laws. The board can also create committees. Directors remain responsible for the management of the company. In non-listed companies the board is usually in charge of day-to-day management. The board can grant general or special powers of attorney through a board resolution, indicating the extent of the authority and powers granted.
In listed companies, the board usually delegates day-to-day management to a CEO or a group of managers while it approves and supervises performance of strategic decisions.
Listed companies must have an audit committee (see Question 4). Compensation and appointment committees are recommended but not mandatory.
Director's duties and liabilities
Directors are bound by duties of care and loyalty towards the company. Directors are jointly and severally liable for damages caused to the company as a result of a breach of their duties. The standard used to evaluate compliance is that of a "good businessperson", which requires a level of diligence that goes beyond that of an "ordinary man" and involves knowledge of certain business aspects. However, it does not result in strict liability and does not imply second-guessing a business decision that is reasonable under the circumstances.
The duty of loyalty generally requires advancing the company's interest and not personal (or third party) interests. In accordance with this, directors are subject to specific prohibitions and restrictions:
They must not vote on a decision to approve their performance as directors.
They must not undertake activities in competition with the company.
They can only enter into agreements with the company that are in the ordinary course of business and at arm's-length (any other agreement must be approved by the board of directors or by the statutory controllers and the general meeting).
Directors must disclose conflicts of interest to the board and the statutory controllers and may not participate in the decision making process.
Additionally, the Criminal Code includes specific criminal offences whenever directors or managers:
Knowingly publish, certify or authorise false or incomplete financial statements, related reports and minutes.
Knowingly provide false or incomplete information to the shareholder meeting regarding material events.
Knowingly consent or collaborate with actions that are contrary to the law or the bye-laws that can result in damages, if that act involves the issuance of shares or quotas the penalty may be increased.
Are involved in fraudulent management.
Theft, fraud and bribery are generally addressed within the Criminal Code. One case of fraud specifically recognised and sanctioned is fraudulent management, which is committed when a person in charge of the management of third party's assets or interests (as is the case of directors) through deception and in breach of his duties, causes harm to the interests of or abusively binds the third party. Bribery is subject to penalties both for the public officer requesting or accepting any bribe, and for the person who offers or pays such bribe.
The Capital Market Reform Act imposes certain specific duties for directors of listed companies, particularly:
The duty of loyalty is expressly stated to include the obligation to avoid conflicts of interest and the prohibition on use of corporate assets, information or opportunities for personal or third party benefit.
Significant transactions between the company and directors must be approved by the board and by the prior opinion of the audit committee (or two auditing firms). If the audit committee does not issue a favourable opinion the transactions must be approved by the shareholders.
If compliance with the duty of loyalty by directors is challenged, directors must prove compliance.
Insider trading and market manipulation are expressly prohibited within the Capital Market Reform Act and also constitute criminal offences under the Criminal Code.
Insolvency law imposes liability for damages caused to the company by directors or managers who, acting with wilful misconduct, cause, allow or worsen the financial condition of the company.
To ensure the effectiveness of this provision, insolvency law requires directors to fully co-operate with the judge or controller during the bankruptcy process. In addition, insolvency law also states that during bankruptcy proceedings directors need court authorisation to travel abroad.
Health and safety related regulations do not specifically provide for directors' liability, any liability is assessed based on the directors' actions and general liability laws and regulations.
Directors can be held liable whenever the company causes any environmental damage according to their involvement in the matter.
Under anti-trust laws, directors who contribute, encourage or allow a breach of anti-trust prohibitions are jointly and severally liable with the company for any applicable fines.
Directors can additionally be subject to disqualification from practising any commercial activities for a period ranging from one to ten years.
In addition, market manipulation is a criminal offence subject to penalties under the Criminal Code.
Liability cannot generally be restricted or limited before the event giving rise to the liability has occurred. A director can however exclude his own personal liability in connection with a particular decision by:
Stating in writing his disagreement.
Notifying the statutory auditor of his opposition to the relevant decision.
On approval of the board's performance in the annual shareholders' meeting (AGM), a director's liability is extinguished if and to the extent:
The liability does not result from a breach of law or a breach of the provision included in the bye-laws.
The decision to approve the directors' performance is approved without opposition of shareholders representing 5% or more of the share capital.
It is mandatory for directors to provide a guarantee to cover their potential liability to the company. Under the Superintendent of Companies (IGJ) regulations, insurance policies are included among the admitted guarantees, although the value that must be covered is not significant (ARS10,000, approximately US$1,150). The company cannot pay the insurance premium.
Under the Capital Market Reform Act, listed companies can obtain insurance for the benefit of their directors to cover the directors' potential risks arising from the performance of their tasks.
The stockholders of corporations and limited liability companies are generally not liable for its obligations. However, when the company is not able to honour its obligations, liability can be extended to a controlling shareholder or parent company as follows:
When there has been an abuse of rights, namely when the company's interests have been harmed in order to benefit the controlling shareholder or parent company and/or when the company's assets or information have been used for the benefit of the controlling shareholder or parent company. In some of these cases, the courts have disregarded (pierced) the corporate veil of the subsidiary and made the controlling shareholder jointly liable with the subsidiary.
Within bankruptcy proceedings, the controlling shareholder or parent can also be declared bankrupt when:
it has used the bankrupt company as a means to take action in its personal interest and disposed of the assets of the company as though they were its own, to fraudulently mislead creditors; or
it has made the controlled company act in the interest of the "controlling person" or for the benefit of the economic group of which it is a member. "Controlling person" includes any person that has co-mingled its assets with those of the bankrupt company.
Transactions with directors and conflicts
See Question 18.
See Question 18.
Directors of public companies can purchase or sell shares of the relevant corporation. However, they must comply with certain disclosure obligations of the quantity and class of shares or convertible securities issued by the company and owned by them and any put and call rights relating to the company's shares or convertible securities.
Directors are also subject to prohibitions on insider trading.
Disclosure of information
The board is responsible for compliance with the company's disclosure obligations.
Close companies must comply with disclosure obligations that are narrower in scope than those imposed on public companies. In general, a close company must make available to the public (by filing with the IGJ or other applicable regulatory authority):
The corporate bye-laws and any amendments thereto.
The board's composition.
The company's domicile.
The general meeting approving the annual financial statements, including the board's report.
Companies authorised to make public offering of their securities must comply with the disclosure obligations imposed in the Capital Market Reform Act and CNV regulations, including periodic annual and quarterly disclosures (including financial statements) and ad-hoc disclosures. Directors of public companies must immediately inform the CNV, the relevant stock exchange and the public of any material event that may significantly affect the negotiation of the company's securities.
An AGM must be held at least once a year to:
Consider the financial statements and related documents.
Decide on the corporations' earnings (or losses).
Remove and/or appoint directors, controllers and/or members of the surveillance committee and determine their remuneration.
These meetings must be held within four months of the end of the fiscal year.
Shareholders' meetings can be ordinary or extraordinary. At least one ordinary shareholders' meeting must take place each year to consider certain matters (see Question 32). Any other matters must be decided by a extraordinary shareholder's meeting.
Shareholders meeting must be summoned at least ten days in advance, but no more than 30 days in advance. Publications in the Official Gazette are required unless all shareholders confirm their attendance in advance and vote unanimously.
The quorum for ordinary meetings is the majority of issued shares. If the quorum is not present, it is possible to hold a second meeting, for which the quorum is any number of shares. Quorum requirements for ordinary meetings may not be amended.
The quorum for extraordinary meetings is 60% of the issued shares. The bye-laws can provide for a higher (but not lower) quorum. If such quorum is not obtained it is possible to hold a second meeting for which the quorum is 30% of issued shares; the bye-laws can provide for a higher or lower quorum.
In both ordinary and extraordinary meetings, decisions are approved with the favourable vote of the majority of shares present at the meeting. This threshold can be increased by a specific provision within the bye-laws.
The following decisions must be approved with the favourable vote of a majority of issued and outstanding shares (plural voting rights are not be taken into account):
Changing the form of the company.
Extending the term for which the company was incorporated (except in companies authorised to make a public offering of their shares).
Transferring the company's domicile abroad.
Substantial amendments to the nature of the business.
Repayment of capital.
Mergers (only for the target company).
Limitation on first refusal rights.
Approval of reserve accounts in an amount exceeding the company's capital plus its legal reserve.
Shareholders representing 5% or more of the corporation's issued share capital can request the board to convene a general meeting and must indicate the agenda to be discussed at the meeting. The board must then summon the meeting to be held on or before 40 days as of the date on which the request was received by the board. Additionally, shareholders of listed companies representing 2% or more of the company's issued share capital can deliver proposals or comments on the company's business up to the fifth day before the date of the AGM.
Minority shareholder action
Whenever they consider the company is being mismanaged, minority shareholders can:
Access corporate information directly (if there is no statutory controller) or through the statutory controller or committee of controllers (the relevant shareholder must hold shares representing at least 2% of the share capital).
Request the board to summon a general meeting (see Question 35).
Challenge decisions adopted by the general meeting when they are contrary to the law or the company's bye-laws.
Oppose the approval of the directors' performance (see Question 25).
Initiate actions for the removal of directors and/or liability actions against directors. The Companies Act recognises two types of liability actions:
the "corporate action" for damages caused to the company, which is generally initiated by the company; and
the "individual action" that can be filed by the shareholder or any third party to claim damages suffered directly by the plaintiff.
Derivative actions to recover a pro-rata share of the damages caused to the company (only allowed within listed companies).
Exercise appraisal rights in cases of approval of certain corporate decisions.
Initiate actions against the controlling shareholder claiming extension of liability.
Initiate actions requesting appointment of a controller when directors and managers have placed the company in significant danger.
Particularly in connection with listed companies, the Capital Market Reform Act provides that, when interests of minority shareholders or holders of other listed securities are compromised, the CNV may appoint a surveillance officer with power and authority to veto any resolutions adopted by the board of the company and remove the board of the company for a term of up to 180 days. This provision has been subject to substantial criticism, and its constitutionality has generally been questioned by commentators and practitioners. Important developments in connection with this provision are expected in the near future. In one particular case, this provision has been suspended by means of a judicial injunction (see Question 1).
Internal controls, accounts and audit
The Governance Code includes recommendations and guidelines regarding the internal control and management of business risks (see Question 4).
Directors are jointly liable for the accuracy of the relevant corporation's accounts and can be subject to criminal liability (see Question 18).
Companies that offer their securities to the public must appoint auditors at the general meeting. When auditors are proposed by the board, the audit committee must issue an opinion as to the proposed auditors. When an accounting firm or association appoints one of its partners to perform duties as external auditor he can act for a maximum term of five years. This term can be extended for one additional year, provided that the extension is not opposed by the audit committee or the board. After the term the relevant partner may not perform any auditing tasks for the relevant company for a two year term.
Auditors must be certified public accountants. Companies that offer securities to the public must have auditors that comply with certain independence requirements as set out by the CNV and the national economic sciences' professional federation (Federacion Argentina de Consejos Profesionales de Ciencias Económicas). They must file a sworn statement before the CNV regarding any fines or sanctions imposed on them and must be duly registered with the external auditor registry kept by the CNV.
For other companies, auditors must be independent.
There are certain tasks and services that, if performed by the auditor for the relevant company, would result in the auditor failing to comply with mandatory independence requirements. These tasks and services include, without limitation, services that entail:
Authorising or undertaking any operations or acting as the company's representative.
Making management decisions.
Custody over the company's assets.
Drafting supporting documents for any transactions.
Auditors are subject to general provisions according to which they are liable for damages caused as a result of their wilful misconduct or negligence. Auditors are subject to professional qualification, standards and rules for the performance of their duties. Accordingly, the standard for evaluating whether they have acted with wilful misconduct or negligence is high.
Ministry of Economy and Finance
Description. Up-to-date regulation provided by the Ministry of Economy and Finance
Public Registry of Commerce, City of Buenos Aires
Description. Up-to-date regulation in the website of the Public Registry of Commerce within the City of Buenos Aires.
National Securities Commission (Comisión Nacional de Valores) (CNV)
Description. Up-to-date regulations and information regarding securities and stock exchange markets specifically, maintained by the CNV.
Laura Huertas Buraglia
Mitrani Caballero Ojam & Ruiz Moreno
T +54 11 4590 8662
F +54 11 4590 8601
Professional qualifications. Colombia, 1998; Argentina, 2003
Areas of practice. Corporate law; financing transactions.
- Advising Tenaris and Ternium Holdings in connection with general corporate governance matters (2008 to 2014).