Debt capital markets in Argentina: regulatory overview
A Q&A guide to debt capital markets law in Argentina.
The Q&A gives an overview of legislative restrictions on selling debt securities, market activity and deals, structuring a debt securities issue, main debt capital markets/exchanges, listing debt securities, continuing obligations, advisers and documents, debt prospectus/main offering document, timetables, tax, clearing and settlement, and reform.
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This Q&A is part of the global guide to debt capital markets law. For a full list of jurisdictional Q&As visit www.practicallaw.com/debtcapitalmarkets-guide.
Legislative restrictions on selling debt securities
Main restrictions on offering and selling debt securities
Argentinean Law No 26,831 is the main law regulating the activities performed in connection with the marketing and sale of securities through a public offering in Argentina. The regulatory body responsible for regulating these activities is the National Securities Commission (Comisión Nacional de Valores) (CNV), a national entity that is separate from the central government with jurisdiction covering the entire territory of the Republic of Argentina. The CNV supervises:
Companies authorised to issue and offer securities to the public in Argentina.
The trading of securities (whether or not those securities are issued in Argentina) in the Argentinean secondary market.
All individuals and legal entities involved by any means in the public offering of securities (including initial public offerings of securities), and secondary market transactions involving securities.
In its capacity, the CNV issues regulations (CNV Regulations), which together with Law No 26,831, as amended, and other legal sources constitute the regulatory framework for public offerings of securities and the secondary market trading of securities in Argentina.
Section 2 of Law No 26,831 defines a "public offer" of securities as the invitation to the public generally in Argentina, or to specific groups of persons (either individuals or legal entities) in Argentina, to participate in any type of transaction with securities, whether made by the issuer of the securities or by individuals or entities that are dedicated exclusively or non-exclusively to trading in securities, by means of:
Publications in writing (for example, newspapers, magazines, and so on).
Radio or television transmissions.
Posting or signs.
Communications or any other means of diffusion.
The Argentine securities laws do not provide for exemptions or the exclusion of certain types of transactions from the public offering regulation (Law No 26,831). Whenever a transaction is performed within the frame of the public offering definition, that transaction will be subject to the Argentinean securities laws.
The Argentinean securities laws do not include exemptions or safe harbours such as those that are set out, for example, under US securities laws.
Although there is no specific regulation governing the nature and type of communication with the public, in some cases, such as in the case of telephone calls, whether or not the activity constitutes a public offer is subject to evaluation. In most cases, specific calls or one-to-one visits to Argentinean residents does not constitute a violation of the law, while the establishment of automatic call systems to a variety of prospective or existing clients or toll-free lines may constitute restricted activity.
A security transaction will not be deemed a public offer and will not be subject to Argentinean securities laws and regulations if the offer is not made to the public or to specific groups of persons, but to individuals or legal entities on a one-to-one limited basis, regardless of the nature of such persons(that is, a private offer).
In 2013 the CNV modified the legal framework applicable to the placing of securities through public offers (CNV Regulations).
The main changes are the following:
The CNV Regulations also applies to placements of shares, commercial papers (short-term bonds), mutual funds and closed mutual funds (fondos comunes de inversion cerrados). Previously, the CNV Regulations only imposed certain requisites for placement of certain securities, that is, trusts and negotiable obligations.
A bidding or auction is required. Previously, placements could be made through a bookbuilding process or similar.
The placement must be made exclusively through an electronic platform carried out by a market duly authorised by the CNV. Previously, registered agents authorized by the CNV to act as placement agents would use forms and lists to register subscription orders.
Investors must make their offers exclusively through an authorised agent in the country. Previously, investors could make their offers directly to the placement agent.
Discrimination between investors is not allowed. The acceptance of subscription offers must only depend on the price and rate competition between the investors.
The offering must be made exclusively through a bid or auction within an electronic platform that can only be accessed by authorised agents throughout the country. Some examples of this are a Dutch auction, a modified Dutch auction or an English auction. Such a platform must be carried out by a market, and must have the prior approval of the CNV. This new placement system is effective from 1 March 2012.
However, the CNV Regulations provide that the issuer, acting by itself or through its placement agents, must perform marketing efforts, so that the offer effectively reaches the market in general. The marketing efforts may include the following actions:
Informative meetings held with potential investors.
Publications in newspapers and exchanges' or markets' bulletins.
Distribution of a prospectus.
Electronic publications for four days in the electronic platform where the offer is to be made.
Other means of mass media or personal communications to potential investors.
The marketing requirements set out above do not apply in the case of public offerings of securities issued by the federal government, the provinces, the City of Buenos Aires, the municipalities, self-governing entities and governmental corporations (section 83, Law No 26,831).
Therefore, a transaction with securities will not be deemed a public offer subject to Argentinean securities laws when it is not made to the public or to specific groups of persons, but is made to individuals or legal entities on a discrete and one-to-one limited basis.
Discrete means that the offer should not be made through mass media (for example, television, radio, newspaper). The essence of "discrete" is that the offer is targeted to a single, specific person or entity rather than being more generally extended.
The reference to a one-to-one limited basis means an individual, exclusive and confidential offer directed specifically to one person or receiver at a time. There are no regulations applicable to the maximum number of offerees that can receive offers of this kind. The concept of "limited" also does not restrict the number of times that the bank as a whole could deal with Argentinean residents. Therefore, any offer of securities that does not fall under the concept of a "public offer" discussed above will constitute a private offer of securities and will not be subject to registration with the CNV or self-regulated markets or other local securities laws requirements.
The Argentine securities laws do not have extraterritorial effect, and, therefore, registration requirements will only apply to offers addressed to the public or groups of persons located in Argentina. However, there are a few CNV precedents alleging violation of the Argentinean securities laws in connection with a potential offer of securities conducted by a foreign company through the internet, when certain additional activity is conducted directly or through an affiliate in Argentina, regardless of the existence of adequate disclaimers to restrict the offer to those jurisdictions where conducting such an offer would not be prohibited by applicable law, including Argentina. However, based on an adequate construction of the Argentinean securities laws, an offer of securities through the internet where adequate disclaimers are included, and when no additional specific and open marketing activity is carried out in Argentina, should not be deemed a public offering carried out in Argentina.
The CNV Regulation applies to securities transactions and to the agents involved in such transactions.
Each authorised securities market in Argentina, including the Buenos Aires Securities Market (Mercado de Valores de Buenos Aires) (MERVAL) (www.merval.com.ar). through the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires) (BCBA) (www.bolsar.com.ar) and the Electronic Open Market (Mercado Abierto Electrónico) (MAE) (www.mae.com.ar), has its own regulations and requirements (the regulation of each which is consistent with the CNV Regulations), including, among other things:
Registry and customer information.
The nature of the assets allowed to be traded.
The scope of the operations.
The requirements to be fulfilled by each of the agents involved in transactions conducted on such a market.
Restrictions for offers to the public or professional investors
Under the CNV Regulations, no person or legal entity is allowed to carry on transactions on an authorised securities market, or to use the denomination of or to act as a securities broker in Argentina on an authorised securities market, without its prior registration with both the relevant authorised securities market and with the CNV. Over-the-counter agents are also required to register with the CNV. Over-the-counter agents are those agents conducting transactions with securities on an over-the-counter market. Agents conducting transactions on an authorised securities market must be authorised and registered with both that market and with the CNV. The most significant authorised securities markets in Argentina are the MERVAL and MAE. The MAE is an electronic trading facility organised and sponsored by its participants and subject to control and supervision by the CNV. The MERVALis the most significant Argentinean market where debt or equity securities issued by corporations are traded, while the MAE is commonly known for the listing and trading of sovereign and corporate debt securities. Debt securities issued by non-governmental entities can be traded on either the MERVAL or the MAE.
As a general principle, an agent can act and operate within different authorised securities markets in Argentina, provided that agent is duly registered and authorised with each such authorised securities market. The broker must also be registered with and authorised by the CNV.
Authorised and registered agent are generally entitled to:
Deal in any kind of securities and other financial products in Argentina, provided the relevant financial product is considered a security under Argentinean law (including futures contracts, forwards, options related to any kind of goods (assets), services, indexes, currencies, live stock, crops (or any other commodity)).
Act as arrangers, underwriters, trustees, agents, and so on, in relation to any kind of securities transactions (either in the primary or secondary markets).
Authorised and registered brokers can generally engage in any activity purporting, directly or indirectly, to involve the intermediation of securities in Argentina.
However, such brokers are generally not allowed to perform lending or deposit-taking transactions in Argentina. These activities, which involve the intermediation between the offer of, and demand for, financial resources, are strictly limited to the financial entities admitted by and authorised by the Argentine Central Bank.
Market activity and deals
Structuring a debt securities issue
As a general principle, all securities' issuances can be purchased by any kind of investor. In primary placements up to 50% of the issuance can be granted with priority to investors that have submitted subscription offers up to a certain low amount, for example ARS100,000 (non-competitive tranche) (CNV). Generally, the CNV promotes participation and access by retail investors to capital markets.
However, there are certain debt securities issuances that can only be purchased in a public offer by qualified investors (inversores calificados). This is the case for:
Negotiable obligations or shares issued under special small or medium companies' regimes.
Securities' certificates (certificados de valores) (CEVA), which are depositary certificates of a variety of securities, including bonds and shares.
Debt securities issued by trusts under special regimes for the financing of small companies (mipymes).
The term "qualified investors" includes, among others (CNV Regulations):
The Argentinean government, municipalities, provinces, governmental entities, public corporations, public companies, public law corporations, self-sufficient entities, official financial entities and banks.
Corporations (sociedades anónimas) and limited liability companies (sociedades de responsabilidad limitada).
Individuals (that is, with a net worth of at least ARS700,000) and partnerships (that is, with a net worth of at least ARS1,500,000).
The national pension fund (Administración Nacional de Seguridad Social (Anses)).
The issuing of debt securities is permitted against certain assets held in trust by a financial trustee under Trust Law No 24,441. A settlor can transfer an asset to a financial trustee, in which case the financial trustee will issue debt securities and place them on the market (Trust Law No 24,441). The funds raised with the subscription price of the debt securities will be used by the financial trustee to pay the settlor the transfer price of the assets held in trust. The cash flow originated by the assets (arising from its sale or collection) will be used by the financial trustee to cancel principal and interest owed under the debt securities.
Main debt capital markets/exchanges
Main debt markets/exchanges
The main debt exchange in Argentina is the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires) (BCBA) (www.bcba.sba.com.ar, which works with an associated market, the Buenos Aires Securities Market (Mercado de Valores de Buenos Aires) (MERVAL) (www.merval.com.ar)). Law No 26,831 (Capital Market Law) established the creation of a new market (the Argentinean Exchange Market (Bolsa y Mercado Argentino) (B&MA)). No legal term has been set out for its creation, though on 5 June 2014 the extraordinary shareholders' meeting of MERVAL approved the constitution of the B&MA. This new market, still subject to the authorisation of the CNV, will be controlled by an 80% stake by MERVAL and the remaining 20% by other Argentinean exchanges, including the BCBA.
Another relevant debt market is the Electronic Open Market (Mercado Abierto Electrónico) (MAE) (www.mae.com.ar), an electronic trading facility organised and sponsored by its participants and subject to control and supervision by the National Securities Commission (Comisión Nacional de Valores) (CNV) (www.cnv.gob.ar) (see Equity capital markets in Argentina: regulatory overview, Question 1). The MERVAL is the most significant Argentinean market where debt and equity securities issued by corporations are traded. The MAE is commonly known for the listing and trading of sovereign and corporate debt securities, and primary placements. Debt securities issued by non-governmental entities can be traded on either the MERVAL, through the BCBA, or the MAE.
Approximate total issuance on each market
This data is not currently available.
The regulatory body responsible for regulating the debt securities markets/exchanges is the CNV (see Equity capital markets in Argentina: regulatory overview, Question 1).
The legislative framework that applies to the debt securities markets/exchanges is the same as for equity markets/exchanges (Law No 26,831 is the main law regulating the activities performed in connection with the marketing and sale of securities through a public offering in Argentina) (see Equity capital markets in Argentina: regulatory overview, Question 1). The other relevant legislation includes:
Trust Law No 24,441, which contains provisions about debt securities and certificates issued by financial trusts.
Negotiable Obligations Law No 23,576, as amended.
Listing debt securities
The main requirements to list debt securities are substantially the same as for equity markets/exchanges (see Equity capital markets in Argentina: regulatory overview, Question 3).
Legislation provides for different kinds of debt securities that can be issued and listed in the local exchanges, the most relevant of which are negotiable obligations under the Negotiable Obligations Law No 23,576, which have preferential tax treatment when they are, among other things, placed through a public offer. The main requirements to list negotiable obligations are the following:
If issued in a series under a programme, a programme prospectus and pricing supplements for each series or tranche are required.
Documents detailing guaranties or sureties to be granted in connection with the notes.
A plan for allocation of funds resulting from the placement of the notes. There are certain tax exemptions that will only apply if the issuer uses the proceeds of the notes to make specific investments and payments (see Question 18).
The agreement with the trustee or representative of the noteholders.
An independent accountant's reports and legal opinions.
Minimum size requirements
There are no minimum size requirements to issue debt securities. However, the CNV Regulations set out a special regime that facilitates the issuing of debt securities in the local markets to small to medium companies. Whether a company is small or medium is determined by their annual sales, depending on their specific activities (such as agriculture, industry, sales, services, and so on).
Trading record and accounts
There are no minimum trading record or working capital requirements. Financial statements for listed companies must be prepared according to the requirements of the CNV Regulations, including that (except for in certain limited cases) listed companies must follow the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) for fiscal years starting 1 January 2012.
The minimum subscription amount is ARS10,000 (CNV Regulations), or the equivalent in other currencies, except for the regime established by the Argentine Central Bank, which states that the minimum subscription amount is ARS400,000 for debt securities issued by Argentine financial entities.
Continuing obligations: debt securities
There are continuing obligations applicable to companies with listed debt securities, which are substantially the same as those which exist in relation to an issuance of shares (see Equity capital markets in Argentina: regulatory overview, Question 21).
Continuing obligations also apply to foreign companies with listed debt securities, in the same way as for issuers of depositary receipts (see Equity capital markets in Argentina: regulatory overview, Question 22).
The penalties for breaching the continuing obligations are the same as for breaches in relation to equity securities (see Equity capital markets in Argentina: regulatory overview, Question 23).
Advisers and documents: debt securities issue
The advisers and agents in a debt securities offering can vary, depending on the needs of the transaction. During the issuing and listing of debt securities the following advisers are required in addition to the advisers in an equity offering (see Equity capital markets in Argentina: regulatory overview, Question 9):
Trustee. For negotiable obligations' issuance, the trustee is hired by the issuer to represent the noteholders before the issuer. In a transaction involving trust securities, the trustee receives the assets as collateral of the issuance of the debt securities. Currently, the CNV carries a registry of the entities authorised to act as trustees under a negotiable obligations or trust issuance. For negotiable obligations, a trustee can only be a financial institution or a broker authorised by the CNV to deal with securities. For financial trusts, a trustee can only be a financial entity or an entity registered with the CNV to act in such a capacity.
Paying agent/registrar/fiscal agent. These are the entities hired by the issuer for:
making payments to the noteholders;
keeping the securities' registry; and
taking notice and registering any transfer or pledge of notes.
Usually, the local clearing house (Caja de Valores for local placements), or foreign banks or specialised entities with a representative office in Argentina or with an agreement with a local financial institution (for international placements), act in such roles.
The main document produced in a debt securities' offering is the prospectus. However, there are other ancillary documents (such as shareholders' minutes and notices to be published) that are generally also required for the transaction (see Question 7).
Debt prospectus/main offering document
A prospectus is always required for a public offer of debt securities. For programmes, in addition to a prospectus, the issuer must deliver a pricing supplement and publish an issuance notice for each series of notes issued (see Question 7). In those cases, the CNV Regulations also require the annual updating of the prospectus describing the programme and the issuer's business and financial information. The main publication/delivery requirements are the same as those for an issuing of shares (see Equity capital markets in Argentina: regulatory overview, Question 10).
There are certain restrictions related to the publication/delivery of a prospectus that apply to an issuance of debt securities, which are the same as for an issuance of shares (see Equity capital markets in Argentina: regulatory overview, Question 11).
The main content/disclosure requirements for a prospectus, and categories of information that have to be included, are the same as for an issuance of shares (see Equity capital markets in Argentina: regulatory overview, Question 12). There are also other specific requirements that apply to debt securities (see Question 7).
The prospectus for debt securities must be prepared in a similar manner as when issuing equity (see Equity capital markets in Argentina: regulatory overview, Questions 10 to 12). The persons responsible for its contents are similar to those responsible for equity offerings (see Equity capital markets in Argentina: regulatory overview, Question 13).
Timetable: debt securities issue
The time required to prepare and perform the offering of debt securities is four to five months, from the beginning of the works until the issuance, depending on the transaction. If the debt securities belong to a tranche issued under an existing programme, the time demanded will be shorter as:
The documentation required is less extensive (that is, a full prospectus is not required).
No new shareholders' approval is in principle required.
The regulatory approvals will not require a decision at the highest levels.
The mains steps for a company applying for a primary listing of debt securities on MERVAL through the BCBA, and main related documents, include pre-filing and filing.
The main steps and related documents in pre-filing include the following:
Preparation of documentation, including a prospectus and special financial statements, if necessary. Due diligence takes place.
A shareholders' meeting approving the request to enter the public offer regime, the modification of its bye-laws, to the extent required, and the appointment of the person responsible for dealing with the market (Responsable de las Relaciones con el Mercado).
The registration of bye-laws' amendments before the Superintendency of Corporations.
A preliminary risk rating report. The CNV Regulations allow the issuer not to have its debt securities evaluated by a risk rating company, in which case a certain warning must be included in the prospectus. However, financial entities are required by the Argentinean Central Bank to have their debt securities rated by two risk rating companies. In addition, a risk rating evaluation is necessary if the debt securities are to be distributed among certain institutional investors, such as insurance companies.
A board of directors' meeting deciding, upon delegation of the shareholders' meeting, about the request to submit to the public offer regime, the issuing, placing by public offer and listing of the debt securities of the company.
The main steps and related documents in filing include the following:
Filing before the CNV of a request to:
enter the public offer regime;
place debt securities by public offer means; and
list the securities on the exchanges, together with a preliminary prospectus and other information.
Filing of documentation with the market carrying the electronic platform where the primary placement will take place.
Pre-marketing of the placement.
Amendments to the preliminary prospectus, clarifications to the authorities, and so on.
Publication of notices in the Official Bulletin (applicable to negotiable obligations).
Authorisation to enter the public offer regime and place the securities through public offer by the CNV.
Execution of contracts related to the transaction.
Publication of the prospectus in the Stock Exchange Bulletin.
Authorisation to list the debt securities on the BCBA.
Placement period and receipt of subscription offers.
Price determination and confirmation of subscription offers.
Publication of placement result.
Proof of compliance with the plan of allocation of funds resulting from the placement (applicable to negotiable obligations), before the CNV.
For public offerings of securities issued by the federal government, the provinces, the municipalities, self-governing and governmental corporations, the issuer is exempt from the obligation to obtain the CNV's prior approval (section 83, Law No 26,831).
Tax: debt securities issue
The main tax point related to debt securities issued in the form of negotiable obligations concerns the preferred tax treatment granted when the notes are issued following certain conditions.
The payment of interest on listed negotiable obligations (including original issue discount, if any) is exempt from income tax if they are issued in accordance with the Negotiable Obligations Law No 23,576 and meet the tax exemption requirements prescribed by section 36 of the Negotiable Obligations Law No 23,576. The interest accrued on such debt securities is tax exempt if the following conditions are fulfilled (section 36, Negotiable Obligations Law No 23,576):
For placement, the notes must be admitted to public offering by the CNV and conform with the applicable regulation.
The proceeds of the notes must be used, under the resolutions authorising the offering, in:
investments in physical assets located in Argentina;
working capital in Argentina;
refinancing of liabilities;
payment of capital contributions into companies controlled by or related to the issuer of the notes, the proceeds of which must be solely applied to the uses specified above; and
the grant of loans for any of the purposes described above if the issuer is a financial institution governed by the Financial Institutions Law.
The CNV is to be duly and timely provided with evidence of the fact that the funds obtained were used for the purposes mentioned above.
Decree No 1076/92 and Decree No 1157/92, both ratified by Law No 24,307, exclude Argentinean companies, permanent establishment of foreign entities, and personal enterprises from this exemption.
If all the conditions under section 36 of the Negotiable Obligations Law No 23,576 are met, the income derived from the sale or other type of disposition of the debt securities by resident individuals, undivided estates located in Argentina and foreign beneficiaries without a permanent establishment in Argentina, is exempt from income tax.
The exemption granted by section 36 of the Negotiable Obligations Law No 23,576 applies irrespective of whether this benefit increases the taxable amount in another country.
Even if the conditions under section 36 are not met, Decree No 2284/91, ratified by Law No 24,307, provides that foreign individuals and legal entities will not pay income tax on the income derived from the sale or another type of disposition of securities, such as debt securities.
Debt securities issued by trustees have the following tax benefits if the securities are placed by public offer:
Financial transactions and services related to the issue, subscription, placement, transference, amortisation, interest and cancellation, and their guarantees, are exempt from value added tax.
Results derived from the purchase and sale, exchange, conversion and disposal, as well as interest and adjustments, is exempt from Argentinean income tax (this excludes Argentinean companies, permanent establishments of foreign entities, and personal enterprises).
Clearing and settlement of debt securities
Debt securities are usually cleared and settled two to three days after the closing of the placement period. Settlement is monitored by the relevant market (for example, MERVAL), by the relevant exchange, and by the CNV. Generally, on the same day, investors disburse the subscription price, which is paid to the issuer, and the issuer either issues a global note, or orders the central depositary (Caja de Valores SA) to credit the respective participations in the issue, in the accounts of the noteholders. Debt securities denominated in foreign currencies can be settled in the foreign currency or in pesos. Debt securities placed outside Argentina must comply with the applicable foreign exchange regulation (which currently imposes some limitations to the transfer of funds going out of or coming into Argentina).
Law No 26,831 established that the existing markets must ensure that their structure is in line with the CNV Regulations and obtain a new authorisation to operate, on or before 31 December 2014. As a consequence, several reforms and amendments will be introduced in the future.
For example, the amendment of the bye-laws of the MERVAL and the listing and corporate governance regulation are currently being analysed by the CNV and will likely be introduced in the next few months.
National Securities Commission (Comisión Nacional de Valores) (CNV)
Description. The official website of the National Securities Commission.
Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires) (BCBA)
Description. The official website of the Buenos Aires Stock Exchange.
Legislative Information & Documentation Centre, Ministry of Economy of Argentina (Información Legislativa y Documental) (InfoLEG)
Description. The official website of the Legislative Information & Documentation Centre, Ministry of Economy of Argentina.
Electronic Open Market (Mercado Abierto Electrónico) (MAE)
Description. The official website of the Electronic Open Market of Argentina.
Sebastian Luegmayer, Partner
Professional qualifications. Universidad de Belgrano, 2001; Masters in Finance, Universidad del CEMA, 2003
Areas of practice. Capital markets; finance.
Several capital markets transactions since 2002.
Financing transactions advising local and international clients.
Expertise on financial derivatives.
Publications. Mr Luegmayer has written several articles in Argentine law magazines relating to legal aspects of derivatives.
Catalina M Beccar Varela, Associate
Professional qualifications. Pontificia Universidad Católica, Argentina, 2013
Areas of practice. Capital markets; corporate.
Structuring, negotiation and documentation of derivatives as well as advising clients on various corporate matters.