Argentina: The Restructuring Review - Argentina

Last Updated: 5 October 2012
Article by Ricardo W. Beller and Martin Campbell

I. OVERVIEW OF RECENT RESTRUCTURING AND INSOLVENCY ACTIVITY

i. Liquidity and state of the financial markets

The international financial markets have not been accessible to either the private or public sector of Argentina since the second half of 2007. During this period Argentina faced its own financial restrictions, to which it later added the international financial turmoil that resulted from the subprime crisis and the fall of leading financial institutions such as Bear Stearns and Lehman Brothers, among others, and more recently the European crisis.

Despite the difficulty of accessing the international financial markets, Argentina has almost completely restructured its defaulted sovereign debt. In June 2010 the Argentine government closed a successful second debt restructuring exchange of its bonds in default. The first exchange offer had been made in 2005, and had been accepted by approximately 76 per cent of the holders of the bonds in default at that time. The aggregate amount of debt restructured in this second exchange was US$18.3 billion. The second exchange was accepted by approximately 70 per cent of the remaining holdouts. Adding the results of the first and second exchange, approximately 92 per cent of the sovereign debt in default has been restructured. The bonds that were not exchanged represent approximately US$5.5 billion, and are held mostly by distress funds, most of which have filed judicial claims against Argentina.

ii. Inflation, slowing down of the economy and exchange control restrictions1

2011 ended on a high note for the Argentine government. GDP grew by 8.9 per cent and Cristina Fernandez de Kirchner was re-elected president by an overwhelming majority of 54 per cent with no significant political opposition; in 2012, however, the situation is not so favourable. Argentina is facing a significant increase in inflation, combined with a slowing down of economic activity: economists refer to this phenomenon as 'stagflation'.

Annual inflation sat at 10.9 per cent in 2006, 8.8 per cent in 2007, 8.6 per cent in 2008, 6.3 per cent in 2009 and 10.8 per cent in 2010.2 In 2011 it increased significantly to 22 per cent per annum, and is projected to reach 25 per cent per annum in 2012.3 GDP, on the other hand, is estimated to grow by 2.2 per cent per annum in 2012,4 which is a significant decrease compared with the growth of previous years: 8.5 per cent in 2006, 8.7 per cent in 2007, 6.8 per cent in 2008, 0.9 per cent in 2009 (a low year due to the 2008 financial crisis in the United States and Europe), 9.2 per cent in 2010 and 8.9 per cent in 2011.5

The inflation has not been accompanied by a proportional devaluation of the Argentine peso, which is relatively overvalued with respect to other currencies. As a result, Argentina is losing competitiveness in its exports, which are relatively more expensive, and is seeing higher demand of imported products and foreign currencies, which are cheaper.

To deter capital flight during 2012 the Argentine government has significantly increased foreign exchange controls. Transfers of funds from Argentina to foreign countries has been increasingly restricted, as has access to exchange pesos for foreign currencies in the official market. This has led to a significant volume of foreign exchange transactions being carried out in the informal market, with a higher difference between the official and the informal exchange rates. As of 30 June 2012 the exchange rate of the informal dollar, locally known as the 'blue' dollar, was approximately US$1 to six pesos, while the official exchange rate was of US$1 to 4.5 pesos.

iii. Greater intervention of the Argentine government in the economy

Increasing intervention of the Argentine government in the economy is decreasing the level of investments being made in the country and increasing capital flight.

Most notably, in May 2012 the government expropriated 51 per cent of the shares of YPF Sociedad Anónima and 51 per cent of the shares of YPF GAS SA. The expropriation process of the controlling stake of these companies owned by Repsol, a Spanish oil and gas company, was initiated in April 2012 by a presidential decree by which the boards of directors of these companies were removed and replaced by two government interveners. The grounds for expropriation alleged by the government were the low level of investments of the company and the resulting decrease of oil and gas reserves. Several claims have been filed by Repsol against the Argentine Republic, which are currently pending resolution.

A prior event that had a negative impact on investments was the expropriation of Argentine pension funds ('the AFJPs'). In November 2008 the Argentine government took over the securities held by these, most of which consisted of equity and debt instruments of Argentine private companies, as well as government bonds. The AFJPs were key players in the Argentine capital markets until then. Their disappearance had a severe negative impact on the local markets, which currently do not offer a relevant source of financing to Argentine companies.

iv. Impact of specific regional and global events

Argentina's access to international financial markets has been restricted since the crisis of 2001, in which Argentina declared the default of its sovereign debt. Argentina has relied on significant trade surpluses, taxes on exports and accumulation of international reserves to overcome these restrictions.

The subprime market crisis in the US and the recent European crisis have not significantly affected some of Argentina's main trading partners, such as Brazil and China, whose economies continue to grow and have a demand for Argentinian products. These crises have therefore not had a significant effect on the Argentinian economy.

Argentinian private-sector companies have also had limited access to financing in recent years. However, significant consumer demand in the local market plus exports to other countries that demand their products have allowed most of them to finance their activities.

v. Market trends in restructuring procedures and techniques employed during this period

There have been two trends in recent years that may be mentioned: there has been a greater involvement and intervention of the Argentinian government in the event of insolvency of a company that provides public services; and several bankrupt companies were taken over by workers, who continued to operate them after bankruptcy.

Greater government intervention

In December 2008 Transportadora de Gas del Norte SA ('TGN'), one of the two companies that provide gas transportation services in Argentina, announced the deferral of the payment of principal and interest of its debt represented by certain type of bonds denominated 'negotiable obligations'. TGN also announced that it would prepare a plan to be proposed to its creditors for restructuring its financial debts. As a consequence, on 29 December 2008, the Argentinian Regulatory Agency for the Regulation of Gas ('ENARGAS') appointed an officer to act as an auditor and perform the 'co-administration' of the company for 120 days, alleging that the provision of the public service of gas transportation was being put at risk as TGN was in default. The governmental intervention in TGN was further extended through different resolutions of ENARGAS and the government was still intervening in TGN in 2011. After the default, TGN did make an offer to its creditors holding bonds that had an important consent from the holders. However, since TGN's cash flow has not improved due to the decision of the government to avoid increasing the tariffs for transportation of gas, TGN decided to withdraw its offer and filed for a judicial restructuring proceeding (concurso preventivo). Due to procedural reasons, the judge hearing this petition decided not to open the process, and as a consequence TGN appealed such order. The Court of Appeals resolved that TGN is precluded from restructuring its debt by means of this concurso preventivo proceeding. To overcome this situation, on 12 July 2012 TGN launched a debt exchange offer that is due to be finalised in August 2012.

The case of Metrogas SA ('Metrogas') is very similar. Metrogas is a public company that provides gas distribution as a public service. On 17 June 2010 Metrogas announced its decision to file for a reorganisation procedure, considering that the company would not be able to pay the upcoming maturities of financial debt and other commercial and tax debts, among other things. As a consequence of this decision, on the same date, ENARGAS resolved to appoint an officer as auditor to control all acts of habitual management of the company that might affect the provision of the public service. ENARGAS intervened in the company for 120 days, on very similar terms to the intervention provided for TGN. Metrogas is currently restructuring its debt by means of a concurso preventivo. Gas Argentino SA, its controlling shareholder, is also conducting a concurso preventivo proceeding, but its proposal has not still been approved by the creditors.

The Argentinian government also appointed an auditor to supervise Autopistas del Sol SA ('AUSOL'), in a manner very similar to the TGN and Metrogas involvement. AUSOL is a public company that holds the concession to exploit certain highways and provides a public service for traffic purposes. On 16 November 2009 AUSOL announced that it would not pay the interest maturing on the following days in a timely manner, and such interest would be part of a restructuring proposal to be made to the financial creditors of the company. As a result, the government appointed an auditor to supervise AUSOL, which continues to be supervised. AUSOL is discussing a negotiated plan with its creditors to restructure its debt.

Therefore, in the event a company that is facing financial difficulties provides a public service, special consideration should be given to the fact that the Argentinian government shall probably appoint an auditor to supervise the debt restructuring process.

vi. Number of formal procedures entered into or exited during this period

We do not have a precise number of proceedings filed during this period, but we ascertain from publicly available information that the quantity of reorganisation procedures entered into during 2011 was relatively stable compared with previous periods (slightly increasing), whereas the number of bankruptcy procedures slightly increased.

II. GENERAL INTRODUCTION TO THE RESTRUCTURING AND INSOLVENCY LEGAL FRAMEWORK

i. Formal and informal insolvency and restructuring procedures

There are various alternatives available to companies that are facing financial difficulties. The alternative that may be implemented in each case will depend on the degree of insolvency of the company, the likelihood that it will be able to formulate a restructuring plan in terms that are acceptable to a sufficient majority of creditors, the activities carried out by the company and the willingness of the debtor to continue its business activities.

The alternatives that are most commonly used are:

  1. out-of-court restructuring agreements and exchange offers;
  2. pre-pack agreements under an acuerdo preventivo extrajudicial procedure;
  3. concurso preventivo (similar to Chapter 11 of the US Bankruptcy Law);
  4. bankruptcy;
  5. special insolvency proceedings; and
  6. voluntary dissolution and winding up.

The first option consists of a private agreement between the debtor and its creditors without judicial intervention. The second, third and fourth alternatives are the main insolvency proceedings provided under the Argentine Bankruptcy Law 24,522, as amended by Laws 25,563, 25,589 and 26,684 ('the Bankruptcy Law'), and require judicial intervention as described below. The fifth alternative refers to companies that are required to restructure their debts under special insolvency proceedings regulations (e.g., financial institutions and insurance companies). Finally, the voluntary dissolution and winding up is a liquidation procedure carried out voluntarily by the debtor.

Out-of-court restructuring agreements and exchange offers

The debtor may enter into a restructuring agreement with all or a portion of its creditors applying exclusively the contractual terms of its debt obligations, without undergoing any of the procedures provided under the Bankruptcy Law.

If the restructured debt includes publicly offered notes or other securities, the debtor would generally conduct an exchange of its outstanding notes for new notes that would reflect the terms of the restructuring.

Direct exchange offers of publicly offered notes raise, among others, the following issues:

  1. The exchange is a voluntary process. Bondholders are not forced to accept the exchange offer, nor are the terms of the new notes enforceable against them. Therefore, the 'holdouts' who do not tender their notes will preserve their rights to bring legal actions against the company under the old notes, including the right to petition for involuntary bankruptcy.
  2. The exchange process is governed by applicable securities laws, including the regulations of the Argentinian National Securities Commission, the Buenos Aires Stock Exchange or other applicable stock exchange or over-the-counter market in which the securities may be listed, and the regulations of the US Securities and Exchange Commission if the securities are registered in the United States.
  3. The exchange process requires the preparation of disclosure documents describing the terms of the exchange offer, including an information memorandum and other documents required by securities regulations.
  4. In the event the restructured notes are negotiable obligations issued under Law 23,576, as amended, or certificates issued under an Argentinian trust created under Law 24,441, careful attention must be paid to the structuring of the exchange to preserve applicable tax exemptions. The same applies in the event the restructuring is implemented under an APE procedure (as described below).

Pre-pack agreement under an acuerdo preventivo extrajudicial procedure

The acuerdo preventivo extrajudicial ('APE') is a procedure provided under the Bankruptcy Law by which a debt restructuring agreement that is entered into by a debtor with a certain majority of its unsecured creditors becomes enforceable against all the unsecured creditors, including those that did not consent or voted against it.

The enforceability of the APE against all unsecured creditors is the key feature that makes the APE an extremely useful tool to achieve a successful debt restructuring.

To become enforceable against all unsecured creditors, two basic requirements need to be complied with: the APE debt restructuring agreement must be consented to by the majority of creditors provided by the Bankruptcy Law; and the court must endorse or validate the agreement (this court ruling is designated a homologación, which basically consists of a judicial confirmation that the Bankruptcy Law requirements have been complied with).

Any company or individual can enter into an APE, with a few exceptions related to certain activities that are regulated by special insolvency rules (e.g., banks and insurance companies).

The restructuring proposal generally comprises all unsecured debt obligations. Once the restructuring agreement is executed by an amount equal to or greater than the required majorities (as defined below), the debtor files the executed restructuring agreement with the court and initiates the APE. The petitioner must show the company is suffering general economic or financial difficulties, or is insolvent. Such difficulties are not required necessarily to represent insolvency or a 'suspension of payments' status. The documentation to be filed shall include documentation describing the financial situation of the debtor, including, inter alia, a statement of assets and liabilities, a list of creditors and the amount of capital and percentage of debt represented by the creditors who have signed the APE.

The majorities of unsecured creditors that must consent to the restructuring agreement for the APE to proceed are as follows: the absolute majority (more than 50 per cent) of all unsecured creditors, determined on a headcount basis; and at least two-thirds of the aggregate principal amount of such unsecured debts ('the required majorities'). Unsecured creditors that are also controlling shareholders of the company are not taken into account when determining the number of creditors required to consent to the APE or the amount of outstanding unsecured debts of the company.

Under the Bankruptcy Law, the court should not conduct a substantive review of the APE proposal (although in certain APE proceedings abusive practices have resulted in stricter scrutiny by the courts). The non-consenting creditors may oppose the court endorsement based only on grounds of omissions or exaggerations of the assets or liabilities, or the absence of the consent of the required majorities. Abuse of rights by the debtor has also been an argument accepted by the courts to reject the endorsement of APE agreements. If the oppositions, if any, are rejected and the required majorities and legal requirements have been complied with, the court should endorse the APE.

The effects of the restructuring agreement that undergoes an APE procedure can be divided into three different stages: effects as of execution of the agreement; effects as of filing the APE before the relevant court; and effects as of court approval.

The restructuring agreement becomes binding on the signatory parties as of the execution date, and shall be effective among them in accordance with its terms.

In practice, restructuring agreements generally provide a series of conditions precedent that must be complied with prior to effectiveness, including a minimum threshold of consenting creditors that must consent to the agreement.

Filing of the APE before the relevant court, provided the required majorities have been met and other requirements of the Bankruptcy Law have been complied with, shall have the following effects, inter alia: all actions to enforce claims against the debtor that are not secured by a pledge or mortgage, or have a preferred payment right created by the Bankruptcy Law, are stayed; the commencement of similar actions against the debtor are prohibited; and interest on outstanding debt continues to accrue.

Upon court approval, the restructuring agreement terms become effective against all unsecured creditors, including those that did not consent or expressly objected to it.

The procedure on average takes between six and 18 months depending on the volume and nature of debts being renegotiated, the size of the debtor and the objections filed by creditors (if any). It should be noted that if part of the debt is represented by securities that have been publicly offered, noteholders' meetings could be required to be called to consent to the APE, which could make the process longer.

Concurso preventivo

The concurso preventivo is a judicial insolvency proceeding initiated by a debtor to restructure its outstanding debts. The concurso is similar to the Chapter 11 proceedings under the US Bankruptcy Code.

Only the debtor can commence a concurso proceeding, either by initiating the concurso directly or by converting an involuntary bankruptcy petition filed by a creditor against it into a concurso.

To initiate the concurso the petitioner must show the company is insolvent or has entered into a 'suspension of payments' status. The petitioner is required to file with the court, among others:

  1. corporate by-laws and records;
  2. an explanation of the express causes of the debtor's financial condition, specifying the date it became unable to pay its debts;
  3. a detailed and valued statement of assets and liabilities with an opinion of a certified public accountant;
  4. financial statements;
  5. a list of creditors, including a dossier for each creditor containing a copy of the documents evidencing the reported debt; and
  6. a report describing the legal and economic situation of the debtor's employees.

Upon the commencement of the concurso, the court will appoint a receiver, who is an individual randomly selected from a list maintained by the court, generally composed of local accountants. The receiver is responsible for reviewing and advising the court regarding the debtor's proposed plan, disputed claims and all other matters relating to the creditors' rights. In addition, the receiver supervises the administration by the board members and management of the company business and advises the court regarding certain specific acts the debtor may wish to perform.

After the proof of claims is filed and decided by the court, the court shall also appoint a provisional committee among the three creditors with the largest approved claims, and a representative of the employees if the debtor is a corporate entity. The purpose of this body is to act as information agent and provide advice. The final creditors' committee (with the same composition as the provisional committee) is the overseer required at the stage of performance of the plan approved, and in the liquidation in the case of bankruptcy.

After commencement of the concurso proceeding, the court will prescribe a period during which creditors must file evidence of their claims to the receiver for verification. All creditors, including secured creditors, are required by the Bankruptcy Law to have their claims against the debtor verified and accepted by the court. The debtor and any creditor may challenge the requests filed with the receiver. At the end of such verification period, the receiver is required to prepare and present a report with its recommendation as to each claim submitted for verification. The court will decide on the recognition or dismissal of each credit. The recognition or dismissal of credits may subsequently be reviewed before the court by the debtor and the creditors.

The debtor must then present a payment plan covering all the unsecured debts and, at the debtor's option, may also include privileged debts ('the plan'). The debtor may also propose to divide the creditors into different categories, based on reasonable grounds of classification.

An 'exclusivity period' follows during which the debtor is the only person with the ability to propose the plan to its creditors. The exclusivity period is 90 days, but the court may grant an extension of an additional 30 days based on the number of creditors. In some cases, judges have also authorised longer extensions taking into account the complexity of the proceeding.

During the exclusivity period, the debtor must obtain the approval of the same required majorities as provided for the APE, with the following clarifications that are specific to the concurso: the only creditors who can vote are those whose claims against the debtor are verified and accepted by the court; and each category of creditors must approve the plan by the required majorities, on the basis of the creditors verified in each category.

Once the plan has been approved by the required majorities, the judge must conduct a substantive review of the terms of the plan prior to approving it. The judge may, if he or she considers that the plan does not comply with the rules of the Bankruptcy Law or is abusive, elect not to approve a plan accepted by the required majorities, or on the other hand approve a plan that was not accepted by the required majorities, upon compliance with certain requirements.

If for any reason the debtor fails to propose a plan, or the proposed plan is not approved by the required majorities, the special bidding process explained below begins.

Upon failure to agree to a plan during the 'exclusivity period', the court will initiate a special bidding process (sometimes also referred to as a cramdown procedure), which is a process pursuant to which the debtor, the creditors, the employees under a labour cooperative entity or third parties may propose plans for the restructuring of the debts of the company and may acquire the company's stock. To be authorised to participate in this proceeding the interested parties must be registered before the court. The special bidding process is available only if the debtor is a company with equity that may be acquired by the creditors, such as a limited liability corporation, a sociedad de responsabilidad limitada or a cooperativa.

Upon failing to obtain the required majorities to approve the plan of the concurso, the court will open a registry during a term of five days where any creditor, the debtor's employees through a cooperativa de trabajo (workers' cooperative) or interested party may register to offer a restructuring plan to the company's creditors, and to purchase the stock of the company. The law does not restrict the shareholders, the debtor or other persons from registering.

If there are registered persons, the bidding process is initiated. The court will determine the value of the company's stock based on an appraisal of an evaluator appointed by the court. A 20-day period then commences during which registered persons, including the debtor if the debtor is registered, will present restructuring plans to the creditors and pursue the approval of the same required majorities as those required for the concurso. The creditors' consent is not exclusive, as creditors may consent to more than one plan.

The first registered person to file evidence with the court showing that it has obtained the required majorities is awarded the right to purchase the company stock and enter into the approved plan it proposes with the creditors.

If the first person to obtain the required majorities is the debtor, the proposed plan is approved following the same procedure as in the concurso. If the required majorities are obtained by another person, the valuation of the stock of the company determined by the judge will be considered. If the stock has negative value, the stock will be transferred to the registered person simultaneously with the court endorsement of the plan. If the stock has positive value, the judge will issue a new valuation taking into consideration the terms of the approved plan. The registered person then has the option to pay the stockholders the stock value determined by the court, or pay a lower value if it obtains the consent of stockholders who own at least two-thirds of the stock of the company.

Once the required majorities are obtained and all requirements are complied with as specified above, the court will endorse the approved agreement. If no person registers within the specified term, or if none of the plans are approved by the required majorities, or the court does not endorse the approved plan, the court will declare the bankruptcy of the company.

Even though the special bidding process is provided under the Bankruptcy Law, there have been few significant cases in which it has been implemented.

The commencement of a concurso has, inter alia, the following effects:

  1. the accrual of interest on unsecured claims is suspended; interest on secured debts will continue to accrue, but may only be claimed to the extent of amounts realised from the assets or property subject to such security interests;
  2. all actions to enforce claims against the debtor that are not secured by a pledge or mortgage are stayed, and the commencement of similar actions against the debtor is prohibited;
  3. all claims against the debtor may be filed before the judge presiding over the concurso, at the creditor's request or, in the case of actions already initiated, continued in the original court; secured creditors with mortgages or pledges can continue enforcement actions, but in the event of 'need and urgency' the court may suspend such proceedings for a period of not more than 90 days;
  4. all future obligations of the debtor are accelerated, so that all such obligations are treated as due as of the filing of the petition;
  5. the existing board and management of the debtor retain authority to operate the debtor's business; transactions outside of the ordinary course of business, including the granting of liens, transactions involving 'registrable assets' (such as real estate, vehicles, planes, ships or securities) and similar significant matters require court approval;
  6. to approve transactions involving 'registrable assets' and similar significant matters, the court will request the opinion of the receiver and of the creditors' committee (if it has been nominated) before ruling, but is authorised to approve such transactions solely in cases of evident need and urgency; and
  7. the management is free to use and allocate any operating income, except that no dividends can be distributed; the extent of the management's fiduciary duty as to the conservation of the value of the company has not been clearly established, except in the case of fraud.

The concurso has certain similarities compared with the APE. Both procedures:

  1. result in a restructuring plan becoming enforceable against all unsecured creditors upon court approval;
  2. need essentially the same required majorities to be approved; and
  3. result in a stay of all claims of unsecured creditors against the debtor as of judicial filing.

However, among other differences:

  1. the judicial filing of a concurso suspends accrual of interest, while the filing of an APE does not;
  2. APE proceedings are faster and cheaper;
  3. in a concurso a receiver needs to be appointed and creditors need to undergo a verification of credits procedure, while none of this occurs in an APE; and
  4. the APE has a less negative impact on the debtor's image.

The concurso generally takes between one and two years, but in some cases may be extended for several years. Timing will significantly depend on the volume and nature of the debt being renegotiated and the size of the debtor and the complexity of the proceeding.

Bankruptcy

Under the Bankruptcy Law, the general purpose of a bankruptcy is to identify all the assets and liabilities of the debtor, liquidate the debtor's assets and distribute the proceeds of such liquidation among all creditors in accordance with their verified claims and in the order of preference, and, after giving effect to priorities, established by the Bankruptcy Law.

A bankruptcy may be commenced either voluntarily upon the petition of the debtor or involuntarily upon the petition of one or more creditors. The petitioner must show the company is insolvent or has entered into a 'suspension of payments' status. If the petition is made by a creditor, the creditor must submit evidence that the debtor qualifies for bankruptcy proceedings and offer sufficient evidence of his or her claims, and prove that the debtor has suspended or defaulted compliance of its obligation to the petitioning creditor, or is otherwise unable to comply regularly with its obligations. In the case of an involuntary bankruptcy, after the petition has been filed with the proper court and all necessary evidence presented, the court will summon the debtor to provide an explanation of the reasons why payment of the obligations in favour of the petitioning creditor has not been made and to prove that the debtor is solvent. If the debtor does not demonstrate its solvency, the court will declare the debtor to be bankrupt. In such case the debtor has the right to transform, in a given term, the bankruptcy into a concurso proceeding.

In bankruptcy, creditors must request verification of their claims, preferences and priorities in the same manner as specified above for concurso, and provide the receiver with information as to the total amount, reason and privileges of each claim.

The receiver has to file with the court a proposal for the allotment to the creditors of the proceeds obtained from the liquidation of the debtor's assets. The judge will then submit the proposal for the consideration of the creditors. Any creditor may challenge the final report prepared by the receiver, and the court in turn may approve, modify or disallow any portion of the report before discharging the petition. The receiver will seek the appointment of a creditors' committee to supervise the liquidation of the assets. The creditors with the majority of claims shall elect the committee.

The commencement of a bankruptcy proceeding, inter alia, has the following effects:

  1. the accrual of interest on unsecured claims is suspended; interest on secured debts will continue to accrue, but may only be claimed to the extent of amounts realised from the assets or property subject to such security interests;
  2. all actions to enforce claims against the debtor that are not secured by a pledge or mortgage are suspended, and the commencement of similar actions against the debtor are prohibited;
  3. secured creditors may file actions to enforce their pledge or mortgage to the extent there is a final judgment resolving about the title on such securities, provided that the coorperativa de trabajo requests such enforcement may be suspended by the judge presiding over the bankruptcy for a two-year period;
  4. all actions against the debtor are consolidated before the judge presiding over the bankruptcy; secured creditors may continue enforcement actions;
  5. all future obligations of the debtor become accelerated, so that all such obligations are treated as due as of the filing of the petition;
  6. all claims denominated in foreign currency are converted into Argentine pesos at the exchange rate of the maturity date of the credit or the day the bankruptcy was declared; and
  7. the cooperativa de trabajo or the receiver, as the case may be, is appointed to succeed to all managerial power of the debtor; upon a declaration of bankruptcy, actions taken by the bankrupt debtor in respect of property of the estate, as well as payments made or received, are, by operation of law and without judicial declaration, void in respect of creditors; the debtor's former managers are required to deliver custody of the business, including all books, records, real property and equipment, to the cooperativa de trabajo or the receiver, as the case may be, and are required to provide the judge and the cooperativa de trabajo or the receiver, as the case may be, with all assistance that they may require in order to clarify the state of the debtor's business and to verify the claims against the estate; the cooperative de trabajo or the receiver, as the case may be, may apply to the court for authority to continue actively to operate the debtor's business, upon proof that a shutdown will cause irreparable injury to creditors and to the preservation of the bankrupt's net worth.

Please note that some of the effects described above may have occurred prior to bankruptcy as a result of the company having previously filed an APE or a concurso before the court. The process generally takes several years. Timing will significantly depend on the volume and nature of the debt being renegotiated and the size of the debtor.

Special insolvency proceedings regulations

Insolvency proceedings of companies involved in certain activities, such as banks and insurance companies, are governed by special regulations and are conducted before or with the intervention of the governmental agency that supervises the industry in which the company carries out its activities (e.g., financial entities and insurance companies may not file a concurso or an APE proceeding; special insolvency proceedings are available for financial entities that are carried out before the Argentinian Central Bank; and liquidation proceedings of insurance companies require the intervention of the Superintendent of Insurance).

Of the different special insolvency proceedings existing, the proceeding for financial entities provided under Article 35-bis of the Financial Institutions Law is worth mentioning. Under this proceeding, the Argentinian Central Bank authorises the exclusion and transfer of privileged assets and liabilities to a trust. The credits of depositors and the Argentinian Central Bank are included in the list of privileged creditors who have guarantees of the trusts' assets. The remaining creditors (those considered unsecured creditors) are required to verify their credits before the bankruptcy court, which will liquidate the remaining assets that were not transferred to the trust and distribute the proceeds between the creditors whose proof of claim has been accepted.

Voluntary dissolution and winding up

A company may also voluntarily resolve to dissolve and wind up its business. The aim of the winding-up process is to liquidate the company's assets, settle its liabilities and distribute any balance to shareholders in proportion to their paid-up capital. During the winding up, the liquidator may only effect liquidation acts and may only involve the corporation in actions that are not evidently foreign to the winding up. The winding up may be carried out by the management or other appointed liquidators.

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Footnotes

1. Part of the following section originally appeared in Simon Robinson (Ed.), The Mergers & Acquisitions Review, Ricardo W Beller and Agustina M Ranieri (6th. Edn, London, 2012).

2. Information obtained from World Bank, http://datos.bancomundial.org.

3. Predicted inflation as projected by private consulting agencies, as published by certain members of the Argentine Congress.

4. As estimated by the World Bank in its June 2012 edition of 'Global Economic Prospects'.

5. Information obtained from World Bank, http://datos.bancomundial.org.

Previously published in The Restructuring Review, 5th edition

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions