Argentina: New Rules Issued by the Companies’ Registry in Argentina Applicable to Foreign Companies

Last Updated: 22 February 2005
Article by Roxana Kahale and Javier Canosa

The Companies’ Registry ("IGJ") issued General Resolution No. 2/2005 [*1] (the "Resolution"), which rules on certain issues related to:

(i) companies incorporated abroad ("Foreign Companies") with no powers and legal standing to act in their places of incorporation;

(ii) Foreign Companies incorporated in (a) low or zero tax countries or territories or (b) jurisdictions considered as "non-cooperative" in the fight against international crime and drug trafficking;

(iii) Cancellation of certain Foreign Companies;

(iv) Foreign Companies unable to conduct their activities in their places of incorporation which state they perform "isolated acts" in Argentina; and

(v) Foreign Companies usually referred to as "vehicle" companies.

1. Foreign Companies with no powers and legal standing to act in their places of incorporation

In accordance with the provisions of General Resolution No. 7/2003 issued by the IGJ [*2] ("Resolution 7"), the Resolution sets forth that the IGJ shall not register Foreign Companies in the Public Registry of Companies under sections 118 and 123 of Law No. 19,550 (the "Companies Act") if the companies do not have powers and legal standing to act in their places of incorporation (i) to conduct their activities or (ii) within the scope of sections 118 and 123 of the Companies Act.

Sections 118 and 123 of the Companies Act refer to, respectively, (i) Foreign Companies willing to develop their corporate purpose in Argentina, and (ii) Foreign Companies willing to participate in Argentine Companies as shareholders or quota holders.

Therefore, the Resolution makes it clear that Foreign Companies with no powers and legal standing to act in their places of incorporation (i) to conduct their activities relating to their corporate purpose or (ii) within the scope of sections 118 and 123 of the Companies Act and which have the intention to (i) conduct activities within their corporate purpose in Argentina and (ii) participate in Argentine Companies as shareholders or quota holders must fully comply with the Argentine laws (i.e. regularize their status).

Said regularization comprises the observance of the criteria set forth by General Resolution No. 12/2003 issued by the IGJ [*3], which rules on the proceedings and requirements for the regularization of Foreign Companies.

Regularization of Foreign Companies within the Argentine legal framework is based on section 124 of the Companies Act, which provides that Foreign Companies with principal places of business or corporate purpose to be carried out in Argentina shall be considered as local companies for incorporation formalities and surveillance over their operation.

2. Foreign Companies incorporated in (a) low or zero tax countries or territories or (b) jurisdictions considered as "non-cooperative" in the fight against international crime and drug trafficking

Section 1 of Resolution 7 provides that Foreign Companies that request their registration before the IGJ in order to (i) conduct activities within their corporate purpose in Argentina and (ii) participate in Argentine Companies must:

(i) notify the IGJ of any statutory prohibition or restriction imposed upon them to conduct any or all of their activities in their places of incorporation; and

(ii) evidence that as of the registration request date they comply with at least one of the following conditions outside Argentina:

a. existence of one or more branches or permanent representations;

b. ownership of non-current assets in other companies; or

c. ownership of fixed assets in their places of incorporation.

The Resolution provides that the IGJ shall review under a "restrictive criteria" the compliance with the requirements mentioned in section 1 of Resolution 7 by those Foreign Companies incorporated in (i) low or zero tax territories (Annex I includes a list of low or zero tax countries); or (ii) jurisdictions considered by the Argentine Central Bank, the Financial Information Unit and the International Financial Action Group as "non-cooperative" jurisdictions in the fight against money laundering and transnational crime (Annex II includes a list of countries and territories considered as "non-cooperative" in the fight against money laundering and transnational crime).

The Resolution sets forth that Foreign Companies (i) included in the above paragraph, that is to say, Foreign Companies incorporated in any of the venues listed in Annex I or Annex II, and (ii) that request the registration before the IGJ in order to conduct activities within their corporate purpose in Argentina must, at the registration request date, evidence the effective performance of business activities in their places of creation, registration or incorporation.

The above evidence shall include the filing of the last financial statements of the Foreign Companies and a description of the main transactions conducted in their places of creation, registration or incorporation during the fiscal year of the financial statements or during the year immediately before if the periodicity of the financial statements is shorter. The description must contain precise information on dates, parties, purpose and amount of the transaction and must be executed by the authorizing officer of the country of origin or by an officer of the Foreign Company. The IGJ may request partial or full filing of the transaction-related documents if the report filed by the Foreign Company is deemed insufficient.

The Resolution also sets forth that Foreign Companies (i) incorporated in any of the venues listed in Annex I or Annex II, (ii) that conduct activities within their corporate purpose in Argentina and (iii) registered before the IGJ in order to conduct activities within their corporate purpose must, upon filing of their financial statements with the IGJ within sixty business days from the ending of the fiscal year, evidence the continuation of actual business activities in their places of origin by means of the documents and under the formalities described in the above paragraph.

3. Cancellation of Certain Foreign Companies

The IGJ shall request before a court of law the cancellation of Foreign Companies (i) with no powers and legal standing to act in their places of incorporation; and (ii) incorporated in (a) low or zero tax countries or territories or (b) venues considered as "non-cooperative" in the fight against international crime and drug trafficking, if any of the following situations takes place:

(1) the Foreign Company does not comply with the periodic filing regime under the Resolution and Resolution 7 and compliance with said regime is not observed within 90 days as from the effective date of the Resolution (that is to say, before May 18 2005); or

(2) the necessary filings were not made within the above 90-day term in order to regularize the Foreign Company’s status to Argentine law.

4. Offshore Foreign Companies that perform "isolated acts" in Argentina

Section 118 of the Companies Act provides that the Foreign Company may (i) perform "isolated acts" and (ii) have legal standing to sue and be sued in Argentina with no need to register before the IGJ.

The IGJ under certain case law by the Federal Civil Court of Appeals [Cámara Nacional de Apelaciones en lo Civil] [*4], later reversed by the Argentine Supreme Court [Corte Suprema de Justicia de la Nación] issued General Resolution No. 8/2003 [*5] ("Resolution 8"), which created a registry of isolated acts to be performed by Foreign Companies. The registry must be solely comprised by the evidence of the acts registered before the Real Estate Registry of the City of Buenos Aires.

Resolution 8 also provides that the IGJ shall analyze the isolated act-related information gathered from said Registry in order to ascertain, on the basis of the reiteration of acts, their significance and other associated aspects, the existence of elements to characterize habitual or main activities in Argentina conducted by the Foreign Company. In this case, Resolution 8 authorizes the IGJ to decide whether the Foreign Company must register under section 118 of the Companies Act or must regularize its status and comply with the Argentine laws.

In agreement with the provisions of Resolution 8, the Resolution sets forth that companies (i) incorporated in venues that impose statutory prohibitions or restrictions upon certain companies therein incorporated to conduct any or all of their main activities in said venue, (ii) that have performed unilateral or "isolated acts", and (iii) that have undergone investigation procedures by the IGJ under Resolution 8 shall be required to regularize their by-laws in accordance to Argentine law, as previously explained.

5. Foreign Companies usually referred to as "vehicle" companies

The Resolution do not apply to Foreign Companies whose registration has been requested with simultaneous compliance with the provisions of General Resolution No. 22/2004 issued by the IGJ [*6], which rules on the registration of Foreign Companies usually referred to as "vehicle companies" or "special-purpose vehicles". However, the IGJ shall send their registration-related proceedings to the Federal Administration of Public Revenues ("AFIP") for its decision on each case on the legal use of the "vehicle" from a tax standpoint. The proceedings before the registry in Argentina shall be suspended and shall be over when the AFIP issues the pertaining legal opinion.

Annex I

Low or zero tax jurisdictions

Anguilla
Antigua and Barbuda
The Netherlands Antilles
Aruba
Ascencion Insland
The Bahamas
Barbados
Belize
Bermuda
Brunei
Campione D’italia
Dominica
The United Arab Emirates
Bahrain
Grenada
Puerto Rico
Kuwait
Qatar
Saint Christopher
Luxembourg
Greenland
Guam
Hong Kong
The Azores
The Channel Islands (Guernesey, Jersey, Alderney, Great Stark Island, Herm, Little Sark, Brechou and Jethou Lihou)
The Cayman Islands
Christmas Island
The Cocos or Keeling Islands
The Cook Islands
The Isle of Man
Norfolk Island
The Turks and Caicos Islands
Pacific Islands
The Salomon Islands
St. Pierre and Miquelon
Qeshm Island
The British Virgin Islands
The US Virgin Islands
Kiribati
Labuan (Malaysia)
Macau
Madeira

Montserrat
Nevis
Niue
Patau
Pitcairn Island
French Polynesia
Andorra
Liechtenstein
Monaco
Uruguay (only entities regulated by Law 11,073 of 24 June 1948)
Tonga
Jordan
Swaziland
Albania
Cape Verde
Cyprus
Djibuti
Guyana
Panama
Trinidad and Tobago
Liberia
The Seychelles
Mauritius
Tunisia
Maldives
The Marshall Islands
Nauru
Sri Lanka
Vanuatu
Yemen
Malta
St. Helena
St. Lucia
American Samoa
Western Samoa
San Marino
Oman
Svbalbard
Tuvalu
Tristan da Cunha
Trieste (Italy)
Tokelau
Ostrava Special Zone (Czech Republic)

Annex II

Countries and Territories considered as "non-cooperative" in the fight against money laundering and transnational crime

(a) Non-cooperative jurisdictions for the Argentine Central Bank
The Cook Islands
The Philippines
Indonesia
Myanmar
Nauru
Nigeria

(b) Non-cooperative jurisdictions for the Financial Action Task Force and Financial Information and Analysis Unit
Myanmar
Nauru
Nigeria

*******************************************************

[*1] Published in the Official Gazette on February 17 2005.
[*2] See our Newsletter dated September 25 2003.
[*3] Published in the Official Gazette on December 4 2003.
[*4] The case is entitled CNCiv, Sala F, 30-06-2003, "Rolyfar S.A. c. Confecciones Poza".
[*5] Published in the Official Gazette on October 22 2003.
[*6] See our Newsletter dated September 22 2004.

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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