Originally published October 2004

In recent months the Argentine Inspectorate of Corporations has continued to issue general and particular resolutions that affect companies incorporated and domiciled in the city of Buenos Aires. Other institutions have also issued resolutions that affect companies.

The Federation of Certified Public Accountants in Argentina issued Technical Resolution 17 in December 2000, becoming effective as of 2003, by which irrevocable capital contributions made by shareholders to their companies must:

  • be duly transferred to the recipient company;

  • have the purpose of subscribing shares to be issued by the company in the future;

  • be accompanied by an agreement between the shareholder and the company, stating the terms and conditions for the conversion of the capital contribution into effective capital; and

  • be approved by a shareholders meeting or the board of directors, subject to further approval of the shareholders meeting.

In addition, if further reimbursement of the irrevocable capital contribution is decided, this must follow the same procedure as for capital reductions in the Argentine Business Associations Law.

Irrevocable capital contributions that do not fulfil the requirements will be considered a liability in the company's balance sheet.

So far all companies are following the procedure and the resolution has not been challenged before the courts on the grounds that it has modified the Business Associations Law.

Corporate Purpose

On July 7 2004 the Inspectorate of Corporations issued General Resolution 9, through which it intends to regulate certain sections of the Business Associations Law which deal with the purposes of companies incorporated in Buenos Aires.

In that respect, it states that the purpose of such companies must be precise and must detail to the greatest possible extent the activities to be performed.

The inspectorate will accept additional descriptions, as long as they are connected to the main purpose of the company.

The resolution also states that the company's capital must be sufficient to develop its purpose, although no indication is given of the parameters which will be taken into account in this respect.

Board of Directors

On September 3 2004 the inspectorate issued Resolution 20, which states that appointments to the board of directors are to be registered in accordance with the Business Associations Law, with failure to do so enabling the inspectorate to suspend all of the company's other registrations. Therefore, non-compliance with the registration required by the law and regulated by the resolution may affect, for instance, the registration of capital increases.

The resolution also regulates the guarantee to be provided by the board of directors in accordance with the provisions of Section 256 of the law. The guarantee will comprise a deposit of $10,000 in cash or bonds and an insurance policy. The deposit of the cash or bonds and an insurance policy, must be for a term equivalent to the appointment of the director and include the statutory limitation period for any claim that could be made against his performance.

The statutory limitation period is three years from the date on which the director ends his term in office.

Some resolutions of the inspectorate affect all companies subject to its control. In this sense, the inspectorate ratifies that only attorneys appointed at the time a foreign shareholder is registered (or in further registrations) may represent such at the shareholders meetings.

On June 17 2004, in The Inspectorate of Corporations v Aerolíneas Argentinas, the National Commercial Chamber of Appeals reversed a decision of the inspectorate that had required a company to remove a member of the board of directors after allegations of incompatibilities were made following acts performed by the member in a foreign country.

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.