Since October 2003 the Argentine Inspectorate of Corporations has issued a number of general and particular resolutions that increase its participation in matters affecting corporations registered with it. The general resolutions include Resolution 11/03, published in the Official Gazette on November 17 2003. This establishes the procedure through which members of the board of directors or legal representatives of a company incorporated in Buenos Aires can have their resignation accepted and registered by the inspectorate where their company does not accept it or has gone out of business without being liquidated. This resolution is a step forward in its empowerment of board members and legal representatives who do not wish to retain their position in companies that are no longer in business.

The inspectorate has also issued particular resolutions with respect to companies that have had significant impact on other companies subject to the inspectorate's authority.

In one such resolution the inspectorate decided that the shareholder owning 99.99% of shares in Coca Cola Femsa SA must (i) transfer some of its shareholding to the minority shareholder or to a third party, or (ii) register itself as a branch of a foreign company. The inspectorate held that shareholdings of 99.99% and 0.01% do not meet the provision of the Argentine Business Associations Law for an "association of two or more persons for the purposes of doing business".

Consequently, all companies with a similar shareholding structure must adapt to the inspectorate's interpretation of this provision. Although no written statement has been issued, the inspectorate puts the minimum percentage for a minority shareholder at approximately 5%. In the case of Coca Cola Femsa, the majority shareholder did not challenge the decision and transferred sufficient shares to give the minority shareholder 5% ownership.

Two other resolutions refer to formalities that should be followed by all companies. Previously, it was common practice for companies to hold shareholders meetings without a prior meeting of the board of directors. The inspectorate decided that a directors meeting must precede a shareholders meeting and should indicate the agenda to be discussed. With regard to shareholders meetings, it was also decided that only the registered legal representatives of a foreign corporation can represent it at a shareholders meeting of the company in which they own shares. If substituting the proxy, such faculty must be clearly stated in the power of attorney. This resolution thus prohibits the common practice of companies granting powers of attorney through letters to people other than those registered.

For further information on this topic please contact Alberto MarĂ­a Lasheras-Shine at Estudio Beccar Varela by telephone (+54 11 4379 6800) or by fax (+54 11 4379 6860) or by email ([email protected]).