On October 1 2014 Congress passed the new Civil and Commercial Code which entered into force on January 1 2016. Within this context, the Commercial Companies Law 19,550 – renamed the General Companies Law – was amended and now applies to all companies. The amended General Companies Law also came into force on January 1 2016.
One of the major changes introduced by the new law is the possibility of setting up corporations formed by a single shareholder, which most countries have already introduced. While the introduction of single-shareholder corporations is a step in the right direction, the restrictions and requisites imposed therein evidence that this new type of organisation – certainly a milestone in Argentina's corporate regulations – does not meet the expectations of the legal and business communities.
Single-shareholder corporations can be incorporated only as corporations – they are subject to permanent government control and cannot set up other corporations. In addition, according to the initial text of the amended General Companies Law, said corporations were required to:
- pay 100% of the capital stock on their incorporation, while companies incorporated under a different type of organisation have a two-year period;
- appoint a board of directors composed of at least three members; and
- appoint a statutory supervisory committee composed of at least three effective and three alternate members.
Further, single-shareholder corporations must comply with several of the filing requirements imposed on companies subject to permanent government control, as stipulated by the public registry of commerce of the jurisdiction where the company has its registered domicile.
All of these initial requisites made single-shareholder corporations costly and inconvenient for small-scale business operations and even for multinational companies, which can always choose to incorporate an Argentine subsidiary under other, less burdensome and expensive types of organisation. After almost a year, and despite the fact that single-shareholder corporations are the best option in most cases, only a few single-shareholder corporations have been incorporated.
Considering the unsuccessful debut by single-shareholder corporations, Congress passed a new law, which entered into force on November 27 2016, which eliminates the requisites of having at least three directors and three effective and three alternate statutory supervisors.
Acknowledging the need to simplify the procedures for setting up new companies, the new federal government has recently submitted a bill to create a simplified type of organisation called a 'simplified corporation'. Although it has not been enacted yet, this new proposal seems to consider the requirements of entrepreneurs and the business community.
After the recent amendment to the General Companies Law, single-shareholder corporations are expected to be a more attractive investment vehicle. If simplified corporations are also passed by Congress, the business community will have two new additional types of organisation so that companies can decide on the more convenient structure, depending on their particular needs.
For further information on this topic please contact Bárbara Ramperti or Diego Krischcautzky at Marval, O'Farrell & Mairal by telephone (+54 11 4310 0100) or email ([email protected] or [email protected]). The Marval, O'Farrell & Mairal website can be accessed at www.marval.com.ar.