Joint Ventures in Argentina

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What are the key types of joint venture in your jurisdiction? Is the ‘joint venture’ recognised as a distinct legal concept?

Joint ventures (JVs) in Argentina are typically implemented either by means of the incorporation of a new legal entity, usually a special purpose vehicle (corporate JV) or the entering into of a collaboration agreement (contractual JV).

Corporations and limited liability companies have historically been the most frequently used types of vehicle to set up corporate JVs. The previous administration created a new type of company, the simplified corporation, which was a more flexible alternative. However, regulations of the new administration have made this vehicle less attractive.

There are three basic forms of contractual JVs regulated under the Argentine Civil and Commercial Code (the Code):

• temporary associations (UTs), which are agreements for the temporary association of existing business enterprises that seek to perform specific work, service or supply – their main characteristic is their transitional character, although in practice some UTs subsist for several years (eg, UTs created to become a party of public concession agreements, which may remain in place for many years (eg, 10 to 20 years));
• collaboration groupings, which are agreements for the joint organisation of existing enterprises to facilitate or develop certain stages of the business activities of its members, or to improve or increase the results of such activities – their main characteristic is that the grouping itself cannot pursue a pecuniary interest; and
• cooperative consortia, which are agreements for the joint organisation of existing enterprises to facilitate, develop, increase or conduct operations related to the activities of its members, defined or not at the time of their formation, to improve or increase their results – their main characteristic is the possibility of pursuing a pecuniary interest, their perdurability and their ability to expand the scope of business to third parties alien to the agreement, even allowing activities that may not be determined at the time of their creation.

As opposed to corporate JVs, contractual JVs do not have a separate legal personality.

In what sectors are joint ventures most commonly used in your jurisdiction?

JVs could theoretically be used in every market, although certain restrictions may apply to specific forms of JV in regulated industries.

The use of corporate JVs is widely spread. The use of contractual JVs is usually more limited, with UTs being the most frequently used. UTs are commonly used in construction, oil and gas projects or other special projects, including those related to public bidding processes for government procurement.

Parties

Are there rules that relate specifically to foreign joint venture parties?

Foreign companies participating in a corporate or contractual joint venture (JV) must have previously registered with the appropriate local public registry as shareholders of domestic companies or Argentine branches, respectively, and before the relevant Argentine tax authorities.

Restrictions may apply to the participation of foreign investors in certain industries or under certain special laws.

What requirements are there to disclose the ultimate beneficial ownership of a joint venture entity?

JVs set up within the jurisdiction of the city of Buenos Aires must, at the time of initial registration and annually thereafter, file an affidavit with the public registry informing of the existence or not of ultimate beneficial owners, defined as individuals who, directly or indirectly, own at least 20 per cent of the share capital or voting rights of an entity, or are otherwise able to control such entity or legal structure. Other jurisdictions within the country may have similar requirements, and banks and other third parties may also require similar information.

Setting up and operating a joint venture

Are there any particular drivers in your jurisdiction that will determine how a joint venture is structured?

The choice of the most convenient structure will depend on the objectives of the association, including the parties’ expectations as regards its duration, limitation to a certain project, contributions to be made and policy for profit distribution, among other things.

If the joint venture (JV) will operate in regulated industries, there could be limitations as to how the JV can be structured.

Also, the decision on whether to operate as a contractual or corporate JV may be driven by tax considerations.

When establishing a joint venture, what tax considerations arise for the joint venture parties and the joint venture entity? How can tax charges be lawfully mitigated?

Corporate JVs are subject to the general tax regime, as with any other local entity (eg, income tax, value added tax (VAT), turnover tax). Any stock or participation in the capital of an Argentine corporate JV held by Argentine-resident individuals or non-Argentine residents (whether individual or entities) is subject to the personal assets tax. The law imposes on the Argentine company the obligation to pay the tax at a rate of 0.5 per cent of the proportional equity value of the relevant stock or participation.

Contractual JVs are considered for income tax purposes as transparent entities and, therefore, any result (profit or loss) shall be directly allocated to its members. However, regarding VAT and turnover tax, contractual JVs are deemed taxpayers and, to such extent, should be registered before the relevant tax authorities and pay taxes. In addition, the Tax Procedural Law sets forth that the members shall be severally and jointly liable for the tax liabilities of the contractual JV.

Depending on the type of business to be conducted through the JV, for tax efficiency purposes it may be convenient to set up one structure or the other.

Are there any restrictions on the contribution of assets to a joint venture entity?

Corporate JVs may receive capital contributions in cash or in kind. Capital contributions in the form of real estate, equipment or other non-monetary assets must be fully contributed at the time of subscription and will be subject to certain valuation rules. In principle, capital contributions cannot consist of services. The contribution in cash does not trigger income tax or VAT for the shareholders, but the contribution of assets may do so.

The Argentine Civil and Commercial Code (the Code) does not contain special provisions with regard to contributions to contractual JVs. Collaboration agreements are generally required to detail the contributions that each member will make to the operational fund. For recordable assets, it is common practice for the parties to contribute a right of use and exploitation of the assets owned by themselves, instead of property rights. Controversy exists as to whether granting a right to use movable assets and services to contractual JVs would be subject to VAT. In the case of services, it is generally understood that participants shall charge the services performed with VAT.

What is the interaction between the constitution of the joint venture entity and the agreement between the joint venture parties?

Corporate JVs must register their articles of incorporation and by-laws with the appropriate local public registry. Agreements creating contractual JVs must also be registered with the appropriate registry. As a consequence of these registrations, the foregoing documents will become enforceable not only between the parties of the JV and, in the case of corporate JVs, the company itself, but also regarding third parties.

It is common practice that complementary agreements ruling certain rights of the JV parties be separately implemented. Such complementary agreements will, in principle, only be binding between their signatories. Because of this, it is usual that the parties decide to reflect at least some of these key provisions in the constitution documents. If the intention of the parties is that the complementary agreement should prevail, such a rule should be expressly provided.

How may the joint venture parties interact with the joint venture entity? Are there any restrictions?

The corporate JV is a separate entity and thus its shareholders, as a general rule, limit their liability to their capital contributions.

Corporate JVs adopt decisions through shareholders’ or board meetings depending on the nature of the decision. To ensure that the best interests of the company are prioritised, the Argentine General Companies Law (AGCL) provides that directors and shareholders should abstain from participating in any decision in respect of which they have a contrary interest.

Also, directors are required to render accounts to the shareholders by submitting annual financial statements for their consideration.

In addition, the AGCL provides a generic right for shareholders to access information and supporting documentation or to request reports from the management or supervisory bodies. The foregoing is subject to certain restrictions, with different rules applying to the different company types and larger restrictions applying to companies with statutory supervisors.

Moreover, the AGCL provides certain cases in which the shareholders may sue directors for breach of their fiduciary duties.

It is worth bearing in mind that shareholders are entitled by law to revoke the appointment of directors with or without cause at any time.

Contractual JVs do not have a separate legal personality; consequently, they cannot, in principle, be sued. The Code sets forth different rules as regards the extent of the liability of the members of each collaboration agreement. While in some cases the general rule is the joint liability of the members, in others the opposite rule is provided.

Decisions of a contractual JV are generally adopted by its members.

The members must appoint representatives who are generally conceived as attorneys-in-fact subject to mandate rules. Attorneys-in-fact have certain duties to provide information and documentation to their grantors, and to render accounts. Also, in the case of a conflict between their own interests and that of the grantors, they must privilege that of the grantors.

Financials should be prepared for the JV parties’ consideration.

All collaboration agreements seem to permit revocation of the representatives with or without cause, although in some cases unanimity is required.

How may the joint venture parties exercise control over the joint venture entity’s decision-making?

The AGCL contains certain rules aimed at providing protection to minority shareholders. Among others, regarding corporations, the AGCL sets forth a mechanism pursuant to which shareholders may vote their shares cumulatively to try to secure certain positions on the board and a right to demand acquisition of their shares if certain relevant decisions are adopted despite their negative vote (right to withdraw).

However, if the minority shareholder wishes to secure a certain level of control over the company’s decision-making, it should enter into an agreement with the majority shareholder to obtain, among other things, a certain number of positions on the board and special majorities to pass resolutions regarding certain matters. While the AGCL provides different quorum and majority requirements, some (although not all) may be qualified. In general, minority shareholders will be interested in reflecting agreements in the constitution documents so that these become enforceable with regards to the company and, upon registration, third parties.

Since contractual JVs do not have a separate legal personality, decisions are generally adopted by their members. While the Code provides certain rules regarding the majorities that decisions should meet, it is generally possible to qualify the same by requiring the affirmative vote of more members. Also, the members can freely agree on the manner in which the representatives will be appointed. As in the case of corporate JVs, provisions included in the constitution documents – as opposed to those in unregistered complementary agreements – will become enforceable regarding third parties upon registration.

What are the most common governance issues that arise in connection with joint ventures? How are these dealt with?

One of the main concerns is avoiding conflicts of interest. In the case of corporate JVs, the AGCL provides that directors must act loyally and as good businesspeople. Also, as regards conflicts of interest, it provides that directors should abstain from participating in the deliberations of the board concerning matters in which they may have a contrary interest. Failure to comply with these standards will make the director unlimitedly and jointly liable towards the entity, the shareholders and third parties for any losses resulting therefrom.

Shareholders that have a conflict of interest are also required to abstain from voting in any decision regarding which they have a contrary interest. Otherwise, they shall become liable for any losses resulting therefrom if their vote was the determinant.

The Code does not provide specific rules as regards conflicts of interest in contractual JVs. However, the representatives are generally conceived as attorneys-in-fact subject to the mandate rules of the Code.

In addition, there are other rules under the Code that could arguably provide grounds on which to question certain actions or omissions of the members or representatives (such as the general principles providing that rights cannot be exercised abusively and that no person has a right to cause damage to another person, among others).

Guaranteeing access to information in favour of the JV parties is another common governance issue.

With an incorporated joint venture, what controls exist in your jurisdiction in relation to nominee directors? How should a nominee director balance the potentially conflicting interests of the joint venture company and the appointing shareholder?

In the case of corporate JVs, directors should act loyally, as good businesspeople and in the interest of the JV. Therefore, they should abstain from participating in the deliberations of the board with regard to matters in which they have a contrary interest of their own or any third party (including the appointing shareholder). In the case of contractual JVs, the Code does not provide specific rules regarding conflict of interest and the mandate rules of the Code shall apply.

What competition law considerations are engaged by the formation and operation of the joint venture? Is approval needed?

The Antitrust Law does not explicitly regulate JVs and they are subject to the same regulations as other economic concentrations.

Full-function JVs are deemed an economic concentration, subject to mandatory notification if the applicable thresholds are met and no exemption applies. Full-function JVs have to notify if the acquiring group (parent companies) and the target surpass a combined turnover of 100 million adjustable units (equivalent to 5.529 billion Argentine pesos considering that the value of the adjustable unit was set to 55.29 Argentine pesos for 2021) in the previous fiscal year in Argentina. The first landing and de minimis exemptions (among others set out in the Antitrust Law) can be applied for.

According to the Antitrust Commission’s case law, non-full-function JVs (defined as JVs that do not constitute an autonomous economic entity in the market) are exempt from notifying for approval. However, due to recent changes to the roster of the Antitrust Commission, we recommend securing a no-filing decision by means of the filing of an advisory opinion.

The new Antitrust Law sets up a pre-closing system where notifying parties are unable to close a transaction without the Antitrust Authority’s prior approval. This system will become operational one year after the constitution of the new Antitrust Authority, which has not occurred yet. As at September 2021, there is no insight available regarding when the Antitrust Authority will be constituted. In addition, there is a draft bill in Congress that, if passed, will eliminate said requirement for the implementation of a pre-closing system. It should be noted that, under the current post-closing regime, JVs can file before or up to one week after closing; therefore, approval is not required to close.

What are the key considerations in your jurisdiction in structuring the provision of services to the joint venture entity by joint venture parties?

In principle, capital contributions to corporate JVs cannot consist of the provision of services. Thus, any service agreement between the shareholders and the company will need to be separately implemented for consideration.

In contrast, there are no specific rules banning members from contributing services to a contractual JV.

Some of the issues more heavily discussed in connection with service agreements in Argentina include the currency applicable to payments, place of payment, rules addressing existing foreign exchange controls, price adjustments in the case of increased costs, term and causes of termination, liability of the parties and indemnification provisions, among others.

In any case, the manner in which any services could be contributed or implemented and the terms thereof should be analysed on a case-by-case basis.

What impact do statutory employment rights have in joint ventures?

The Argentine Labour Law contemplates the transfer of establishment, pursuant to which, upon transfer of an autonomous business unit (it being the whole company, or an independent line of business or business unit), employment contracts shall continue with the transferee, who shall honour employees’ prior labour conditions and acquired rights, including, but not limited to, years of service, compensation, benefits and responsibilities of the transferred employees. This type of transfer does not require the transferred employees’ consent, but they may, however, consider themselves constructively dismissed if they are adversely affected by the transfer. Transferors and transferees are jointly and severally liable for labour obligations that exist at the time of the transfer. Thus, if employees are transferred to a corporate JV in the context of a transfer of establishment, employees would be transferred by operation of law with no further consent being required.

If the transfer does not qualify as that of an autonomous business unit, employees would not be transferred by operation of law and it would be necessary to resort to the individual employee transfer regulations, which are mostly similar to those described above in terms of requirements to honour prior conditions and joint liability. The main difference is that, in this case, prior written consent would be required.

As regards contractual JVs, despite the fact that labour judges have understood that these JVs do not have a separate legal personality and, consequently, cannot hire employees, administrative labour and tax authorities have accepted them as employers. When the contractual JV appears as the employer, its members will, as a general rule, be liable for any labour dispute that may arise. The extension of their liability should be analysed on a case-by-case basis.

How are intellectual property rights generally dealt with on the creation, operation and termination of a joint venture in your jurisdiction?

There is no specific regulation in connection with intellectual property rights (IPRs) and JVs, so general intellectual property laws and principles will apply.

Upon formation of a corporate JV, the parties could either transfer or license relevant IPRs to the JV. In doing so, they should be careful to adopt a structure that reflects their intention as to the ownership, management and licensing of IPRs. They should also consider the tax consequences of any IPR transfer or licence.

Parties may choose to address any newly developed IPRs in different ways. For instance, corporate JVs could retain ownership of such newly created intellectual property and license it to the parties. Parties should also carefully determine how IPRs are treated upon termination of the JV. For example, one party could retain ownership of any IPRs and grant the other party a worldwide, perpetual, sublicensable and free licence to use such IPRs, or both parties could agree on joint ownership of any rights (such joint ownership will be subject to any regulations or limitations regarding specific IPRs).

In the case of contractual JVs, the parties could choose to regulate IPRs in the JV contract or through a separate agreement. It is important for any provisions regulating IPRs to be clear as to the management and ownership of IPRs, as well as to foresee what will occur to any IPRs upon termination of the JV. In particular, it is important to consider that IPRs in the context of a contractual JV may result in the creation of jointly owned IPRs.

In all cases, it is important to consider IPR issues along with tax and employment issues as they tend to affect the JV structure and IPRs.

Funding the joint venture

How are joint ventures generally funded in your jurisdiction? Are there any particular requirements relating to funding and security packages?

The funding of joint ventures (JVs) can be generally accomplished either by contributions (capital contributions in the case of corporate JVs and contributions to the operating fund in the case of contractual JVs) or through financing.

The constitution document of the contractual JV shall include provisions related to the way in which the joint venture activities will be funded.

The Argentine General Companies Law has a minimum capital requirement for some corporate JVs. In the case of contractual JVs, there is no minimum capital requirement.

If a corporate JV is funded through capital contributions, the following should be considered from a tax perspective:

• capital contributions in cash will not be subject to income tax;
• capital contributions in kind could be subject to income tax for the shareholder and, in particular, contributions of movable assets could also trigger value added tax (VAT); however, should there be a tax credit related to VAT, such credit may be used by the corporate JV in  future prior registration as a VAT taxpayer;
• the net worth of the corporate JV and consequently the tax basis of personal assets tax (0.5 per cent of the net worth) will be increased; and
• any voluntary capital reduction may trigger a dividend distribution, which will be subject to a tax of 7 per cent.

If a corporate JV is funded through financing, the following should be considered:

• pursuant to thin capitalisation rules, interest and negative currency exchange differences in the principal arising from financial debts with related parties (either resident or not) would be deductible up to the annual amount to be established by the government (currently 1 million Argentine pesos) or up to the equivalent of 30 per cent of the net income corresponding to the fiscal year prior to deducting the interest, whichever is the highest;
• transfer pricing regulations will apply to intercompany loans with related non-resident lenders;
• interest payments may be subject to withholding tax; and
• stamp tax may be applicable to the instrumentation of loans.

Regarding contractual JVs, as they do not pay income tax, most tax aspects should be analysed in respect of the impact on the members (eg, the income tax should be borne by these companies, including the income obtained in their own annual corporate income tax returns).

The setting up of security packages will be subject to different requirements depending on the type of security being granted. Security packages usually include collateral from the shareholders or members and may include, for example, the assignment to creditors of the proceeds of the business of the JV as collateral.

Are there any legal or regulatory restrictions on the injection of capital into, or the distribution of profits or the extraction of cash by other means from, the joint venture entity?

There are currently foreign exchange controls in Argentina, as a result of which the acquisition and transfer of foreign currency to and from Argentina through the Argentine Foreign Exchange Market (the FX market) is subject to the regulations that are periodically issued by the Argentine Central Bank (BCRA).

Foreign exchange regulations generally have an impact on all industries and on a wide variety of subjects such as foreign trade, financial indebtedness and foreign investments, including the payment of profits and dividends to non-Argentine resident shareholders. Some payments abroad, especially those involving related parties, may require prior BCRA approval, which may be granted or denied on a discretionary basis. In practice, it is rarely obtained.

Applicable foreign exchange regulations do not require the foreign currency proceeds resulting from capital injections to be transferred to Argentina and sold for pesos through the FX market and, thus, they could be held in a bank account outside Argentina, subject to certain conditions and used, for instance, to make payments to foreign suppliers. However, in that case, any subsequent access to the FX market for the payment of profits and dividends, as well as the repatriation of foreign investments, will be subject to prior approval from the BCRA.

Currently, prior approval from the BCRA will not be required to access the FX market to pay profits and dividends abroad to non-Argentine resident shareholders (up to 30 per cent of the amount of the new contributions made by non-Argentine resident shareholders) or to purchase foreign currency in the FX market and transfer it abroad as a repatriation of investments, provided that certain requirements are met. These requirements include that the proceeds from the foreign investment are brought into Argentina through the FX market or an exception applies.

Despite the above, in practice, it is frequent among local companies to carry out blue-chip swap transactions in the context of a capital increase. This has an important financial advantage due to the exchange rate difference. There is currently a significant spread between the US$–Argentine peso official exchange rate and the implicit exchange rate applicable to blue-chip swap transactions. Generally, blue-chip swap transactions occur in the purchase and sale of securities (eg, representing debt or equity issued by the Argentine government, or by public or private Argentine companies) that are actively traded on any stock market or over-the-counter market in Argentine pesos or in other such markets outside Argentina in foreign currency (generally US dollars). These transactions are made through broker-dealers, so any company engaging in them should have operative brokerage accounts and would have to demonstrate the source of the funds. Blue-chip swaps are currently regulated by the Argentine Securities Commission. Existing regulations include, among others, a minimum holding period of the securities depending on the type of transaction or the persons executing it and restrictions are applied to certain specific transactions.

What tax considerations should be taken into account in the operation of the joint venture?

If the joint venture is a corporate JV, the total tax burden of corporate income is integrated in a two-stage tax scheme: at the company level and when there is a dividend distribution.

At the company level, the following scale applies to tax periods starting 1 January 2021.

These amounts will be adjusted annually starting 1 January 2022. To that effect, the annual variation of the Consumer Price Index stipulated by the National Institute of Statistics and Census will be calculated. 

Dividends distributions to individuals or non-residents are subject to 7 per cent tax, regardless of the tax rate paid by the company at the corporate level. Dividends distributed to other Argentine corporate JVs are not subject to the 7 per cent tax.

Interest payments by an Argentine company to a creditor that is not an Argentine resident would be subject to Argentine withholding tax at a rate of:

• about 12 per cent, in most cases, if the creditor is a resident of a country that has signed a tax treaty, for the avoidance of double taxation, with Argentina;
• 15.05 per cent if the lender is a banking or financial institution that is under the supervision of the relevant central bank or equivalent authority located in a jurisdiction that is not considered a low tax jurisdiction or in a jurisdiction that is party to an exchange of information treaty with Argentina and, as a result of the application of its internal regulations, cannot refuse to disclose information to Argentine authorities on the basis of bank or stock secrecy rules;
• 15.05 per cent over financing interests in connection with imports of fixed assets, excluding automobiles, granted by the suppliers; or
• 35 per cent otherwise.

Argentine transfer pricing rules would apply to transactions between related parties.

Regarding VAT (which is a federal tax collected by the Argentine Tax Authority over the sale and import of goods and the performance of services), turnover tax (which is a local tax collected by the different Argentine provinces and by the city of Buenos Aires over the revenue obtained for the performance of economic activities in their territories), as well as any other applicable taxes, corporate JVs are subject to tax in the same way as any other corporate entity.

If the JV is a contractual JV, for income tax purposes it is considered as a transparent entity and, therefore, any result will be directly allocated to its members and subject to the tax rate applicable to such members.

Regarding VAT and turnover tax, a contractual JV is deemed a taxpayer, different from its members. To this extent, contractual JVs should be registered as taxpayers before the Argentine Tax Authority and the relevant local tax authority. Once registered, contractual JVs will have to assess and file the relevant tax returns in the same way as any other taxpayer.

Finally, the Tax Procedural Law sets forth that the members shall be severally and jointly liable for the tax liabilities of the contractual JV.

Are there any noteworthy accounting or reporting issues for the joint venture parties regarding their investment in the joint venture?

JVs must carry accounting books and are subject to several reporting duties established in local legislation.

To name one specific reporting rule, according to General Resolution 3573, the legal representative of a contractual JV must inform the Argentine Tax Authority of the execution, amendment or dissolution of any collaboration agreement within 10 days of the registration of the agreement with the public registry, or its execution date should no registration be required. In addition, the legal representative shall file the contractual JV’s financial statements or accounting reports.

Deadlock, exit and termination

What deadlock provisions are commonly included in joint venture agreements in your jurisdiction?

Deadlock provisions usually include different forms of call and put options, the right to terminate the joint venture (JV), or the submission of the matter to a third-party expert or to arbitration.

It is worth noting that the Argentine Civil and Commercial Code (the Code) provides that options may not be granted for more than one year. As the Code was only implemented relatively recently (2015), it is still uncertain whether courts will construe this as a mandatory rule, which is non-waivable. Alternatively, agreements could include a buy-sell procedure that, while having the same effects, could arguably be construed as not being subject to the foregoing limitation.

In the case of contractual JVs, call and put options must adopt less traditional forms, as there are technically no shares to be acquired or sold. On the contrary, what the members may transfer is their contractual position in the JV.

The Code grants certain powers to the legal representative or co-administrators of the companies in the case of deadlock, which, in some cases, the shareholders of corporate JVs may want to limit.

The Argentine General Companies Law (AGCL) also provides a right of withdrawal to the shareholders of corporate JVs.

Deadlock solutions may be reflected in the constitution documents or by separate agreement.

When analysing the incorporation of specific deadlock provisions to a certain joint venture, it is important to take into consideration their potential effects. For instance, if the joint venture has been set up to perform certain work adjudged by means of a public bidding, it would be critical to ensure that solutions do not conflict with the terms of the public bidding.

What exit provisions are commonly included? Does the law restrict any forms of mandatory transfer provision or any basis of calculation?

Exit provisions usually include call and put options, tag- and drag-along rights and rights to request termination of the JV, among others.

It is understood that mandatory transfer provisions agreed between sophisticated parties should not be questioned, although some debate exists regarding the validity of these clauses considering that they will require one party to be forced to relinquish its investment.

As regards the basis of calculation, apart from the provisions of the AGCL regarding the price to be paid to shareholders of a corporate JV exercising the right of withdrawal, there are no specific rules about the consideration to be paid. Therefore, in principle, the basis of calculation can be agreed by the parties, with certain limitations. In this sense, the AGCL provides that provisions entitling one party to acquire another party’s interest in a certain JV for a price that does not reflect the actual value at the time of the acquisition shall be null and void. Likewise, the Code grants certain rights to the party of an agreement that has assumed an obligation that has become excessively onerous with the passing of time.

The Argentine Bankruptcy Law does not specifically refer to compulsory transfers of shares by the shareholders of a company undergoing a bankruptcy procedure. As a general rule, shareholders can sell their shares in a company even if it is undergoing a bankruptcy procedure.

If the sale is, however, somehow made in detriment to creditors, it would become an ineffective act (which requires proof) by means of a bankruptcy revocation action. If it is a donation, for example, it is ineffective in its own right and the court usually declares it as such.

Moreover, if a shareholder exercises the right to withdraw at the time the insolvency status of the company began, that shareholder must reimburse the amount they received from the company.

What are the tax considerations on termination of the joint venture?

Upon termination of a corporate JV, if the company dissolves and winds up, any asset to be transferred to the shareholders could trigger value added tax and income tax for the price difference between the tax cost and the fair market value of the involved assets. Also, withholding tax of 7 per cent, as the case may be, may apply if winding-up dividends are approved.

As a general rule, the termination of a contractual JV could trigger taxes if assets other than cash are transferred to the members. 

Disputes

In your jurisdiction, are there constraints on the choice of law or the method of dispute resolution provided for in joint venture agreements?

Argentine law generally allows parties to choose the law that will govern their agreements provided there exists some connection to the system of law that is selected, although certain matters are governed exclusively by local law. Therefore, members of a contractual joint venture (JV) would, in principle, be permitted to choose the law that will govern their collaboration agreement. The same rule would apply to complementary agreements of both corporate and contractual JVs. The constitution documents of a corporate JV, however, must be governed by Argentine law.

Argentine law also acknowledges that parties to a contract may select a jurisdiction other than Argentina for the settlement of their disputes, provided that the matter is of an international nature and relates to pecuniary rights. However, Argentine courts retain their exclusive jurisdiction over certain types of dispute, such as insolvency proceedings relating to debtors domiciled in Argentina or whose principal place of business is in Argentina. Both litigation and arbitration are generally permitted as dispute resolution methods in JV agreements. Therefore, provided that the above requirements are met, members of a contractual JV would, in principle, be permitted to select a jurisdiction other than Argentina or submit to arbitration. The same rule would apply to complementary agreements of both corporate and contractual JVs. With regard to the constitution documents of corporate JVs, it is generally accepted that by-laws may provide that disputes should be submitted to arbitration, although it is controversial whether this could be seated in a foreign jurisdiction.

It is worth noting that the possibility of setting different laws or methods of dispute resolution in the constitution and complementary agreements should be carefully reviewed, since it may be inconvenient from a practical perspective (eg, leading to contradictory interpretations of the rights of the parties and to discussions as to which would be the competent tribunal for dispute resolutions).

In the case of joint ventures aimed at participating in public projects (known as consortia) involving foreign investors, resorting to investment arbitration may also be an available method of dispute resolution on the basis of one of the bilateral investment treaties to which Argentina belongs.

If the JV is to operate in regulated industries or apply to a certain public bidding process, it will be important to review the above in light of specific applicable regulations or bidding rules.

What mandatory provisions of local law will apply irrespective of the choice of governing law?

In Argentina, the selection of foreign law will only be valid to the extent that the contracting parties have not agreed on such law with the purpose of evading the application of any mandatory rules contained in Argentine laws that would apply in the absence of a choice-of-law provision. Typical public policy laws that may be relevant to consider in JV agreements include criminal, tax, labour and bankruptcy laws, as well as certain corporate and contractual rules. Similarly, the Argentine Civil and Commercial Code (the Code) requires that the law selected by the parties does not breach Argentine public policy or international mandatory rules of those states that may have a strong connection with the case.

Are there any restrictions on the remedies a tribunal can grant that would have a bearing on the arbitration of joint venture disputes? Are there any restrictions on the arbitration of shareholder claims?

Under the Argentine legal system, arbitrators can resolve disputes submitted to their arbitral jurisdiction and grant orders or preliminary measures (iudicium). However, arbitrators lack the power to enforce their decisions by force (imperium). Hence, the parties or the arbitrators themselves must eventually resort to the Argentine state courts to enforce the arbitral award or preliminary measures (such as attachment of assets or any other type of measure ordered by the arbitrators). In principle, there are no restrictions as to the arbitration of shareholders’ or members’ claims.

Are there any statutory protections for minority investors that would apply to joint ventures?

The Argentine General Companies Law contains certain rules aimed at providing protection to minority shareholders (eg, cumulative votes, right to withdraw). Also, other rights may be granted contractually and may not necessarily be reflected in the company’s by-laws. Since contractual JVs do not have a separate legal personality, decisions are generally adopted by their members (eg, it is possible to qualify the majorities provided by the Code and decide their manner of representation).

How can joint venture parties have liabilities to each other beyond what is expressly agreed in the joint venture agreement?

As a general rule, the shareholders of a corporate JV limit their liability to their capital contributions. Also, the Code sets forth different rules regarding the extent of the liability of the JV members for each collaboration agreement.

The JV parties may, however, have liabilities beyond the foregoing and any specific provision agreed by the JV parties in certain cases, such as when the rights of users and consumers are involved in the dispute or in the case that a court understands that there are sufficient grounds to pierce the corporate veil (in the case of corporate JVs). In these cases, liabilities may be extended to the right of compensation on behalf of the parties.

Are there any particular issues that can arise in joint venture disputes in your jurisdiction concerning disclosure of evidence?

There are no particular issues regarding the disclosure of evidence in JV disputes that would not normally arise in any other kind of litigation within the Argentine forum. However, in accordance with Argentine procedural rules, the evidence is produced within the proceedings as there is no pretrial discovery stage. Under exceptional circumstances, and provided that certain requirements are met, a party can file for a preliminary proceeding to secure or produce in advance the evidence that it intends to use in future litigation. Likewise, evidence is revealed during the judicial proceedings and incorporated into the file, becoming a key tool for the judge to support the decision.

Market overview

What advantages does your jurisdiction offer for parties wishing to set up and operate joint ventures?

The Argentine legal framework provides investors with a great variety of instruments through which joint venture (JV) businesses could be implemented. This allows for the implementation of tailor-made structures that meet the needs of the JV parties and the project they seek to carry out. Also, investors will find highly educated professionals to help them in structuring their JVs.

Argentina is a large country with vast natural and human resources. Also, prices and salaries in Argentina are very competitive, which may be an advantage.

Are there any particular requirements or restrictions relating to joint ventures in your jurisdiction that could deter international investors?

Each project should be analysed on a case-by-case basis to determine its viability under applicable laws. However, the reintroduction of foreign exchange restrictions in late 2019 and other measures adopted in the context of the covid-19 pandemic can represent a challenge for certain investment structures.

Moreover, foreign companies must comply with certain requirements to participate in a JV in the city of Buenos Aires. In this jurisdiction, the foreign shareholder must provide evidence for relevant activity outside Argentina and cannot be an offshore entity, or incorporated in a tax haven or a low or zero tax jurisdiction, among others.

Update and trends

What are the current trends affecting joint ventures in your jurisdiction? What recent developments in legislation and case law have had an impact on joint ventures?

The year 2020 was challenging for Argentina from a macroeconomic and political perspective, and the covid-19 pandemic aggravated existing difficulties. However, there are now business opportunities available as, due to the pandemic, local companies’ price estimates are well below their historic valuations.