Following Argentine Central Bank’s Communication 5318 which suspended the ability of residents and legal persons to purchase foreign currency since 2012, foreign companies have been unable to offer employee stock purchase plans (“ESPPs”) in Argentina and employees or other individuals have been unable to remit funds out of Argentina for the purchase of shares under other equity plans.
On December 17, 2015, the Central Bank issued Communication “A” 5850 which lifts several exchange control restrictions and allows Argentinian residents (both individuals and local entities, other than entities in the financial sector) to purchase foreign currency and transfer funds abroad for investment purposes (including for investment in foreign securities), subject to certain restrictions and requirements (further described below).
Practically speaking, this means companies can resume offering ESPPs or similar purchase plans and lift any cashless exercise restrictions imposed on stock options. Similarly, local entities should be able to make reimbursement payments for shares issued to its employees to the foreign parent company.
Any outward remittances are subject to a monthly limit of US$2 million per individual/local entity, and in order to effect the foreign fund transfer from Argentina, certain steps must be taken. In particular, various documents must be completed and executed, such as a currency exchange slip provided by the bank assisting with the transfer, a sworn statement indicating the origin of the funds used to purchase the foreign currency/ assets and a sworn affidavit declaring that the individual/entity has not exceeded the US$2 million monthly limit. The bank assisting with the transfer may ask for other administrative forms to be completed and executed. Any funds must be transferred to a foreign account opened in the name of the individual/local entity which acquired the foreign currency.
It is not clear yet whether intercompany transfers (i.e., the remittance of funds by way of offsetting book entries between the local entity and the foreign parent company) will be permitted.
It is expected that the requirements for the remittance of funds out of Argentina will be further clarified in the coming months.
We would like to thank our colleagues in Buenos Aires, Martin Quintanar and Gabriel Gomez-Giglio, for their advice and contributions to this alert.