Typical transaction structures – public companies

What is the typical structure of a business combination involving a publicly traded real estate-owning entity?

Corporations that operate in Argentina are regulated by Law No. 19,550 (the Commercial Companies Law (CCL)) and the National Civil and Commercial Code. These describe the different types of business combinations that companies can adopt within the Argentine jurisdiction, and hence, their business structures. It is worth noting that the different types of legal entities are set out in the CCL, and for a company to be legally constituted in Argentina, it must adopt one of these established legal types.

The business structure that is adopted depends on multiple factors, such as:

  • the form of corporate governance;
  • constitution requirements;
  • financing instruments;
  • legal protection of assets;
  • need for third-party equity capital; and
  • constitution and operations costs.

The typical business combination involving a publicly traded real estate-owning entity is the corporation. One of the main reasons for this is that the process to transfer the shares issued by a corporation, as provided by the CCL, is simple compared to other business combinations. This process is regulated in articles 214 and 215 of the CCL and the only formal requirement is the notification of the transfer to the company’s shareholders.

There are not many publicly traded real estate-owning entities in Argentina, therefore a trend in this regard is not yet identifiable. Conditions up to 2019 suggest that the best structure of a business combination is participation as a shareholder in a company owning real estate or participation in a real estate investment trust (REIT) that is investing in real estate in Argentina. (See question 35.)

Typical transaction structures – private companies

Are there any significant differences if the transaction involves a privately held real estate-owning entity?

There are no significant differences if the transaction involves a privately held real estate-owning entity.

Nonetheless, the Capital Markets Law (Law No. 26,831, as regulated by Decree No. 1,023/2013 and amended by the Productive Financing Law No. 27,440) and its corresponding administrative regulation by the National Securities and Exchange Commission (CNV) have regulated merger and acquisition (M&A) transactions regarding companies that publicly trade their shares. In this regard, the Capital Markets Law, as amended by the Productive Financing Law and the CNV rules, establishes that a mandatory tender offer is to be made by the party that has effectively reached the control of a target publicly traded entity, to protect the minority shareholders against changes of control in publicly held companies. A tender offer allows the minority shareholders to participate in the ‘control premium’ paid to the controlling shareholders.

On the other hand, for the companies that publicly trade securities other than shares, no tender offer is required. However, pursuant to the CNV rules, the acquiring company must notify and obtain the approval of the transaction from the Public Registry of Commerce as long as it is not a publicly traded entity, and the company being acquired must notify and obtain the approval of the transaction from the CNV, as long as it is a publicly held company (with securities other than shares) (according to article 14, section I, Chapter X of Title II of the CNV rules).

Typical transaction process

Describe the process by which public and private real estate business combinations are typically initiated, negotiated and completed.

In Argentina, the process by which public and private real estate business combinations are typically concluded generally do not differ from those of non-real estate-related businesses, in the sense that the business object does not affect the process.

However, the processes by which business combinations are concluded tend to differ, as every transaction has its own particularities and characteristics.

Nonetheless, transaction processes usually consist of:

  • pre-negotiation handled informally in any way suitable for the parties;
  • creating a letter of intent (LOI) resulting from the conclusions of the pre-negotiation;
  • signing of a non-disclosure agreement to grant the purchaser an exclusivity period during which it may conduct the corresponding due diligence on the target;
  • due diligence pursuant to international standards;
  • negotiation of transaction documents, for example, in the form of a stock purchase agreement;
  • signing of transaction documents; and
  • post-closing procedures.

Other points can be considered depending on the structure of the target, for example, in the case of a publicly traded entity, the approval of the CNV.

Law and regulation

Legislative and regulatory framework

What are some of the primary laws and regulations governing or implicated in real estate business combinations? Are there any specific regulations or laws governing transfers of real estate that would be material in a typical transaction?

The following are the primary laws and regulations governing business combinations in Argentina:

  • the Civil and Commercial Code (Law No. 26,994);
  • the Capital Markets Law (Law No. 26,831);
  • the Investment Funds Law (Law No. 24,083);
  • the Commercial Companies Law (Law No. 19,550);
  • the Bankruptcy Law (Law No. 24,522);
  • the Antitrust Law (Law No. 25,156); and
  • the Transfer of Ongoing Business Concern Law (Law No. 11,867).

Regarding real estate business combinations, compliance with the Rural Land Law (Law No. 26,737) and the border security regulations is required.

Cross-border combinations and foreign investment

Are there any specific material regulations or structuring considerations relating to cross-border real estate business combinations or foreign investors acquiring an interest in a real estate business entity?

For a foreign investor to participate in a cross-border business transaction in Argentina, the investor or the acquirer must constitute a local subsidiary in accordance with the regulations stipulated by the CCL. To do so, the acquirer or investor can choose from the different combinations provided by the laws, the most common in Argentina being corporations and limited liability companies (LLCs). In recent years, single-owner corporations (known as ‘SAU’) have acquired a certain popularity among investors and acquirers owing to a new regulation enacted for this type of business.

Another option is to open a branch of a foreign company in Argentina. Branches must be duly organised under the laws of their country of origin and register the articles of association or by-laws with the Registry of Public Commerce.

Moreover, in December 2012, the National Congress enacted Law No. 26,737, which sets out the protection regime of the national domain over property, possession or control of rural land in Argentina (the Rural Land Law).

According to the Rural Land Law, ‘foreign persons’ are foreign individuals and legal entities controlled by foreign capital, subject to certain requirements set out under the Law. Moreover, the Rural Land Law provides specific exceptions for foreign persons - for instance, foreign persons with 10 years of continuous, permanent and verified residence in Argentina are exempt from the prior approval of the rural land authority (the Rural Land Registry).

As from the effective date of the Law (5 January 2012), any purchase, transfer or assignment of possession rights of rural lands in favour of foreign persons must be previously authorised by the Rural Land Registry.

The main restrictions under the Rural Land Law are that:

  • foreign persons (physical or legal) cannot own or possess more than 15 per cent of the rural lands of Argentina;
  • foreign persons (physical or legal) of the same nationality cannot own or possess more than 30 per cent of the 15 per cent mentioned above;
  • foreign persons (physical or legal) can own only up to 1,000 hectares in the ‘nucleus area’ (as defined under Decree No. 274/2012) or the ‘equivalent surface’ to the nucleus area in the rest of the country;
  • foreign persons (physical or legal) cannot own or possess rural lands containing, or bordering, large and permanent bodies of water, unless specifically authorised; and
  • foreign individuals or legal entities cannot own or possess rural lands that are in border security zones, unless specifically authorised.

According to the Rural Land Law, all acts executed in violation of it are absolutely and irrevocably null and void and create no right of indemnification in favour of the authors of and participants in the illegal act.

The Rural Land Law also provides that the Rural Land Registry is empowered to initiate administrative proceedings to investigate possible breaches of the Law. The potential violator must be notified of the results of the investigation, following which he or she will have 10 business days to collect and submit evidence. The Rural Land Authority will analyse the incident and apply a penalty it deems appropriate (if any). The penalties may be in the form of warnings, fines and special disqualification orders ranging from six months to two years.

Finally, the purchase of real estate property by foreign persons in border security zones is subject to prior and special authorisation issued by the border security zone authority.

Choice of law and jurisdiction

What territory’s law typically governs the definitive agreements in the context of real estate business combinations? Which courts typically have subject-matter jurisdiction over a real estate business combination?

In Argentina, as a general rule, there is freedom regarding the choice of law and jurisdiction, pursuant to Title IV of the National Civil and Commercial Code, unless a treaty regarding this subject between the countries of which the parties are nationals is in force. In these cases, the treaty will be applicable.

Nonetheless, real estate transactions are an exception to the general rule. Pursuant to articles 2,609 and 2,667 of the National Civil and Commercial Code, whenever a conflict arises regarding property in Argentina, Argentine law will govern the transaction and Argentine courts will rule over the dispute. Civil courts will have subject-matter jurisdiction over a real estate business combination.

Agreements entered into in a foreign country ruling over property situated in Argentina’s jurisdiction, will be enforceable as if they were entered into in Argentina, considering the above.

Approval and withdrawal

Public disclosure

What information must be publicly disclosed in a public-company real estate business combination?

Publicly held entities in Argentina are subject to rule of the CNV, which has established the general rule of ‘full disclosure’, stating that all relevant information regarding publicly held business combinations must be disclosed to the public. This rule stems from the Capital Markets Law, as amended by the Productive Financing Law, and the Transparency Regime of the Public Offer Administrative Ordinance (Ordinance 677/2001) set forth in the Periodic Information Regime (Title IV of the NT 2013 by the CNV).

The full disclosure general rule applies to all publicly held business transactions regardless of their size or the form in which they are executed.

Duties towards shareholders

Give an overview of the material duties, if any, of the directors and officers of a public company towards shareholders in connection with a real estate business combination. Do controlling shareholders have any similar duties?

Directors of local corporations are subject to a standard duty of loyalty and care (section 59 of the CCL). Non-compliance with this standard might result in unlimited and joint personal liability for the damage caused by the director’s action or omission.

Pursuant to section 268 of the CCL, the president of the board of directors is the legal representative of the company, although the company’s by-laws may authorise the performance of one or more directors. The legal representatives bind the company for all acts that manifestly exceed the corporate’s main purpose. This is applicable even in violation of the joint legal representation regime, in cases of obligations being assumed as securities, agreements between absent parties or adhesion contracts, when the other party is aware that the act infringes on the joint legal representation (section 58 of the CCL).

Regarding publicly held entities, article 78 of the Capital Markets Law establishes the principle of loyalty of directors. Among other obligations, article 78 states that directors must avoid any actions that may be contrary to the entity’s interests.

Aside from the principle of loyalty of directors, compliance with the ‘full disclosure’ general rule is relevant. Additionally, article 102 of the Capital Markets Law states that directors and officers must comply with the highest standards of confidentiality regarding information not yet disclosed to the public and that might affect an ongoing negotiation or issuance of shares.

Shareholders’ rights

What rights do shareholders have in a public-company real estate business combination? Can parties structure around shareholder dissent or rejection of a real estate business combination, and what structures are available?

Shareholders in any public-company business combination have the right to dissent or object to any kind of transaction, as long as this right is executed at the corresponding shareholders’ meeting.

A shareholders’ meeting is mandatory according to the Argentine Companies Law (Law No. 19,550). During the meeting, shareholders can object to or dissent from specific transactions, but objections have no effect unless the dissenting opinion is shared by the majority of those holding rights to vote at the shareholders’ meeting. The majority’s configuration will depend on the company’s by-laws, as will the quorum needed for the shareholders’ meeting to take place.

Shareholders in transactions involving private companies in Argentina can agree to drag-along and tag-along rights. As in many other jurisdictions, the purpose of these rights is to protect the specific rights of the majorities and minorities within companies.

Regarding publicly held companies, the acquisition public offer, regulated by the Capital Markets Law, establishes the obligation of the purchaser to make his or her offer to all shareholders, regardless of the amount of shares he or she has, to respect the right to a fair price.

Argentine law also permits pre-emptive rights to be established to enable certain shareholders to acquire new shares prior to their issuance. Finally, in direct relation to this pre-emptive right, shareholders have the right to acquire remaining shares - that is, the product of the equity issuance - when all the shareholders have not exercised their pre-emptive rights. This is known as the ‘right to accrue’.

Termination fees

Are termination fees typical in a real estate business combination, and what is their typical size?

Termination fees in business combinations in Argentina are common, in a number of transactions, including those related to real estate. These fees are generally implemented with a twofold objective. On the one hand, it gives the acquirer the right to prematurely end a transaction before it is perfected in certain cases, and, on the other hand, it gives the seller enough motivation to avoid calling off a transaction.

Reasons why a termination fee is triggered, include:

  • non-compliance with the agreement;
  • the occurrence of a fortuitous or force majeure event; and
  • impossibility to meet all of the conditions prior to the closing of the transaction.

Termination fee provisions are usually included in LOIs and option or preliminary agreements.

Regarding the amount of the termination fee, it is impossible to establish a formula or method to calculate it, since each transaction has its own particularities, among which there are the most diverse kinds and amounts of termination fees. Nonetheless, it is reasonably common to establish the amount of the fee at 2 or 3 per cent of the amount of the transaction. National courts may, under certain circumstances, rule a termination fee as either acceptable or as abusive and so invalid.

Sometimes a fixed amount is agreed as liquidated damages.

Takeover defences

Are there any methods that targets in a real estate business combination can employ to protect against an unsolicited acquisition? Are there any limitations on these methods?

There are no methods targets can employ to protect themselves against unsolicited acquisition offers, other than to withhold consent. Targets can be approached by offerors at any time and under any circumstances, but, ultimately, the target must give its consent for a transaction to be perfected.

However, in unsolicited acquisitions, shareholders of a targeted publicly held company have the right to demand compliance with the requirements of the Capital Markets Law regarding fair price and equitable treatment of shareholders.

Notifying shareholders

How much advance notice must a public target give its shareholders in connection with approving a real estate business combination, and what factors inform this analysis? How is shareholder approval typically sought in this context?

Shareholders’ approval of a business combination in relation to a publicly held company in Argentina is generally sought through the majority of votes in a general shareholders’ meeting. The necessary quorum and the configuration of the majorities should be established in the company’s by-laws.

Regarding the advance notice that a public target should give its shareholders to approve or reject the business combination at hand, there is no specific amount of time, but an extraordinary shareholders’ meeting is generally called.

Finally, there is no specific regulation in regard to the documentation and requirements needed during the shareholders’ meeting, but all the documentation related to the transaction should be provided to the shareholders.

Taxation and acquisition vehicles

Typical tax issues and structuring

What are some of the typical tax issues involved in real estate business combinations and to what extent do these typically drive structuring considerations? Are there certain considerations that stem from the tax status of a target?

There are three different levels of government authorities that can levy taxes, the main authorities being the federal government and provincial governments. Hence, the acquisition of real estate property within the scope of a real estate business combination may be subject to different taxes imposed by the different levels of government simultaneously.

Regarding federal taxes, the sale of real estate property performed by legal entities - both foreign and local - is subject to income tax at a 35 per cent rate on the purchase price. Foreign residents pay the due tax by means of a withholding regime. The sale of real estate property owned by a foreign resident is levied at a rate of 35 per cent more than 50 per cent of the gross value paid (an effective rate of 17.5 per cent), or the purchase price minus expenses incurred to obtain and maintain the source of income (ie, 35 per cent over the net value). The beneficiary may choose which of the taxable bases mentioned will be applied.

However, the sale of real estate property by individuals - both foreign and local - is subject to the tax on real estate transfers at a rate of 1.5 per cent of the purchase price.

As a principle, the sale of real estate property is not subject to VAT. Nevertheless, if the seller of a construction built on his or her own property is considered to be a ‘construction company’ pursuant to the definition set forth by the VAT Law, this principle will not apply and the sale of the building on the property may be subject to VAT (the value of the building or certain parts of it and not the land could be subject to this tax). The general rate is 21 per cent; however, a reduced rate of 10.5 per cent may be applied to the sale of residential real estate property.

Concerning provincial taxes, the acquisition of real estate property may be subject to stamp tax. This tax is levied on the execution of agreements and it is estimated on the economic value of the agreement. The applicable rate differs from one jurisdiction to another, ranging from 1.5 per cent to 5 per cent.

Mitigating tax risk

What measures are normally taken to mitigate typical tax risks in a real estate business combination?

The most common measures to mitigate tax liabilities when acquiring a real estate portfolio are:

  • fulfilling the procedure outlined in Law No. 11,867 on the transfer of going concerns, which involves providing the tax authority with a notification;
  • the creation of an escrow account to cover any potential tax liabilities;
  • the buyer requisitioning an indemnity letter against potential tax claims from the seller; and
  • holding business premises.
Types of acquisition vehicle

What form of acquisition vehicle is typically used in connection with a real estate business combination, and does the form vary depending on structuring alternatives or structure of the target company?

Acquisitions may be structured around multiple and diverse vehicles or types of entities, which are thoroughly considered in the CCL. However, the most common types of entities are corporations and LLCs. In recent years, owing to new regulations, the ‘simplified corporation’ has acquired popularity, but, to date, its use is not yet widespread, so we cannot guarantee its effectiveness regarding transactions of considerable size.

The use of corporations and LLCs to structure a business combination is very common, since both provide many benefits. Their main difference consists in the joint liability of LLCs’ equity holders.

Regarding tax issues, both types have similar, if not the same, conditions. For instance, corporations and LLCs share the same considerations when it comes to federal income tax, gross income tax and social security taxes.

There are, however, other types of companies in Argentina that provide a wider range of benefits regarding tax issues, such as the simplified corporations or non-regular companies (these types of companies are recommended for small enterprises and entrepreneurs). Until 2018, local investment trusts had tax benefits, but with the new regulation, the situation has been mitigated, constituting a similar situation to the above-mentioned types of companies.

The same can be said regarding buyer’s liability, since corporations and LLCs were created to protect shareholders and equity holders.

Regarding other considerations, corporations typically have easier access to credit loans and the public offer regime.

Take-private transactions

Board considerations in take-private transactions

What issues typically face boards of real estate public companies considering a take-private transaction? Do these considerations vary according to the structure of the target?

In Argentina, boards of public companies considering a take-private transaction generally face issues such as:

  • compliance with all permissions and regulations regarding the transaction;
  • value and price of the assets involved;
  • advantages and disadvantages of the transaction;
  • financial and tax issues regarding the transaction; and
  • the risks involved in the business combination.

In addition to these, specifically with respect to take-private transactions, boards of directors generally face other issues in the context of business combinations, such as the designation of officers and directors, increase or decrease of the share capital, and regimes of shareholders’ and directors’ meetings.

Finally, and most importantly, boards must consider the price to make the acquisition public offer. It is highly recommended that financial, legal and technical advice is taken to set this price.

Time frame for take-private transactions

How long do take-private transactions typically take in the context of a public real estate business? What are the major milestones in this process? What factors could expedite or extend the process?

For a publicly held entity to go private, the entity must withdraw from the public offer regime. For this to happen, the decision must be based on one of the reasons established by the CNV. Among the most important reasons is the decision to withdraw from the public offer regime (i) voluntarily, after the decision is adopted at a shareholders’ meeting, (ii) because of a merger or acquisition or (iii) because of bankruptcy.

Depending on the reason for the withdrawal, the procedure will be different, as will its duration.

The most common cases for withdrawal from the public offer regime consist of the voluntary withdrawal or the withdrawal owing to bankruptcy. Both procedures contemplate the requirement of holding a public offer for acquisition of shares (OPA). In Argentina, holding an OPA takes around 10 to 12 months, depending on the size of the transaction and other factors.


Non-binding agreements

Are non-binding preliminary agreements before the execution of a definitive agreement typical in real estate business combinations, and does this depend on the ownership structure of the target? Can such non-binding agreements be judicially enforced?

Non-binding preliminary agreements such as LOIs or memoranda of understanding are very common, even though there is no legal obligation regarding their implementation. Generally, this does not depend on the target’s structure, as every kind of structure involved in a business combination may use these kinds of instruments. Nonetheless, the content of these instruments may vary depending on the structure of the parties involved in the transaction.

Non-binding documents are generally not enforceable through judicial means, because of their nature, but, in certain and specific cases, non-binding documents may be enforceable, partly or in full.

Enforceability will depend on many factors, with the intention of the parties involved towards the enforceability of the instrument being the most important.

Typical provisions

Describe some of the provisions contained in a purchase agreement that are specific to real estate business combinations. Describe any standard provisions that are contained in such agreements.

Regarding provisions specific to real estate business combinations, purchase agreements generally contain, within the representations and warranties chapter, provisions such as:

  • the good, valid and marketable title to all real property, free and clear of all encumbrances, other than those permitted;
  • the absence of proceedings, claims, disputes or conditions affecting any real property that might curtail or interfere with the use of this property;
  • the absence of any governmental decree or order establishing the condemnation, expropriation or taking of the whole or any portion of the material real property;
  • the absence of notifications regarding the violation of the real property of any applicable building, zoning, health, sanitary or other law, ordinance or regulation;
  • financial capacity of the buyer at the closing of the transaction; and
  • compliance with all regulatory and environmental regulations.

Are there any limitations on a buyer’s ability to gradually acquire an interest in a public company in the context of a real estate business combination? Are these limitations typically built into organisational documents or inherent in applicable state or regulatory related regimes?

In Argentina, the only limitation on a buyer’s ability to gradually acquire an interest in a public company is the offeror’s obligation to make a tender offer in cases when the buyer has effectively reached the control of companies that publicly trade their shares:

  1. through the voting shares, subscription rights, stock warrants or stock options, convertible securities or other similar instruments of the target company that are entitled to own or buy shares;
  2. through agreements with other holders of securities that, in a concerted manner, ensure the necessary votes to form the corporate will in ordinary meetings or to elect or revoke the majority of the board members; and
  3. indirectly or as a result of a corporate reorganisation process.

The CNV expressly states that the offer to purchase must represent 100 per cent of the shares with voting rights or pre-emptive rights stock warrants or stock options, convertible securities or other similar instruments. The price of the takeover bid will be adjusted to the fair price standards, also established by the CNV.

Notwithstanding the above, disclosure requirements are triggered by the acquisition of shares or other securities that entitle holders to more than 5 per cent of the voting rights of companies that publicly trade their shares. Thus, every transfer of shares that exceeds or modifies this percentage threshold will trigger disclosure obligations.

Certainty of closing

Describe some of the key issues that typically arise between a seller and a buyer when negotiating the purchase agreement for a real estate business combination, with an emphasis on building in certainty of closing. How are these issues typically resolved?

When negotiating the purchase agreement for a real estate business combination, some of the typical issues that may arise include:

  • the existence of the good, valid and marketable title to all real property, free and clear of all encumbrances;
  • the absence of any environmental liability;
  • the purchase price and its corresponding adjustment, if any;
  • the provisions of the escrow agreement or any other holdback agreement; and
  • the termination rights and fees.

These issues are generally resolved through:

  • the conditions precedent;
  • covenants;
  • representations and warranties;
  • indemnification;
  • the escrow agreement; and
  • ownership and cadastral certificates.
Environmental liability

Who typically bears responsibility for environmental remediation following the closing of a real estate business combination? What contractual provisions regarding environmental liability do parties usually agree?

The owner of real estate bears the responsibility for environmental remediation prior to the closing of a real estate transaction. Likewise, in real estate business combinations, the seller holds responsibility for this remediation and generally agrees to keep the purchaser harmless. As with most provisions, the responsibility in this regard can be negotiated, but, as stated above, it is the seller who generally warrants compliance with all environmental laws, decrees and regulations.

Provisions regarding environmental liability generally include the following sections:

  • the property is in material compliance with all applicable environmental law;
  • the seller has not received any communication (written or oral), whether from a governmental body, citizen groups, employee or otherwise, that alleges that the property is not in full compliance with any applicable environmental law; and
  • no proceedings or orders are at closing date effective in connection with environmental, health or safety matters requiring investigation, clean-up, remediation, cure, work, constructions or material capital investments or expenditures.

Following closing date, the buyer will bear all responsibilities for environmental remediation unless stated otherwise.

Other typical liability issues

What other liability issues are typically major points of negotiation in the context of a real estate business combination?

Major issues regarding the liability of the parties involved in the context of a real estate business combination generally include:

  • the good and valid title to all real property;
  • compliance with all permits regarding the use and the construction of the property;
  • labour risks;
  • hidden defects; and
  • warranty against eviction and third-party claims.
Sellers’ representations regarding leases

In the context of a real estate business combination, what are the typical representations and covenants made by a seller regarding existing and new leases?

In real estate business combinations, the buyer takes over all the seller’s obligations towards third parties as agreed in the transaction documents. In this context, the buyer assumes the responsibilities of the seller either as landlord or as tenant. Hence, the most common representations agreed by the parties involved in the transaction in this regard contemplate the validity of the lease agreements, the due payment of the rent and corresponding taxes - either from the landlord’s or the tenant’s perspective - and the absence of claims by the other party involved in the lease agreement or by third parties.

Covenants in this regard may include the obligation of the seller not to enter into any new lease agreements between the end of negotiations and the end of the transaction.

Change of control in either landlord or tenant should not be expressly forbidden.

Due diligence

Legal due diligence

Describe the legal due diligence required in the context of a real estate business combination and any due diligence specific to a real estate business combination. What specialists are typically involved and at what point in the transaction are the various teams typically brought in?

Due diligence is required in the context of a business combination, whether it is real estate-related or not, and takes place before the transaction. During the pre-transaction period, the seller will, at the buyer’s request, set up a data room that can be either in physical or virtual form. The data room will contain the legal, financial, accounting, labour, tax, corporate, environmental and real estate information that may be of interest to the buyer and the transaction at hand.

The process will consist of the analysis of the listed information by the corresponding and qualified professionals and, based on the analysis, the drafting of a due diligence report, which will include all the seller’s relevant information, including all its properties.

Due diligence generally includes lawyers, financial and accounting advisers, representatives and, should it be needed, technical advice.

The time at which these groups are brought in varies greatly depending on the transaction and the approach adopted.


How are title, lien, bankruptcy, litigation and tax searches typically conducted? On what levels are these searches typically run? What protection from bad title is available to buyers, and does this depend on the nature of the underlying asset?

Titles to all real property are registered at the corresponding Registry of Real Property in the jurisdiction in which the property is located. The titles must be requested at the Registry and reviewed by the corresponding professionals to detect any inconsistencies or irregularities.

Regarding bankruptcy and litigation matters, the information is registered diffusively since there is no single registry in this regard. However, the Registry of Trials in each jurisdiction is the most trustworthy place to begin the search.

Concerning tax matters, there is no registry of pending taxes but, depending on the jurisdiction and the taxed asset or action, there are several web pages or offices where specific information regarding specific taxes can be requested. Generally, the main offices that provide this information in the city and the province of Buenos Aires are the Federal Administration of Public Income, the Takings Agency of the Province of Buenos Aires and the General Administration of Public Income.

Tax and litigation indemnities are generally agreed while negotiating the terms of the transaction.

Representation and warranty insurance

Do sellers of non-public real estate businesses typically purchase representation and warranty insurance to cover post-closing liability?

In Argentina, and in Latin America, insurance for representations and warranties is not common. Insurance companies do not provide this service except in unique and specific circumstances. Nonetheless, there have been attempts to implement this kind of insurance for M&A deals. Insurance companies, and business people interested in these kinds of transactions, believe that in the future, this kind of insurance might be implemented in Argentina.

Review of business contracts

What are some of the primary agreements that the legal teams customarily review in the context of a real estate business combination, and does the scope vary with the structure of the transaction?

Legal teams generally review agreements such as the lease, management, and supply and service agreements. Titles and permits are always reviewed.

The scope of the review will mainly depend on the corporate structure of the business combination. This structure will determine the corporate documentation to be reviewed.

Breach of contract

Remedies for breach of contract

What are the typical remedies for breach of a contract in the context of a real estate business combination, and do they vary with the ownership of target or the structure of the transaction?

In Argentina, the breach of a contract in the context of a business combination may be remedied through the implementation of termination or rescission rights. Some of the most commonly used are termination fees, liquidated damages or reduction of the purchase price.

M&A deals in Argentina generally implement termination fees, regardless of the structure of the business combination.


Market overview

How does a buyer typically finance real estate business combinations?

A buyer can finance business combinations through loans granted by financial institutions. These can be either banking institutions or private equity institutions.

Additionally, with the purpose of promoting certain aspects of the economy, the federal, provincial and municipal governments have financed projects in recent years.

Generally, in real estate business combinations, mortgages are agreed as warranty of payment in favour of the lender.

Seller’s obligations

What are the typical obligations of the seller in the financing?

Generally, the seller does not have any sort of obligation towards the buyer or the lender in this regard, other than the obligation to operate in good faith and the obligation to deliver the property on the agreed date and terms, particularly if this property is going to be mortgaged in favour of the lender. The main reason for this is that the seller is not a creditor or a debtor in the relationship. In addition, the seller generally does not have a say regarding the method by which the business combination is financed.

Repayment guarantees

What repayment guarantees do lenders typically require in the context of a property-level financing of a real estate business combination? For what purposes are reserves usually required in the context of property-level indebtedness?

In real estate-related business combinations, lenders generally request a mortgage over the property that is being acquired to guarantee the corresponding payment, since this is the fastest and easiest way to do so.

The mortgage can be set upon a property other than the one being acquired, but since the loan is intended and directed towards the acquisition of the asset, it is expected that there will be a connection between the amount of the loan and the amount of the purchase.

Other repayment guarantees include the borrower’s guarantor or sponsor regarding the obligations towards the lender.

Borrower covenants

What covenants do lenders usually insist on in the context of a property-level financing of a real estate business combination?

Lenders generally insist on covenants such as:

  • loan exclusivity in relation to the purchase;
  • loan-to-value covenants;
  • compliance with applicable legislation;
  • governmental licences;
  • property-related covenants, such as maintenance of insurance and maintenance of the property; and
  • information covenants.

Covenants requested by lenders may vary greatly depending on the size of the transaction and the loan.

Typical equity financing provisions

What equity financing provisions are common in a transaction involving a real estate business that is being taken private? Does it depend on the structure of the buyer?

Take-private real estate-related business transactions are not common, which makes it difficult to establish a pattern in equity financing provisions.

However, in a transaction with the aforementioned characteristics, common provisions include:

  • a buyer’s representation to the seller concerning the terms of its committed debt financing;
  • a covenant of the buyer to obtain financing;
  • a covenant of the seller to cooperate with the buyer in obtaining financing; and
  • financing conditions, such as break-up fees or reverse break-up fees.

Collective investment schemes


Are real estate investment trusts (REITs) that have tax-saving advantages available? Are there particular legal considerations that shape the formation and activities of REITs?

In Argentina, REITs, as they are known in other parts of the world, do not exist. Other similar investment vehicles, such as trust funds, share certain basic aspects of REITs, but none of their characteristics make them REITs. However, with recent changes regarding investment legislation, analysts agree that the situation is favourable enough for REITs to appear and develop.

Investors worldwide are looking forward to the development of this specific investment vehicle in Argentina because of the possibilities they offer and their compatibility with the country’s economic situation.

Private equity funds

Are there particular legal considerations that shape the formation and activities of real estate-focused private equity funds? Does this vary depending on the target assets or investors?

Real estate-focused private equity funds are not fully developed in Argentina. Hence, it is difficult to establish a pattern for the formation and activities of this kind of fund.

Update and trends

Key developments of the past year

Are there any other current developments or emerging trends that should be noted?

Key developments of the past year37 Are there any other current developments or emerging trends that should be noted?

In early September 2019, several foreign exchange regulations were enacted. These regulations may be temporary, depending on the development of the economic policies of the new elected government that will be taking office in December 2019.