For purposes of conducting business in Argentina, a foreign investor may either incorporate a company under one of the types provided for by the Argentine Companies Law (“ACL”) – subsidiary – or it may set up a branch of its company and appoint a representative thereto. Foreign investors normally elect to set up a subsidiary under the type of Corporations (Sociedades Anónimas “SA”) or Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”), for both cases the foreign investor’s liability is limited to the stock capital amount invested in the subsidiary. This first post will summarize the SRL main characteristics.
Foreign investors infrequently prefer the branch structure, as (unlike corporations and limited liability companies) branches do not enjoy limited liability. Branches are not considered to be a separate entity from their parent companies, and therefore, all such acts carried out by the branches are considered as directly performed by the parent company itself. This implies that foreign entities are fully liable for all the transactions carried out by their branches. Both legal structures (subsidiaries and branches) require the foreign investor to be registered with the Public Registry of Commerce in Argentina.
Main characteristics of the Argentinian Limited Liability Companies: las Sociedades de Responsabilidad Limitada (SRL)
Registration and by-laws: No more than 50 quotaholders are permitted in the limited liability companies.
Capital Limited liability companies: No minimum capital is required to form a limited liability company. As in the case of the corporations, the corporate capital must be proper to the development of the corporate purpose and the Public Registry of Commerce may request the companies to fix an amount higher than the one decided by the partners. At least 25% of the capital must be paid up at the time of formation and the remaining 75% must be contributed within a term of two years as of that moment.
Liability SRL: The liability of the quotaholders is limited to the amount of the capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable when companies have been organized or used with fraudulent purposes, abusing of the right to organize such separated legal person.
Legal Books and Records SRL: Only a Book of Meetings of Managers and Quotaholders is required.
Management SRL: Are managed by managers who may be appointed indefinitely. Managers are not required to be Quotaholders and also the majority must be resident in Argentina. Managers have the same rights and obligations as directors of corporations.
Supervision SRL: the appointment of a syndic is optional unless the capital is more than AR$ 10,000,000, in which case one or more syndic must be appointed.
Quotaholders’ Meetings SRL: Corporate resolutions are adopted by a partners’ resolution as set forth in the act of incorporation. At least one Ordinary Quotaholders’ Meeting must be summoned annually to consider the financial statements, the managers’ report, allocation of profits, and appointment of managers and statutory auditors as basic subjects. Amendments of the by-laws, should a sole partner represent the majority vote, require the vote of another partner.
Financial statements, Balance Sheets and Accounts SRL: Annual financial statements must be submitted for the consideration of the Quotaholders’ Meeting. Same must be filed with the Public Registry of Commerce only if the capital exceeds the amount of $ 10,000,000.