May 25, 2021
Argentina corporate legal authorities modify regime for foreign companies
The resolution clarifies the rules for foreign corporations to be classified as special purpose vehicles. Companies doing business in Argentina should analyze how these new rules will affect their operations, including their investments.
On May 17, 2021, Argentine corporate legal authorities (i.e., the Public Registry of Commerce of the City of Buenos Aires (PRC)) published, in the Official Gazette, General Resolution No. 8/2021 (Resolution 8/2021), modifying the regime for foreign companies registered as "investment vehicles" or "special purpose vehicles" (SPVs).
Resolution 8/2021 introduces new regulations and modifies PRC General Resolution No. 7/2015, which established the rules for foreign companies that hold shares/interests in Argentine entities to register with the PRC.
The resolution subjects foreign companies that request to register as SPVs with the PRC, and those that are already registered as SPVs, to the following rules:
a) SPV status must be declared at the time of registration.
b) The registration of more than one SPV per foreign company group is not allowed.
c) SPV status will not be granted if the company's direct or indirect controlling entity is registered in Argentina under Section 118 or 123 of Argentinean General Companies Law No. 19,550 (AGCL).
d) SPV status will not be granted to companies with shareholders that are sole-shareholder corporations. Similarly, the registration of a local sole-shareholder corporation whose shareholder is a foreign sole-shareholder corporation will not be approved, regardless of whether the foreign sole-shareholder corporation is an SPV.
In addition, the resolution clarifies that foreign companies registered under the provisions of Sections 118 or 123 of the AGCL that have their primary shareholdings in local companies that are domiciled and headquartered in the City of Buenos Aires must be registered before the PRC (that is to say, in the City of Buenos Aires). Their registration in other jurisdictions of Argentina will not be enforceable.
The resolution requires foreign companies to file an investment plan with the PRC when registering under the provisions of Section 123 of the AGCL. The plan must include the list of entities in which the foreign company intends to hold shares or incorporate in Argentina. The plan also must include the foreign company's domicile, name, the effective activity the foreign company carries out abroad and the effective activity of the local entities in which it intends to hold shares or incorporate. Additionally, the plan must identify the local entities' shareholders and the number of shares the foreign company intends to acquire.
If the foreign company does not identify a beneficial owner under the terms of Section 510 of the PRC General Resolution No. 7/15, the rules clarify that the foreign company must have evidence of one of the following to show that a beneficial owner does not exist:
a) The parent company has all its shares listed on a stock exchange.
b) The ownership of the shares among individuals does not reach the minimum percentage of 20% of ownership.
Companies doing business in Argentina should analyze the impact of these changes on their operations, particularly those holding entities used to make investments in Argentine territory.