Bill: “Foundations and Starting Points for the Freedom of the Argentineans” - Amendments to the General Companies Act

Following our previous publications about this topic (see link), we hereby inform briefly the main amendments proposed under the so called “Foundations and Starting Points for the Freedom of the Argentineans” Bill (the “Bill”) submitted by the President with the Federal Congress on December 27, 2023 on the General Companies Act N° 19,550 (the “GCA”).

Should the amendment under the Bill be enrolled by the Federal Congress, they will complement other amendments already in force as per the Emergency Decree N° 70/2023, i.e., abrogation of regulations of the business organizations in which the Federal Government is a member (e.g. mixed private-public ownership companies, or state-owned enterprises and companies), amendments of sections 30 and 77 of the GCA in relation with the ownership of shares of any corporation by nonprofit organizations, or the amendment of subsection 299:3 GCA, with respect to the permanent governmental auditing over the state-owned business organizations.

The Bill, among others, includes the following amendments to the GCA:

▪️ Single Member Limited Liability Companies (S.R.L.U.). In addition to the single shareholder corporations (sociedades anónimas unipersonales or “S.A.U.”), admitted under Act N° 26,994, the Bill introduces the single member limited liability companies (sociedades de responsabilidad limitada unipersonales or “S.R.L.U.”). As the Bill also includes the abrogation of subsection 299:7 GCA, sole member business organizations (whether they are S.A.U. or S.R.L.U.) will not be subject to permanent governmental auditing anymore provided, however, the activity of the business organization is not included in any of the other subsections of section 299 GCA.

▪️ State-controlled corporations (SAPEM). In accordance with the amendments under Decree 70/2023, the Bill abrogates the regulations of the state-controlled corporations (sociedades anónimas con participación estatal mayoritaria or “SAPEM”) and, as per the amendment of Section 1 of the GCA, it includes the principle of equal treatment in corporate matters, even if is a state-owned business organization and a public interest is invoked.

▪️ Employee stock ownership and corporation’s acquisition of its own shares. The Bill adds section 221 bis to the GCA, by which corporations might issue shares in consideration with performance bonuses or, with the express and sole consent of the employee, a below pair payment. Those shares may be acquired by the corporation under the new subsection 220:4 GCA added in the Bill and, as per the new subsection 13:5 GCA, by-laws may include an acquisition price different from the actual value of the shares without being construed as an abusive provision. The abovementioned amendments are complementary to amendments in force under Decree 70/2023, in relation with the Employee Stock Ownership Plan under Act N° 23,696.

▪️ Dividend right. Pursuant to the amendment of section 1 GCA, by-laws may include any provision, without any limitation, with respect to the final profit distribution, including a non-distribution provision, subject to unanimous consent of the members.

▪️ Objects with multiples activities. Contrary to the regulations of certain Public Registries (cfr. section 67 of General Resolution N° 7/2015 as amended of the Superintendency of Companies), pursuant to the amendment of Section 11 and the addition of Section 6 bis to the GCA, by-laws may include multiples activities in the objects in the extent they are permitted by law.

▪️ Subordination of the member’s credits. The Bill stipulates the subordination of the credits of the members against the business organization, which shall be paid after the third parties’ credits are fully paid.

▪️ Right of members to appraisal. Members of any business organizations may be entitled to a right of appraisal (derecho de receso) without invoking any cause and only subject to a 90-days expiration term. As the abovementioned amendment would be added under the new section 55 bis in Chapter 1 of the GCA “General Provisions”, the appraisal right may be applicable to any business organizations, irrespective of the business organization type.

▪️ Mandatory appraisal. Under the Bill, Members that hold at least 2% of the capital stock and do not participate at the member’s meetings or do not collect dividends during the last five consecutive fiscal years shall be excluded by the business organization under a mandatory appraisal (receso forzoso).

▪️ Undefined term of office of the directors of corporations. By-laws of the corporations (sociedades anónimas) may include provisions which set forth whether a specific or an undefined term of office of the directors or may delegate to the shareholders meeting the determination of the term of office. Except otherwise provided, the term of office shall be undefined.

▪️ Nominative shares regulations. Several sections of the GCA, e.g., sections 208, 213, 215, 263 and 335, are amended in accordance with Nominative Private Shares Regulations Act N° 24.587 (Official Gazette, 11/22/1995).

 

For further information please contact us at corporate@trsym.com.

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Omnibus Reform Bill: Modifications to Hydrocarbons and Natural Gas Regulatory Framework

On December 27, 2023, Argentine President Javier Milei sent to the Congress an omnibus bill (the “Omnibus Bill”). Matters pertaining to hydrocarbons and natural gas are addressed below:

I. Amendments to Law 17,319 on Hydrocarbons

  1. Scope and objectives: The Bill includes the hydrocarbon processing activity as part of the law’s scope, empowering the Executive Branch to grant authorizations for its development. Also, the main objective of the national policy is modified to maximize the income obtained from resources’ exploitation and satisfaction of the hydrocarbon needs of the country.
  2. Free trade: The Executive Branch would no longer have the power to fix prices of the domestic market in any of the production stages (by way of eliminating the so-called domestic barrel). In the case of state-owned companies, these may only trade at arms-length prices. In relation to foreign market permit holders, concessionaires, refiners and/or marketers, these may freely export hydrocarbons and/or their derivatives, and the Executive Branch will regulate its conditions, with the end-goal of promoting free international trade.
  3. Exploration activities: The Bill removes the exclusivity of the superficial examination in areas reserved to state-owned companies and revokes the section that did not allow to begin with such works without prior approval. On the other hand, Section 21 modifies the payment of royalties for hydrocarbons extracted during exploration (previously set on 15%), which will now be agreed in the bidding process.
  4. Investment regime: Concessionaires would no longer be required to ensure that their investments ensure the maximum production of hydrocarbons, and that they are compatible with the adequate and economic exploitation of the field and the observance of criteria that guarantee the adequate conservation of reserves.
  5. Exploitation by foreign legal entities: the Bill overturns the Section that did not allow foreign legal entities to bid for permits and concessions.
  6. Royalties: The exploitation concessionaire would pay a monthly payment to the grantor, to be determined in bidding awarding process. Furthermore, the enforcement authority will have the power to reduce the royalty up to five percent (5%) taking into account the productivity, conditions, and location of the wells. Per the bill, royalties will be the sole income of the provinces (owner of the resources).
  7. Unconventional exploitation: The exploitation concessionaire, within the area of concession, may require the subdivision of the area and the conversion from conventional to unconventional. In addition, the Bill eliminates the five (5) year time-bard applicable to the pilot planning stage, and the possibility to request for ten (10) year extensions.
  8. Replacement of the transport concession: References related to hydrocarbon processing are incorporated to Article 4 regarding transportation. Likewise, the regime of transportation concessions is replaced for an authorization regime.

II. Amendments to Law 24,076 on Natural Gas

  1. Exports and imports: While natural gas imports continue to be authorized without prior approval, exports must be regulated by the Executive Branch.
  2. License Renewal: The Bill extends the term for license renewal, from ten (10) to twenty (20) years.
  3. Transportation, distribution, and stocking: The acquisition, construction, operation and maintenance of new gas storage facilities is allowed.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Pablo Arrascaeta, Daiana Perrone, Florencia Martínez Trobbiani, Milagros Piñeiro, Rocío Valdez, and/or Victoria Barrueco.

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Derogation of Rural Lands Law and changes on Environmental Rules

On December 21, 2023, President Javier Milei released Emergency Decree No. 70/2023 (“Decree 70”), that entered into force on December 29, 2023.

While emergency decrees are constitutionally required to go through Congress, they are binding until they are overturned.

Among other provisions, Decree 70 revoked Law No. 26,737 that set forth the “Regime for the Protection of the National Domain on the Ownership and Possession of Rural Lands” (the “Rural Lands Law”). The Rural Lands Law contained certain restrictions to foreign land ownership, which do not longer apply.

Separately, on December 27, 2023, the President sent to the Congress an omnibus reform (the “Omnibus Bill”) proposing certain changes regarding several environmental rules.

The implications of the derogation of the Rural Lands Law and the Omnibus Bill on the below selected matters are as follows:

I. Derogation of Rural Lands Law

The Rural Lands Law was passed with two main objectives: (i) determine the ownership and possession, under any title or factual situations, of rural lands; and (ii) with respect to foreign individuals and legal entities, set the limits to ownership and possession of rural lands.

By its derogation, foreign entities or persons are no longer bound to land ownership restriction.

II. Reform of environmental laws

  1. Land Burning: the Omnibus Bill amends Law No. 26,562 on the “Regime of Minimum Environmental Protection to Control Land Burning”. Namely, the Omnibus sets forth that the authorization for burning activities must be issued within a maximum period of thirty (30) working days following its request, otherwise it is considered as tacitly issued.
  2. Native forests: modifications to Law No. 26,331 on the “Regime of Minimum Environmental Protection to Native Forests” include the elimination of the prohibition to deforest native forests categorized as red or yellow, in turn allowing to carry out deforestation activities in such categorized areas.
  3. Glaciers: the Omnibus Bills specifies the scope of Law No. 26,639 on the “Regime of Minimum Environmental Protection of Glaciers”. In this regard, this law originally protected glaciers and the periglacial environment, while the Omnibus Bill indicates that its rules will apply to: (i) uncovered and covered glaciers in the glacial environment; and (ii) active rock or debris glaciers in the periglacial environment, located in Argentina, and that comply with certain conditions.
  4. Fertilizers control: the Omnibus Bill revokes section 6 of Law No. 20,466 on the “Control of Fertilizers” that established the obligation to inform in advance, to the appropriate agency, the commercialization of fertilizers in bulk.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, Milagros Piñeiro, Pablo Arrascaeta, Florencia Martínez Trobbiani, Rocío Valdez, and/or Victoria Barrueco.

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National State reform adopted by President Javier Milei

On December 21, 2023, President Javier Milei released Emergency Decree No. 70/2023 (the “Decree 70”), which establishes the “Foundations for the Reconstruction of Argentina’s Economy”. Decree 70 has entered into force on December 29.

While emergency decrees are constitutionally required to go through Congress, they are binding until they’re overturned.

Decree 70 states that the Argentine Republic is undergoing a situation of unprecedented hardship, generating deep imbalances with a negative impact on the entire population and, especially, on social and economic aspects.

One of the most relevant measures adopted by Decree 70 was the abrogation of state-owned act (Law No. 20,705), and an amendment to companies Law No. 19,550.

In that respect, Decree 70 orders the transformation of wholly or partially state-owned companies into private entities (even in cases where they are wholly state-owned enterprises (SOE)). These new entities shall be ruled by Law No. 19,550.

A maximum transition period of one hundred and eighty (180) days is provided to proceed with the transformation and registration of the transformed companies in the corresponding Public Registries.

In addition, Decree 70:

  1. Revokes Decree-Law No. 15,349/1946 and Law No. 13,653, that provided a separate regime for wholly-owned SOE, allowing the State to enter into industrial or commercial activities or operate public utilities trough such SOE;
  2. Partially abrogates Law No. 18,875, that foresaw a specific regime for purchases made by the National State; and
  3. Amends Law No. 23,696, on matters related to employees’ share participation program on SOE.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Pablo Arrascaeta, Daiana Perrone, Rocío Valdez, and/or Victoria Barrueco.

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Emergency Decree 70/2023 and the Energy Sector

On December 21, 2023, President Javier Milei released Emergency Decree No. 70/2023 (“Decree 70”). Decree 70 will enter into force on December 29.

While emergency decreets are constitutionally required to go through Congress, they are binding until they’re overturned.

Key aspects of the measures adopted by Decree 70 with respect to the energy sector are summarized below:

1. Hydrocarbons: Decree 70 revokes Decree No. 1060/2000 that established a limited term of exclusive fuel supply contracts entered into between oil companies and/or fuel suppliers and gas stations operators.

2. Electricity:

  1. Export Contracts: Decree 70 revokes Decree No. 1491/2002. This decree established that power capacity, energy and trading agreements: (i) were not comprised by Law No. 25,561 (that declared public emergency and the reform of the FX rate regime in 2002) and Decree No. 214/2002 (which allowed debtors to cancel payment obligations in Argentine pesos), and (ii) would be exclusively invoiced in US Dollars.
  2. Power Transmission Expansions: Decree 70 revokes Law No 25,822 that established the “Federal Electric Transportation Plan”, implemented by the Secretary of Energy (the “SE”). It also revokes Decree 624/2003 that authorized the SE to re-determine the fee or price corresponding to the portion of power transmission facilities not yet operational, regarding high voltage transmission or trunk distribution grid.
     
  3. Refundable loans: Decree 70 revokes Decree No. 311/2006, that approved refundable loans from the National Treasury to the Unified Fund, created by Section 37 of Law No. 24,065. Per law, receivables of the Unified Fund would act as a hedge against the fluctuations of the spot price and the stabilized price of the Wholesale Electricity Market (WEM).
     
  4. Distributed Generation: Decree 70 abrogates Sections 16 to 37 of Law No. 27,424, which foresaw certain promotional provisions with respect to distributed generation.

3. Powers granted to the Secretary of Energy: Decree 70 gives broad rights to the SE to redetermine the current pricing and subsidy structure of the energy chain, comprising electricity and gas.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Pablo Arrascaeta, Daiana Perrone, Rocío Valdez, and/or Victoria Barrueco.

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President Javier Milei Omnibus Reform Bill

On December 27, 2023, Argentine President Javier Milei sent to the Congress an omnibus reform proposing far-reaching changes with respect to the matters described below.

  • Creation of an Incentive Regime for Large Investments: The bill creates the so-called "Incentive Regime for Large Investments", through which the holders and/or operators of large investments in new projects or expansions of existing ones of certain sectors (including agribusiness, infrastructure, forestry, mining, oil and gas, energy, and technology) that adhere to such regime will be entitled to tax grants, customs and FX benefits, among others, and long-term stability in such matters.
  • Introduction of changes in Public Works Concession regulation: Relevant amendments to the public works concession regime of Law No. 17,520 are contemplated, providing broad provisions with respect to the incorporation of sole purpose investment vehicles (SPVs), financing parties protection, arbitration resolution mechanisms, covenants of the State, and the possibility of presenting infrastructure projects by initiative of the private sector.
  • Amendments to the Electric Energy Regulatory Framework: The National Executive Power is empowered until December 31, 2025 to reform the electricity regulatory framework (Laws No. 15,336 and 24,065). Such changes shall conform the following guidelines: the right to freely negotiate export/imports electricity agreements; promote competition and the expansion of electricity markets; ensure that electricity transactions are based on economic rules; provide for transparency on price and rate calculation mechanisms; and foster the expansion of the transmission infrastructure.
  • Energy transition and reduction of GHG emissions : Within the framework of compliance with the Greenhouse Gas ("GHG") emissions targets committed by Argentine under the Paris Treaty, the National Executive Power is empowered with the right to assign GHG emission rights to each economic sector, set annual limits compatible with international commitments, monitor and penalize non-compliance with emission targets, and establish an emission rights market for the trading of surpluses of those who comply with their targets. The National State will provide private companies, the public sector and other organizations with the appropriate conditions and instruments to achieve these goals and access climate financing facilities.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, Milagros Piñeiro, Pablo Arrascaeta, Florencia Martínez Trobbiani, Rocío Valdez and/or Victoria Barrueco.

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Albanesi Group´s US$ 31,380,462 Notes Offering

Counsel to Generación Mediterránea S.A. and Central Térmica Roca S.A. in the co-issuance of 9.5% Class XXV Additional Notes for US$ 3,668,561 due April 18, 2026, and 6.5% Class XXVI Additional Notes for US$ 27,711,901 due April 12, 2026, issued under the Global Notes Program for an amount up to US$ 1,000,000,000.

Banco de Servicios y Transacciones S.A., SBS Trading S.A., Balanz Capital Valores S.A.U., Macro Securities S.A.U , Facimex Valores S.A., Puente Hnos S.A, Banco de la Provincia de Buenos Aires, Nación Bursátil S.A., Banco Supervielle S.A., Bull Market Brokers S.A., Invertironline S.A.U, Invertir en Bolsa S.A., Petrini Valores S.A., Neix S.A., Global Valores S.A., TPCG Valores S.A.U., Banco Hipotecario S.A., BACS Banco de Crédito y Securitización S.A. and Allaria S.A. acted as placement agents of Class XXV Additional and Class XXVI Additional Notes, while SBS Capital S.A. and Banco de Servicios y Transacciones S.A. acted as placement agents.

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Argentina declares emergency in energy sector

The recently elected Administration has declared the energy sector emergency. The measure was adopted by emergency decree No. 55/2023 (“Decree 55”).

Additionally, Decree 55 orders the gas and electricity regulatory bodies to undertake an integral rate review, in turn authorizing temporary rate hikes.

Further, Decree 55 entrusts the Secretary of Energy (“Secretary of Energy”) to establish a comprehensive governmental program with respect to power generation, transmission and distribution, and gas production, transportation and distribution, with the end-goal of establishing a pricing criteria based on market conditions and free access rules, while maintaining revenue levels in real terms and covering investment needs.

Finally, regulatory bodies ENARGAS and ENRE are intervened while their directors are appointed through a public contest.

Key aspects of Decree 55 are as follows:

I. Considerations of Decree 55

Decree 55 seeks to adopt urgent measures in view of the high risk of natural gas and electricity energy shortage to users all around the country, while assuring a better and more efficient service.

In a general way, Decree 55 also recognizes that gas and electricity public utilities associated infrastructure is becoming obsolete, namely because the lack of grid expansion programs.

It also added that power transmission lacks capacity, leading to curtailment. Moreover, it recognizes that the pricing criteria and current remuneration schemes do not have the adequate signs for new investment, nor promote a market-term among the industry participants.

With respect to natural gas transportation infrastructure, it is noted that local production of natural gas in northern Argentina and the availability of the resource imported from Bolivia have decreased, thus leading to potential shortages.  Therefore, the need for the reversion of the Northern Gas Pipeline is highlighted, to guarantee gas supply on that area, which is critical to lithium and other industries too.

II. Relevant provisions of Decree 55

  1. Powers of the Secretary of Energy: The Secretary of Energy is empowered with elaborating an overall program with respect to the activities mentioned before, with the objective of establishing a rate and pricing criteria under conditions of competition and free access, maintaining in real terms the levels of income, covering investment needs, and guaranteeing a secure and continuous public utilities.
  1. Rate adjustment and temporary increases: Gas and power regulators ENRE and ENARGAS must start revising gas and electricity rates, and by December 31, 2024, a new rate scheme should be in place. Temporary increases are permitted.
  1. Intervention of ENRE and ENARGAS: The ENRE and ENARGAS are intervened until their vocals are appointed. Broad powers are given to the intervenors, who will be appointed by the Secretary of Energy.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, Pablo Arrascaeta, Milagros Piñeiro, Florencia Martínez, Rocío Valdez and/or Victoria Barrueco.

 

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Javier Constanzó, new Partner of the Energy & Infrastructure Department

We are pleased to announce the promotion of Senior Associate Javier Constanzó to the position of Partner.

Mr. Constanzó will join the Energy & Infrastructure Department where he will be a partner along with Nicolás Eliaschev, cementing the Firm's presence in those key industries. He is a regulatory and public law expert, who has an outstanding and extensive experience in structuring energy and infrastructure projects, with relevant expertise in project finance, acquisitions, and other corporate finance transactions in renewable and conventional energy projects. He also advises a range of clients in a variety of infrastructure matters, primarily involving lithium, representing banks, sponsors, mining companies, and power generation companies.

His contributions to the legal field have been acknowledged with distinctions, including being named a Rising Star by Legal500 on multiple occasions.

Javier has played key roles throughout his career as Associate at Tavarone Rovelli Salim & Miani since October 2016, helping to build the energy powerhouse practice at the Firm. Also, during 2021-2022 he worked as an International Visiting Associate at the Latham & Watkins office in New York, as part of the corporate and project finance practice, and successfully rejoined the firm after that.

Mr. Constanzó holds a Postgraduate Degree in Finance and Corporate Law from the Universidad del CEMA, a Master’s Degree in Public Law and Economics from the Pontifical Catholic University of Argentina, and is a qualified lawyer from the University of Buenos Aires.

In addition to his private practice, Javier has been a visiting professor of energy and public law in several universities.

“In the current context, under a new Administration in Argentina, we see great potential for new business in the energy, infrastructure and natural resources industries. Javier will add tremendous expertise to our platform and strengthen one of our leading practices”, said Marcelo R. Tavarone, Managing-Partner of the Firm.

“Constanzó is a strong team player and a commercially focused lawyer, who has helped to build a robust practice. I am extremely proud for his promotion to the role of Partner, and he will definitely help to continue growing our market share and delivering outstanding legal service to our clients”, added Nicolás Eliaschev, Partner at the Energy and Infrastructure practice.

Tavarone, Rovelli, Salim & Miani stands out as one of the prominent full-service law firms in the Argentine legal market, with a substantial track record of providing comprehensive advice to corporate and financial clients, as well as active participation in complex transactions and litigation. With this promotion, the Firm will add relevant firepower to the already well-known energy, infrastructure and natural resources practice.

 

Media Contact: Paula Cafferata - paula.cafferata@trsym.com

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Establishment of the Environmental Protocol for Massive Events

On December 7, 2023, the Ministry of Environment and Sustainable Development published Resolution No. 465/2023 (the "Resolution"), that created the Environmental Protocol for Massive Events (the "Protocol"). Organizers of massive events are invited to adhere to such Protocol.

The Protocol is framed in the 2030 Agenda and the Sustainable Development Goals (SDGs), as an additional public policy to achieve observations of the SDGs and to reduce the negative impact that urban life has on the environment, especially in managing mass events. It aims to provide tools that contribute to the reduction of the environmental impact produced before, during and after the development of mass events, through concrete actions and indicators to measure the performance of the environmental management of the event.

Thus, in order to carry out a correct management of environmental impacts in a mass event, it is important to consider all the impacts derived from the procurement of raw materials, production, transportation, and end of life of all the elements used for its realization.

The Protocol identifies the following lines of action for the sustainable management of mass events:

  1. Waste;
  2. Responsible consumption;
  3. Communication and environmental education;
  4. Sustainable mobility;
  5. Energy;
  6. Water; and
  7. Inclusion and Diversity.

Based on these, the Protocol proposes certain qualitative and quantitative indicators to monitor and have metrics that serve to set goals and improvements in the future.

 

For additional information, please contact Nicolás Eliaschev, Pablo Arrascaeta, Milagros Piñeiro, Rocío Valdez and/or Victoria Barrueco.

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