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).
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