Limits on the Duration of Commercial Companies

On February 1, 2022, the public registry of commerce (the "IGJ") published General Resolution No. 1/2022 (the "Resolution"), by means of which established that the maximum duration term for commercial companies will be of 30 years.

The Resolution established that all articles of incorporation to be registered with the IGJ must include the term of duration of the company, which may not exceed 30 years from the date of its registration with such entity. According to customary and usual practices, said term used to be for a maximum period of 99 years, therefore, the Resolution forces the corporate renewal in a substantially shorter term.

The Resolution applies to all companies organized in the jurisdiction of the Autonomous City of Buenos Aires after the publication of the Resolution in the Official Gazette.

 

For further information, please do not hesitate to contact corporate@trsym.com.

 

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More benefits for our team: New maternity & paternity policy

We officially launched our new maternity and paternity policy aimed to grant more benefits to the members of the Firm during their first years of parenthood. This new policy looks to support those parents that work at the Firm in their professional careers and accompany them to boost their possibilities to the top.

The new benefits' policy is based in three main phases:

  • Immediately after the birth or adoption of a child: An additional month to the mothers´ -or primary caretaker- paid leave, aside from the three months granted by law and without detriment of the leave of absence option. Two weeks paid leave to the partner of the primary caretaker.
  • Soft landing during the child´s first two years: An ad hoc system to grant work flexibility combining remote work and office time, and a flexible schedule to take care of unexpected daily family situations.
  • From the 2nd year until the end of elementary school: Wide schedule flexibility to attend children's needs (education, health, etc) and contingencies.
  • Pumping room: The incorporation of an exclusive space within TRSyM offices with the adequate hygiene and comfort conditions to promote breastfeeding.

Marcelo R. Tavarone, Managing Partner, said regarding this new measure that "we are very happy to present this new policy that will support our team during their parenthood, aimed to boost their possibilities while promoting the relationship with their children, parenting, and preserving their personal wellbeing."

Juan Pablo Bove, member of the Firm's Administration Committee, stated that "the policy is focused in diversity, as it erases traditional 'mom' and 'dad' roles and is orientated to the primary caretaker of a child and to those who accompany them, without focusing in specific genre matters that aren't part of TRSyM's vision."

 

Read here the complete document with the terms of this policy.

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Amendments to Resolution No. 285/2018 of the former Ministry of Energy and Mining: COD Extension and reduction of penalties for RenovAr projects

On August 3rd, 2021, the Secretary of Energy issued Resolution No. 742/2021 (“Resolution 742”), which partially amended Resolution No. 285/2018 of the former Ministry of Energy and Mining (“Resolution 285”).

1. Main outlines of Resolution 285

Resolution 285, now modified by Resolution 742, allowed generators under RenovAr 1, 1.5 and 2 to defer Commercial Operation Date (“COD”) under their Power Purchase Agreement (“PPA”) for up to 180 days.

In addition, Resolution 285 also allowed generators to pay penalties for late COD in 12 or 48 monthly installments.

2. Context in which Resolutions 285 and 742 are enacted

Resolution 742 continues the path lay out by Resolution 285 as it is issued to allow the execution and operation of projects under RenovAr 1, 1.5, 2, 3, and Resolution No. 202/2016 of the former Ministry of Energy and Mining which have suffered delays in achieving COD.

Accordingly, Resolution 742 purported purpose is to enhance further investment in the renewable sector by providing certain relief to the projects comprised in said resolution.

Furthermore, both resolutions are issued under the scope of the Laws No. 26,191 and 27,191. Such laws aim to increase to twenty percent (20%) by 2025 the total domestic demand of renewable energy, by mandating that a portion of the country’s electricity consumption must be sourced from renewable energy.

3. Resolution 742 key takeaways

Key takeaways of Resolution 742 are:

  • Option to extend the additional term provided by Resolution 285 to achieve COD in 360 days.
  • Right to adhere to the terms of Resolution 285 (as amended by Resolution 742) at generator’s option.
  • Reduction of penalties fines based on the progress of the project’s works or, in the case of projects that have already achieved COD, with a delay greater than 180 days, such reduction is of 70%.
  • CAP to the penalties which may be offset from the PPA, amount which shall not exceed 40% of the monthly revenues.

Below is a comparison between the most significant aspects of Resolution 285 and Resolution 742.

Also, we detail certain maters introduced by the Resolution 742 which were not foreseen in Resolution 285.

Finally, we single out certain aspects of Resolution 742 which should be further clarified.

Issue Resolution 285 Resolution 742
Payment of penalties Penalties payable in 12 or up to 48 equal, consecutive, monthly installments. In the latter, an annual interest rate of 1.7% is applied. Penalties still can be paid in 12 or up to 48 equal, consecutive, monthly installments.
However, in the latter, Resolution 742 caps the monthly penalty in an amount no greater than 40% of the monthly revenue under the PPA. The unpaid balance will be offset until the total is completed, under this methodology. The purpose of this clause is to ensure generation plants maintenance and to avoid a penalty deduction greater than the monthly remuneration.
Extension of COD COD extension up to 180 days. COD extension up to 360 days, if the following criteria is met:
(i) evidences that the Project has been executed in a percentage equal or greater to seventy percent (70%) an increase of the Contract Performance Guarantee; or
(ii) the compliance bond has been increased or is increased in 30%.
Additional changes Resolution 285 provided that for the application of a daily penalty a rate of US$1,388/MW. Nonetheless, this fine could be reduced evidencing certain progress of the project. Article 3 bis is incorporated, which establishes:
(a) Projects that have achieved COD: Those that (x) reached COD, (y) with a delay of more than 180 days, and (z) that have not requested the application of Resolution 285, may postpone COD in 360 days. In this case, a reduction of penalties in 70% is foreseen.
(b) Projects that have not reached COD: Those that (x) have not reached COD, (y) did not requested the application of Resolution 285, and (z) adhere to Resolution 742; must replace the compliance bond with a bank guarantee, payable upon demand, which shall also contemplate any prior increase which may be due.
In this case, it is provided that, during the additional 360 days extension period of COD, the daily fine will be equivalent to the daily fine established in Clause 13.2. (a) or 13.1, accordingly. Such fine may be reduced based on the progress of the project.

4. Other relevant matters

Generators adhering to Resolution 742 are required to waive any prior or future administrative, judicial, administrative, or arbitral claims against the National Government, the Secretary of Energy or CAMMESA in the Argentine Republic, whether in Argentina or abroad.

If adhering to Resolution 742, generators shall manifest so in writing to CAMMESA and submit such waiver within 30 business days.

5. Matters which should be further clarified

The following matters are singled out which, from our perspective, are not entirely clear and should be further clarified.

Resolution 742 does not state whether the eventual reduction of the penalties fines up to 70% is for the entire fine accrued, or for the balance not yet accrued or unpaid.

Resolution 742 does not indicate whether the replacement of the compliance bond for a bank guarantee is for the projects covered by article 3 bis, second paragraph solely (projects without COD, which have not yet adhered to Resolution 285) or for all projects comprehended by Resolution 742.

Finally, in relation to the compliance bond increase, required by articles 3 a) (ii) and 3 b) to admit the extension of the COD, is not specified whether such increase should be for the original guarantee or for the replaced guarantee (bank guarantee).

 

For further information, please contact either Nicolás Eliaschev, Javier Constanzó, or Daiana Perrone.

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New Pricing Scheme for Legacy Power Generators, Co-generators and Self-generators: Amendment to Resolution 31/2020 of the Secretary of Energy

On May 21st, 2021, the Secretary of Energy issued the Resolution No. 440/2021 (“Resolution 440”), which most relevant aspects are singled out below:

  1. Resolution No. 31/2020 (“Resolution 31”) is abrogated by Resolution 440, including the remuneration adjustment mechanism set forth in said Resolution 31.
  2. A new pricing scheme applicable to the Wholesale Electricity Market Generator Agents of Tierra del Fuego’s (WEMGATDF) is contemplated.
  3. WEM Agents included in Resolution 440 are required to waive any prior or future administrative claim against the National Government, the Secretary of Energy or CAMMESA, regarding the implementation of the remuneration adjustment mechanism provided in Resolution 31.
  4. Finally, CAMMESA is instructed to re-settle any economic transaction starting on February, 2021, thereof.

The purported aim of Resolution 440 is to mitigate the effects of the economic situation as a result of the economic crisis and COVID-19 pandemic, as a way to ensure the sustainability of the WEM under economically reasonable and efficient conditions.

Below is a summary of Resolution 440 most relevant aspects:

1. Scope of Resolution 440

A new remuneration mechanism for conventional and renewable generation, cogeneration and self-generation, operating without a PPA, has been approved, effective as of February 1st, 2021.

2. Changes in the remuneration conditions of the Generating Agents

Resolution 440 provides for a new remuneration scheme for the WEMGATDF and WEM Agents, with increases in around 29% when compared to repealed Resolution 31, with effects starting on February 2021.

Unlike abrogated Resolution 31, Resolution 440 does not include a remuneration adjustment mechanism.

3. Waiver under Resolution 440

WEM Agents included in Resolution 440 which choose to benefit from Resolution 440 are required to waive any prior or future administrative claim against the National Government, the Secretary of Energy or CAMMESA, regarding the implementation of the remuneration adjustment mechanism provided in Resolution 31.

Such waiver shall be submitted no later than June 21st, 2021.

For those WEM Agents which chose not to submit such waiver, they shall continue receiving the remuneration set forth in Resolution 31 and forfeit they right to receive the retroactive amounts provided in Resolution 440.

If such waiver is submitted later than June 21st, 2021, they shall receive the new remuneration set forth in Resolution 440 but will not be entitled to receive said retroactive amounts.

 

For further information, please contact either Nicolás Eliaschev or Javier Constanzó.

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New limitations to Foreign Companies

On May 17, 2021, the Superintendence of Corporations (“Superintendence”) published General Resolution No. 8/2021 ("RG IGJ 8/21") which establishes limitations in reference to foreign companies registered or applying for registration pursuant to Section 118 and 123 of the General Corporations Law No. 19,550 ("GCL"), especially in relation to special purpose vehicles ("SPVS"), which are basically companies incorporated abroad for the purpose of holding shares of local companies.

Following the restrictive criterion that the IGJ had already set out in Resolutions No. 530/2020 (“SFSC”) and 33/2021 ("MERCADOPAGO"), RG IGJ 8/21 provides that:

  1. the status as SPV of the entity must be declared at the time of its registration in the Argentine Republic (and not afterwards).
  2. the registration of more than one vehicle company per group is not allowed.
  3. the registration of SPVs will not be allowed if their direct or indirect controlling company is registered in the Argentine Republic pursuant to Sections 118 or 123 of the GCL.
  4. the registration of SPVs resulting from a chain of control between successive sole proprietorships will not be admitted.
  5. the registration of sole proprietorships whose shareholder is only a company incorporated abroad as sole proprietor, whether it is a vehicle or not, will not be allowed.

Likewise, and with special practical consequences on the activity of Argentine companies owned by foreign companies, RG IGJ 8/21 establishes that companies incorporated abroad that have a principal shareholding stake in local companies with headquarters in the City of Buenos Aires must be registered with the Superintendence. Registrations in other jurisdictions of the Argentine Republic will not be enforceable in such case.

The new regulation also requires that for the purposes of the registration of a foreign company under the terms of section 123 GCL, an investment plan must be submitted along with the list of companies in which it intends to participate or incorporate in the Argentine Republic.

In case the foreign company states that there is no ultimate beneficial owner, documentary evidence must be provided to show that: a) the head of the group company has all of its shares admitted to public offering; or, b) the ownership of the shares is so dispersed among the persons holding the capital stock that none of them holds the minimum percentage of shares (currently 20%).

RG IGJ 8/2021 abolished sections 212, 217, 219, 222, 239, 240 and 249 and amended sections 215, 218, 245, 255 and 256 of the General Resolution No. 7/2015 ("RG IGJ 7/15") to reflect the aforementioned changes. These amendments entail that the Superintendence will not register companies incorporated abroad that:

  1. lack the capacity and legal standing to act in the place of their incorporation.
  2. are incorporated, registered or incorporated in countries, domains, jurisdictions, territories, associated states and special tax regimes, considered non-cooperative for tax transparency purposes and/or categorized as non-cooperative in the fight against Money Laundering and Financing of Terrorism, or of low or nil taxation, according to the criteria of the Central Bank of the Republic of Argentina, of the Financial Investigation Unit, of the Ministry of Justice and Human Rights or of organizations governed by international public law standards, such as the United Nations, the Organization of American States, the Financial Action Task Force (FATF), OECD, or, which in the reasonable opinion of the Superintendence, do not meet such standards.

Finally, as a result of the amendment to section 255 of RG IGJ 7/15, the abbreviated annual information regime of foreign companies may only be filed for a maximum of one (1) consecutive financial year.

RG IGJ 8/2021 came into force on the same day of its publication, May 17, 2021.

For further information, please do not hesitate to contact Juan Pablo Bove, Federico Otero, Julián Razumny, Pablo Tarantino, Agustín Griffi, or corporateteam@trsym.com.

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Francisco Molina Portela New Partner of the Banking & Finance Department

Senior associate Francisco Molina Portela was promoted to partner. Francisco will lead the Banking & Finance Department together with Marcelo R. Tavarone, Federico Salim and Julieta De Ruggiero.

Francisco (35), joined the firm when it was founded in 2014. He concentrates his practice on capital markets transactions, project finance, debt restructuring and banking and securities regulation.

He obtained his law degree from Universidad de Buenos Aires (2011), and completed an LL.M in Banking and Finance Law (with distinction) at Queen Mary University of London in 2016. During 2017/2018 he worked as a foreign associate at Simpson Thacher & Bartlett in New York. He is also an assistant lecturer in Contract Law and Banking Law at the Universidad de Buenos Aires.

Marcelo R. Tavarone, Managing Partner of the firm said: “We are really pleased with Francisco’s promotion, the first associate of our firm to become partner. This promotion is a recognition to his ability and dedication. Since the foundation of TRSyM in 2014, our commitment has been to accompany our associates in their professional development, and Francisco’s promotion is the best example of this. It also reflects the continuous growth of our firm, despite the adverse context that Argentina and the world are going through. Francisco is part of the new generation of lawyers who will lead the future of the legal profession”.

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Argentine Central Bank Mandates Companies to Refinance Debt

Pursuant to Communication “A” 7106 dated September 15, 2020, the Argentine Central Bank tightened currency controls.

According to the new regulation, private sector companies and financial institutions shall reprofile at least 60% of any payment of principal scheduled between October 15, 2020 and March 31, 2021 on any external financial debt (other than intercompany debt) and dollar-denominated local securities offerings.

A refinancing plan shall be filed with the Argentine Central Bank based on the following standards:

a) Argentine debtors shall be granted access to the foreign exchange market to purchase foreign currency to make payments of services of principal for up to 40% of the principal amount due on such period only; and

b) at least 60% of the principal amount due on such period shall be refinanced with a new external indebtedness with an average life of at least 2 years.

This shall not apply to: (a) indebtedness with international organizations or their associated agencies or guaranteed by them; (b) indebtedness granted by official credit agencies or guaranteed by them; or (c) payments of principal for an amount no exceeding USD 1,000,000 per calendar month.

The refinancing plan shall be filed before the following deadlines: (a) September 30, 2020, with respect any payment due before December 31, 2020; and (b) at least 30 calendar days before the relevant payment, with respect to any payment due between January 1, 2021 and March 31, 2021.

For more information, do not hesitate to contact Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero or Francisco Molina Portela.

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News in the Oil Upstream Sector: Argentina Fixes Local Crude Oil Reference Price

On May 19th, 2020, Decree No. 488/2020 (the “Decree”) has been issued by the National Executive, which fixes the local crude oil reference price locally produced and delivered (known as the Criollo or domestic barrel) at US$ 45 per barrel, with effects up to December 31st, 2020.

Furthermore, among other relevant matters, the Decree:

  1. Establishes a 0% rate for export duties if the international crude oil price is below US$ 45 per barrel.
  2. Foresees certain obligations for producing, trading and refining companies.
  3. Includes certain restrictions applicable for those companies in connection with the FX market.
  4. Limits the ability to import crude oil.
  5. Updates the values foreseen for penalties under the Hydrocarbon’s Law.

According to the Decree’s recitals, this measure is enacted in order to allow oil producing companies to cover operational costs and sustain the activities and/or production levels prevailing prior to the beginning of the epidemiological crisis, taking into account the current demand shrinkage caused by COVID-19. In addition, the Decree holds a special consideration to the strategic dimension of non-conventional hydrocarbons production in Vaca Muerta.

Below is a summary of the Decree’s most relevant aspects:

1. Domestic oil barrel price

The Decree is effective immediately and the domestic price set forth therein is valid until December 31st, 2020, unless as stated below.

Crude oil produced and delivered in the local market shall be invoiced by producing companies and paid by refining and trading companies considering the Medanito crude type oil price of US$ 45 per barrel (US$ 45/bbl) as reference. This price shall be adjusted concerning each crude type for quality and charging port, according to the usual practice in the local market, and shall also be applicable for payment of royalties to Provinces.

Should at any time the “ICE BRENT PRIMERA LÍNEA” price exceed US$ 45 per barrel for ten days in a row, the domestic price established by the Decree shall cease to be in effect.

2. Obligations of the producing companies

While the domestic price is in force, producing companies are compelled to:

  1. Sustain the activity and/or production levels registered during 2019, taking into consideration current local and international demand shrinkage, and always within the adequate and economic operation parameters established in article 31 of Law No. 17,319.
  2. Comply with the regional services contracts and maintain the employee payroll which was in place in December 31st, 2019.

3. FX restrictions

During the validity term of the domestic oil barrel price, the producing companies which benefit from such price, shall not be able to access the FX market for the structuring of foreign assets nor have the ability to operate in the blue chip swap market.

4. Refining and trading companies’ obligations

The refining and trading companies shall purchase the total crude oil demand to local producing companies, considering the crude quality required by the refining processes and in accordance with the price established in the Decree. For integrated companies, the purchase shall be held with 2019-standards if the crude acquisition exceeds their own production and the subsidiary ones.

Companies shall not be able to import products available in the local market.

5. Export duties for oil and derivatives

For the calculation of the rate applicable for export duties, the Executive Power sets the following “ICE Brent primera línea” values: a) Base Value (“VB” in Spanish): US$ 45 per barrel; b) Reference Value (“VR” in Spanish): US$ 60 per barrel; and c) International Price (“PI” in Spanish): the one published the last business day of every month by the Secretary of Energy, based on the last (5) “ICE Brent primer línea” prices” taken from the “Platts Crude Marketwire” with the “Future Settlements” heading.

For those purposes, the last business day of every week, the Secretary of Energy shall assess the monthly average prices and, if the difference between that price and the actual valid price were to exceed 15%, it shall establish a new price, which shall enter into force the following business day.

Accordingly, the Decree stipulates a 0% rate for duty exports when the International Price is equal or lower than the Base Value.

On the contrary, if the price is equal or higher compared to the Reference Value, the duty rate shall be set forth in 8%. Otherwise, if the International Price were to be higher than the Base Value and lower than the Reference one, the rate shall be determined through the following formula: Duty rate = {PI-VB/VR-VB} x 8%.

6. Taxes.

The increase on Liquid Fuel and Carbon Dioxide Taxes pursuant the updates corresponding to the first and second trimester of 2020 shall enter into force for unleaded and virgin oil, and gas oil as of October 1st, 2020.

7. Updates on fines values

Fines that may be imposed by the concession grantor under Law No. 17,319 have been updated, whereby the new fine values established are the following: minimum amount equivalent to the value of 22 m3 of the national crude oil in the local market and a maximum amount equivalent to 2.200 m3 of the same hydrocarbon for every breach.

8. Delegation of powers to the Secretary of Energy

The Executive Power has awarded the Secretary of Energy the authority to modify the crude oil prices foreseen in the Decree on a quarterly basis, as well as to periodically revise the extent of this measure pursuant the production volume and levels of activity and investment.

Likewise, the Secretary of Energy shall verify the non-realization of monopolistic conducts by every subject of the oil chain of production. To exercise this supervision authority, this public body shall consider objective standards of production and shall consider the consequences provoked by COVID-19 pandemic.

An interview made by the Law Journal of Universidad San Andres (Revista Jurídica de la Universidad de San Andrés) to our partner Nicolás Eliaschev including further analysis and opinion about the Decree can be accessed by clicking or tapping here (in Spanish).

For further information, please contact Nicolás Eliaschev and/or Javier Constanzó.

In the following link, you can access the Firm’s statement on COVID-19.

For information concerning COVID-19 legal implications, please refer here.

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COVID-19: Standards for Electricity Distribution

On May 16th, 2020, Resolution No. 35/2020 (the “Resolution”) was published in the Official Gazzette, in which the Electricity Regulatory Authority–in Spanish Ente Nacional Regulador de la Electricidad–(“ENRE”) authorizes certain EDENOR and EDESUR users reached by the mandatory isolation measures established by Decree No. 297/2020 (as amended) to either suspend payments or make partial payments on account of the contracted capacity through supply agreements; or otherwise, to terminate the contract or require an amendment.

1. Benefited users and periods comprised

EDENOR and EDESUR users belonging to categories T2, T3 and Toll (i.e. medium to large users) whose power demand was reduced in 50% or more as a result of isolation measures, may resort to the alternatives provided in the Resolution for payments accrued since March 20th, 2020 and pending subsequent periods.

2. Benefit’s extension and payment facilities

For users which have opted to whether suspend or make partial down payments, this benefit will terminate when the demand recovery reaches 70% of its contracted capacity. In addition, users who resort to this option shall pay debt accrued pursuant to criteria to be determined by ENRE.

3. Distribution companies’ obligations

Distribution companies shall communicate to users the extent of the different options authorized and refer a weekly report to ENRE with the contractual suspensions, modifications and/or terminations based on the Resolution.

For further information, please contact Nicolás Eliaschev and/or Javier Constanzó.

In the following link, you can access the Firm’s statement on COVID-19.

For information concerning COVID-19 legal implications, please refer here.

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The Superintendence of Corporations Continues to Tighten Controls on Simplified Companies

Following the trend adopted by the Superintendence of Corporations (“Superintendence”) this year regarding Simplified Companies (“SAS”), on May 6, General Resolution 22/2020 (“RG IGJ 22/2020”) was published in the Official Gazette, which tightens the level of supervision for this type of company.

The RG IGJ 22/2020 provides mechanisms for obtaining information and measures to determine the business development of the SAS, registered both in the public registry of the City of Buenos Aires ("CABA") and other local jurisdictions, in relation to the ownership by this type of companies of property rights over real estate located in the CABA. The intention of the regulator would be to be able to determine if said ownership is alien to the corporate purpose. For this, the resolution provides for collaboration between the Superintendence and the Registry of Real State of the City of Buenos Aires, to obtain information on the existence of transactions regarding real estate rights in which the acquirers, creditors or assignees, fully or acting as trustees, are SAS.

If, based on such information, the regulator determines that those properties are not related to the development or financing of an organized economic activity of production of goods and services conducted by the SAS, the Superintendence will promote -or entrust the Public Ministry Prosecutor- the corresponding legal actions to declare the disregard of the legal entity. In turn, the Superintendence will be empowered to adopt additional measures if it deems it necessary.

In the same sense, note that on May 4, the Superintendence published General Resolution 20/2020, through which it modified article 38 of General Resolution 6/2017, establishing that for the registration of the appointment of administrators, those who are domiciled abroad must file the powers-of-attorney granted to their representatives, which may only be granted in favor of the directors of the  residing in the Argentine Republic.

We also refer to our other Newsletters (see General Resolution IGJ 9/2020 and General Resolution IGJ 17/2020) in relation to the latest regulations applicable to SAS.

For further information, do not hesitate to contact Juan Pablo Bove, Federico Otero, Julián Razumny, Pablo Tarantino, Agustín Griffi, or corporateteam@trsym.com.

In the following link, you can access the Firm’s statement on COVID-19.

For information concerning COVID-19 legal implications, please refer here.

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