Dr María Laura Rozental
Our law firm has participated innumerable times in the registration of foreign companies so that they can act in Argentina and, for example, acquire shares.
The Argentinian principle of sovereignty justifies the control of the actions of foreign companies in our territory; the requirement of registration in the local commercial registers is an effective mechanism for such purposes.
Registration
When a company founded abroad acts in Argentina with an active participation in the economic life of our country, it must be subject to Argentina laws, thus requiring reasons of public order linked to the exercise of state sovereignty. They are imposed by the control and publicity of the commercial activity carried out in our territory, with a view to guaranteeing certainty and morality in commercial relations.
Investments in Argentina are usually channelled through corporate vehicles with limited liability or through trusts, the main characteristics of which are indicated below.
Forms of Action
A foreign company is governed as to its existence and form by the law of the place of its constitution and can act in Argentina in the following ways:
- Incorporate to a company in Argentina or acquire shares in a local company, for which you must register in the Public Registry of Commerce (RPC) under the terms of Article 123 of the General Society Law (LSC) and prove that it has been established under the laws of your respective country and register your statute and documentation relating to their representatives.
- Regularly carry out commercial acts in the country, establish a branch, seat, or any type of permanent representation, for which you must register under the terms of Article 118 of the LSC, and prove to the RPC the existence of the company in the place of Constitution; to establish a domicile in Argentina; and justify the decision of the company to create the representation in Argentina, naming the person in whose charge the representation will remain.
- Carry out isolated acts (that is, not habitual) or be part of trials, for which no requirement must be fulfilled or must not be registered in any registry.
It is necessary to emphasise that, in the case of foreign off-shore companies that are registered in the area of the Autonomous City of Buenos Aires, they must comply with some additional requirements set by the RPC that is in charge, in said jurisdiction, of the General Inspection of Justice (IGJ).
The type of legal entity you choose to establish in Argentina will largely depend on the type of business you plan to run, and the internal structure of your business. Before starting a business in Argentina, we suggest talking to local experts who can advise you not only on the types of legal entities but also on a market entry strategy to ensure business success.
Acquisition of Shares and Due Diligence
In the event that a foreign company thinks about acquiring shares of a local company, it is important to consider different aspects for the correct implementation of the transaction. The first of these is the preparation and carrying out of an adequate due diligence on the target company in order to be able to identify its main contingencies and risks.
For our law firm, due diligence is an extensive process that covers many aspects of a business – from financial statements and accounting records, to key staff members and contracts. The aspects of a company covered by due diligence usually fall within five broad areas: finances, commercial performance, legal compliance, operations, and environmental impact. The aim of due diligence is to check the valuation of assets and liabilities, assess the risks within a business, and identify areas for further investigation. This process enables an investor or purchaser to make informed investment decisions. It will also be necessary to study whether by the corporate purpose, the company whose shares are intended to be acquired, is regulated by some control body. As we mentioned above, it is important to talk to local experts who can advise about legal issues and strategies to ensure business success.
XLNC MAGAZINE | No. 06 | October 2020