February 01st 2018
Law 27,349 known as the “Venture Capital Support Law” (the “Law”) promises to revolutionize the daily practice of corporate law and business affairs.
In business affairs, legislation is enacted after there is a usual business practice, that is, generally the legal regimes regulate a habitual business practice. In this case –the Venture Capital Support Law – the most important introduction is a new business form, the Simplified Corporation or SAS which anticipates the business needs. The SAS has shaken us in such a way that practitioners and qualified individuals have to modernize and adapt to this new regulation.
The Venture Capital Support Law introduces several interesting concepts, such as fiscal benefits for investors in “venture capital”, but the most important introduction is the SAS, which promises to revolutionize how businesses practice in Argentina and may bring into question, the need and utility of the traditional business forms (i.e. the Argentine Corporation “S.A.” and the Private Limited Company “S.R.L.”).
The Simplified Corporation (SAS) – A new business form.
To begin with, this is a new business form regulated mainly by Law 27,349 “Venture Capital Support Law” and the Companies Law (Law No. 19,550).
The SAS most remarkable features include the following:
- SAS may be created by one or more natural or legal persons whose liability will be limited to the full payment of the subscribed/acquired shares.
- SAS are based on SRL rules, together with features of S.A., but it involves a new corporate structure.
- Any business entities may be converted into a SAS.
- SAS owned by one person cannot create nor participate in other one-person SAS.
- The management body does not require a majority of Argentine residents; in fact, only one resident is enough.
- Meetings may be held through digital means (video or teleconference).
- In the City of Buenos Aires, the Business Entities’ Controlling Body (“IGJ”) has only registry powers, this means that it cannot control or analyze the content of the documentation, it can only control the formalities.
- SAS may be formed either by a notarially recorded instrument or by a private instrument certified either judicially, notarially, by bank, by the applicable public registry authority, or through digital means with the digital signature (we will analyze this below).
- Minimum content of the Articles of Incorporation:
- Shareholders who are natural persons: name, age, marital status, nationality, occupation, domicile, ID number (DNI/CUIT/CUIL/CDI);
- Shareholders who are legal persons: corporate name, domicile and place of business, personal information of the directors, CUIT or CDI of the foreign entity, if applicable, and information of its registration under section 118 or 123 of the Companies Law.
- Corporate name: must include the expression “Sociedad por Acciones Simplificada” or “SAS”. Otherwise, directors or corporate representatives will be unlimitedly and jointly liable for the performed acts.
- Domicile and place of business: If the Articles of Incorporation only indicate the domicile, the address of the place of business may be indicated in the minutes evidencing the incorporation. Notices served in the registered domicile will be valid and binding.
- Purpose: may be plural but the main activities must be clearly and accurately indicated. These activities may be linked or not with each other.
- Term: must be ascertained.
- Corporate capital and shareholders’ contribution: must be expressed in national currency. The classes of shares must be indicated as well as the method of issuing shares, other characteristics of shares, and the capital increase regime, when applicable. The Articles of Incorporation must also set forth the capital subscription, the amount and the paying up of the shares, and, if any, the term for paying any owed amount, which must not exceed two (2) years as from the date on which said instrument was executed. In this regard, there is absolute freedom for establishing what is deemed necessary.
- Management, shareholders’ meeting, and auditing body, if any: The Articles of Incorporation must indicate the directors appointed, and, if any, the members of the auditing body, their term in office and the domicile where notices will be served. In all cases, a legal representative must be appointed.
- Profits: The rules to distribute profits and bear losses are applied.
- Miscellanea: The clauses necessary to establish the rights and obligations of shareholders towards each other and in relation to third parties.
- Liquidation: The clauses related to the corporate functioning, dissolution and liquidation.
- Year-end date.
- Publication: SAS must be published for one (1) day in the official gazette of its place of incorporation. The legal notice must include:
- At the time of incorporation: basic information of the abovementioned Articles of Incorporation and Bylaws.
- At the amendment of the articles of incorporation or dissolution of the SAS:
- The decision of amending the Articles of Incorporation.
- The date of the shareholders´ resolution at the shareholders’ meeting in which the amendment/dissolution was adopted.
- Registration: The registration must be made within 24 hours as from the working day following the filing of the relevant documentation, provided that the petitioner uses the sample of Articles of Incorporation and Bylaws approved by IGJ.
- Restrictions: In order to incorporate and maintain the structure of SAS, the SAS must not fall within any of the cases set forth in section 299 of the Companies Law, nor have any affiliates owning 30% of its capital that fall within any of the cases provided for in said section (except when the corporate capital is AR$10,000,00), this means that the SAS must not: (i)be subject to the public offering regime, (ii)be a state majority owned company, (iii)perform capitalization or transactions that require publicly traded securities, (iv) render public services. In the event the SAS is included in any of these cases, it must be transformed into any of the corporate structures set forth in the Companies Law in no more than six (6) months as from the occurrence of the circumstance. During this period, and until the filing with the Registry, the shareholders will be unlimitedly, jointly and subsidiarily liable to third parties, notwithstanding any other liability incurred.
- However, the SAS will never be considered an entity that falls within section 299 of the Companies Law, even when the corporate capital exceeds the statutory amount (currently AR$10,000,000).
This comprehensive article was written by Javier Canosa, Aliant partner and head of the Argentina office. It is the first part a four-part series. To read the second post, please click here.