26 Feb 20 Practical effects of the return to the old IGJ regime on foreign companies
By Agustin Cerolini and Martin Chindamo
On February 20, 2020, the Public Registry of Commerce of the City of Buenos Aires (IGJ, for its acronym in Spanish) issued General Resolution 2/2020, which repeals the former regulations for companies incorporated abroad provided in the General Resolution 6/2018 of the same body (RG 6/18), which had been in effect since August 2018, and reinstates its prior regime (Title III of Book III) stated in General Resolution No. 7/2015.
It should be noted that the IGJ had made a comprehensive amendment to its regulations on foreign companies in 2018 by means of RG 6/18. In this regard, the IGJ had almost completely eliminated the registration requirements and information regimes that foreign companies had to comply with in order to establish a branch in Argentina (Article 118 of the Argentine General Companies Law) and/or participate as a partner in a company incorporated in Argentina (Article 123 of the Argentine General Companies Law).
Notwithstanding the above, the RG 2/20 reverses the regime provided on the RG 6/18, which is repealed in its entirety and qualified as a “deviation of power”. At the same time, it reestablishes “all the normative texts that were revoked, modified or replaced” by RG 6/18 in relation to companies incorporated abroad.
In this regard, the main characteristics of the regime reestablished by means of the RG 2/20 are highlighted below:
i) The regulatory regime for the registration of companies incorporated abroad is reinstated, whereby any foreign company wishing to register with the IGJ must provide evidence:
- that the company is not comprised in legal prohibitions or restrictions to carry out all its activities or the main activity in its place of origin (place of constitution, registration or incorporation of the company);
- that the company conducts relevant business abroad;
- that the main seat of the company is located abroad; and,
- on the identification of its shareholders.
ii) The annual information regime is reinstated. In this sense, any foreign company, which is currently registered or will be registered, has the obligation to prove on an annual basis the maintenance of a substantial economic activity outside Argentina and the identification of its shareholders.
Compliance with this regime must be filed with the IGJ within 120 calendar days as of the closing date of the foreign company’s fiscal year.
iii) The regulation related to “special purpose vehicle companies” is reinstated, whereby, in order to be registered with the IGJ, they must comply with additional requirements to those indicated in section i) above.
iv) The rules relating to “isolated acts” were reestablished, giving the IGJ the power to assess them as acts within the meaning of Articles 118 and 124 of the Argentine General Companies Law and to instruct companies to register in this way.
v) It is stipulated that the legal representatives of foreign companies, registered with the IGJ, must provide a guarantee for an amount equivalent to five times the minimum corporate capital established for corporations (sociedades anónimas, in Spanish), currently set at the amount of AR$100,000 (Argentine pesos one hundred thousand). This guarantee must be maintained in force until the cancellation of their registration as legal representative -with an additional term of three (3) years from the cessation of their position-.
vi) Finally, the restriction to register off-shore companies with the IGJ is reinstated. With the enactment of RG 2/20, the registration of this type of companies with the IGJ is prohibited and, therefore, their registration will require their adaptation to the regulations in force in Argentina.