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Legal & Business Overview of Argentina

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  1. Legal & Business Overview of Argentina North Carolina Bar Association, May 6, 2008 Carlos Gabriel Kaplan JD University of Buenos Aires LLM Duke University

  2. Argentina • Facts • Legal system • Business law • Vehicles available • Regulations on foreign investment • Taxation • Business Opportunities

  3. Facts • Location • Mercosur

  4. Facts • 23 provinces + City of Buenos Aires • Territory: • 1,068,302 sq mi • 8th largest country in the world • 2nd in the region • 40 million inhabitants

  5. Economic Growth • Economy • Crisis in 2001/2002 • Growing ~8.5% for 5 years

  6. Trade (2006) • RTP: • (At least!) 4 Companies

  7. Foreign Direct Investment (2005) • Spain • United States (~15%; $13.2bn) • France • Brazil • Canada • Mexico

  8. Legal System • Democratic Republic • Federal Constitution • 3 Levels of Government • Federal • Provinces + City of Buenos Aires • Municipalities • Each with • Executive • Legislative • Judicial powers: Civil law

  9. Legislative powers of the Federal Government: • Delegated by the Provinces: • Enact codes • Regulate international and inter-provincial commerce: • Companies Law 19,550 • Foreign Investment Act 21,382

  10. Foreign Investment Act • Foreign investors • Same rights than local investors • May use any type of business organization • Free access to local and international financing • Allowed repatriation at any time of revenues and investment, now subject to regulation

  11. Areas of investment • No restriction to foreign investors • Exceptions: • Media: Limit 30%

  12. Federal Companies Law • Types of Business Organizations • Jurisdiction • Provincial / City of Buenos Aires • Incorporation • Control • Federal • Public offerings

  13. Business Organizations • Branch: Sucursal • Corporation: Sociedad Anónima (S.A.) • LLC: Sociedad de Responsabilidad Limitada (S.R.L.) • Trust: Fideicomiso • Partnership: Sociedad de Hecho • Joint Venture: Unión Transitoria de Empresas (UTE)

  14. Branch • Same entity • Separate accounting • Parent responds with assets • Registration • Domicile • Representative resident in Argentina • Additional requirements

  15. Corporation: Sociedad Anónima • At least 2 shareholders • Limited liability • Capital • Minimum requirements • Par value • Classes of shares • Purpose • “Unique and determined”

  16. Corporation: Sociedad Anónima • Governance • Shareholder meetings • Ordinary • Extraordinary • Board of Directors • President • Control • Registry of commerce

  17. Corporation: Sociedad Anónima • Control • Registry of commerce • Statutory supervisor • Supervisory Commission, if • Capital > A$2,100,000 • Public offering • Public concessions

  18. LLC: Sociedad de Responsabilidad Limitada (S.R.L) • Limit 50 partners • Limited liability • No capital requirement • Pass Thru • Start as S.R.L. convert to S.A.

  19. Trust: Fideicomiso • Widely used in real estate financing • Allows to • Isolate risks • Securitization of funds • Fiscal benefits

  20. Foreign Investor • Activity in Argentina • Branch: Regular activity • Shareholder in S.A. / Partner in S.R.L. (Art. 123) • Registration and information requirements • Articles of incorporation, by laws • Shareholders • Non off shore • Principal purpose out of Argentina • No prohibition to act in place of incorporation • Activity and assets in other jurisdiction • Exception: part of a corporate group

  21. Central Bank Regulations • Capital inflows • Minimum term for loans: 365 days • Subject to mandatory 30% non - interest local Bank deposit • Exceptions: • Direct investment • Real estate operations • Portfolio investments in publicly traded securities

  22. Federal Taxation • Income Tax • Residents: World Wide Income • Non residents: Argentine source income • Treaty with US not in force • Value Added Tax • Sale of goods, provision of services and imports • Personal assets • Residents or assets located in Argentina • Tax on Credits and Debits in Bank Accounts • Tax on Exports

  23. Local Taxation • Provinces • Turnover tax “Gross Income” • Stamp Tax • Municipalities • Service fees

  24. Risks • Inflation • Official: ~ 8% • Unofficial: ~ 20%? • Legal uncertainty

  25. Business Opportunities • Agriculture: machinery, genetics • Financial services • Information technologies • Telecommunications • Airport and ground support equipment • Residential building materials and supplies • Travel and tourism

  26. Thank you very much! Carlos Gabriel Kaplan carlos.kaplan@law.duke.edu