I. Legal aspects involved in carrying out on-going activities in Argentina.  

For purposes of conducting business in Argentina, a foreign investor may either incorporate a company under one of the types provided for by the Argentine Companies Law (“ACL”) – subsidiary- or it may set up a branch of its company and appoint a representative thereto.

Foreign investors normally elect to set up a subsidiary under the type of Corporations (Sociedades Anónimas  “SA”) or Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”), for in both cases the foreign investors liability is limited to the stock capital amount invested in the subsidiary. The corporation is the most commonly used legal entity in Argentina for the development of all kind of activities and businesses. Limited liability companies are not as common and in general they are used for smaller business. However, for certain jurisdictions (such as the US), the local SRLs are considered as transparent or pass through entities for tax purposes. 

In August 1st, 2015 an entire amendment of the Argentine Civil Code authorized the incorporation of companies with only one shareholder: Sociedades Anónimas Unipersonales or “SAU” for its acronym in Spanish. 

Foreign investors seldom prefer the branch structure, as unlike corporations and limited liability companies, branches do not enjoy limited liability.  Branches are not considered to be a separate entity from their parent companies, and therefore, all such acts carried out by the branches are considered as directly performed by the parent company itself. This implies that foreign entities are fully liable for all the transactions carried out by their branches. 

Both legal structures (subsidiaries and branches) require that the foreign investor be registered with the Public Registry of Commerce in Argentina.  

II. Differences between a corporation, a limited liability company and a branch or representative office of a corporation domiciled abroad

1. Registration and by-laws

Corporations and limited liability companies: No more than 50 quotaholders are permitted in the limited liability companies. No limit in the number of shareholders for the Corporations. 

The shareholders of an SA or partners of an SRL can be either foreign or local companies or individuals, and no nationality or residency requirements apply. 

It is necessary to previously register the Articles of Incorporation and By-laws of the foreign company forming a subsidiary, with the Public Registry of Commerce. When this is completed the formal act of the formation may take place establishing the By-laws of the new corporation or limited liability company (name, corporate purpose, duration, capital, administration, shareholders meetings, etc.).

Branches:  It is necessary to register the Head Office Articles of Incorporation and By-laws and the decision to register the branch in Argentina. The branch will act in accordance with the Head Office’s By-laws.

2. Capital

Corporations:  At present a minimum capital of $ 100.000 (for an updated US$ / Ar $ exchange rate, please visit http://www.bna.com.ar/ section “Cotizacion divisas”) is required to form a corporation. However, corporate capital stock must be appropriate for the development of the corporate purpose. Therefore, the Public Registry of Commerce may request that companies fix an amount of capital higher than the referred to minimum. At least 25% of said capital must be paid up at the time of formation of the corporation. The remaining 75% must be contributed within a term of two years as of that moment.
Limited liability companies: No minimum capital is required to form a limited liability company. As in the case of the corporations, the corporate capital must be appropriate to the development of the corporate purpose and the Public Registry of Commerce may request the companies to fix an amount higher than the one decided by the partners. At least 25% of the capital must be paid up at the time of formation and the remaining 75% must be contributed within a term of two years as of that moment.

Branches:  There is no required assignment of capital to the branch with the exception of branches acting in certain industries such as banking or insurance. In these cases, a minimum capital should be assigned to the branch. The capital must be paid up in full from the very beginning.

3. Liability

Corporations and limited liability companies: The liability of the shareholders and quotaholders is limited to the amount of the capital invested. The sole limitation to this rule is the "lifting of the corporate veil" doctrine, applicable when companies have been organized or used with fraudulent purposes, abusing of the right to organize such separated legal person.

Branches:  Obligations undertaken by a branch of a foreign corporation are binding for the parent company without limitation of liability.

4. Books and Records

Corporations:  The following registered commercial books are necessary:  Board of Directors' Meetings Minutes Book, Shareholders' Meetings Minutes Book, Book of Deposit of Shares and Registry of Attendance to Shareholders' Meetings, Registry of Shares, Daily Journal, Inventory and Balance Sheets.

Limited liability companies: Only a Book of Meetings of Managers and Quotaholders, Day book , and Book of Inventory and Balance Sheets are required.

Branches: Only the Daybook and the Book of Inventory and Balance Sheets are required.

Any of the entities may also use whatever manual or mechanic records they may deem convenient, in which case annual filings before the Public Registry of Commerce are required.

5. Management

Corporations: Are managed by a Board of Directors appointed by the Shareholders' Meeting. Directors are not required to be shareholders but the majority must be resident in Argentina.  The Board may function with even one member if the By-laws establish such a minimum.  

The Board of Directors must hold meetings at least quarterly.
Limited liability companies: Are managed by managers who are appointed indefinitely or by the Quotaholders’ Meeting.  Managers are not required to be Quotaholders and also the majority must be resident in Argentina. The managers have the same rights and obligations as directors of corporations.

Branches: Local operations are directed by the legal representative of the branch or representative office.  No meetings are required.

6. Supervision

Corporations: the appointment of a syndic is optional unless the capital is AR$ 100,000,000 or more, in which case one or more syndic must be appointed. Corporations organized as SAU and corporations included in Section 299 of Law 19,550 (listed companies, among others) are subject to permanent supervision of the Registry of Commerce and must appoint three regular syndics and three 

Limited liability companies: the appointment of a syndic is optional unless the capital is AR$ 100,000,000 or more, in which case one or more syndic must be appointed

7. Shareholders' Meetings

Corporations: The Shareholders Meeting is the governing body of the corporation. At least one Ordinary Shareholders’ Meeting must be called annually to consider the financial statements, the Board of Directors report, allocation of profits, and appointment of directors and statutory auditors, if applicable, as basic subjects.

Limited liability companies: Corporate resolutions are adopted by a partners’ resolution as set forth in the act of incorporation. At least one Ordinary Quotaholders’ Meeting must be called annually to consider the financial statements, the managers’ report, allocation of profits, and appointment of managers and statutory auditors as basic subjects. Amendments of the by-laws, should a sole partner represent the majority vote, require the vote of another partner.

8. Financial statements, Balance Sheets and Accounts

There are no substantial differences in the accounting obligations of branches and subsidiaries.

Corporations: Annual financial statements must be submitted for the consideration of the Shareholders' Meeting and filed with the Public Registry of Commerce. The statements must be audited by an independent public accountant. 

Limited liability companies: Annual financial statements must be submitted for the consideration of the Quotaholders' Meeting. Same must be filed with the Public Registry of Commerce only if the capital exceeds the amount of $ 10,000,000 (for an updated US$ / Ar $ exchange rate, please visit http://www.bna.com.ar/ section “Cotizacion divisas”).

Branches: Branches must keep separate accounting in Argentina. Revenues in Argentina must be consolidated in Head Office Financial Statements if the rules and regulations applicable to Head Office require said consolidation. 

The financial statements of the branch must be submitted to the Public Registry of Commerce within 60 days following the closing of the fiscal year. In addition, within 60 working days as of the financial statements closing date, branches shall submit to the Public Registry of Commerce a certification subscribed by an officer of the foreign company (head office), which states the composition and the value of its current and non-current assets located outside Argentina and the identity of its shareholders. 

III. Formation of a local company. Registration of a branch – Procedure

III. (i) Formation of a local company

The formation of a local company involves the following actions in the event the founding investors are companies incorporated outside Argentina:

(i) Registration of the foreign entity wishing to act as a shareholder of the local company. 

In order to participate in the incorporation of a company in Argentina, legal entities domiciled abroad must first produce evidence to the Registry of Commerce that it has been duly organized under the laws of its home country . 

This registration is required to hold participation in a local entity but it does not imply the setting of a branch or permanent establishment of such foreign entity nor does such registration convert such entity in an Argentine taxpayer . 

Within the jurisdiction of the City of Buenos Aires, in order to comply with the above-mentioned requirement, the foreign legal entity must file before the Superintendency of Corporations (“Inspección General de Justicia”  or “IGJ”) the following documents: (a) Articles of incorporation and by-laws of the company, and any amendment thereof.
(b) Certificate of Good Standing. 
(c) Certified copy of a formal minute of the board of directors' meeting of the company, resolving to register the company with the IGJ, for the purpose of being holder of shares or quotas of Argentine companies and participate in their formation. The legal representative does not need to be resident in Argentina. 
Pursuant to the regulations of the IGJ the only one entitled to vote and exercise the rights and interests of a foreign corporation -and therefore to vote at the shareholders / quotaholders’ meetings of the local companies in which the foreign company holds a participation- is its legal representative duly registered before the IGJ or any attorney exclusively appointed by such representative. Furthermore, the legal representative of a foreign entity is subject to an information regime before the AFIP (Federal Tax Bureau) in case it participates in certain transactions vis-à-vis the company in which the foreign entity holds a participation.
(d) Affidavit executed by Legal Representative, identifying the final beneficial ownership – individual person- of the foreign company, holding directly or indirectly at least 20% of its capital stock (name, passport, percentage of participation, nationality, date of birth, domicile, tax identification number).

Certain regulations issued by the IGJ have strengthened the control over foreign companies with investments in Argentina. 

These regulations are aimed at restricting the action of foreign companies formed for the sole purpose of avoiding the application of the Argentine Law, thus forcing such foreign companies to prove the contrary. 

To such purposes, foreign companies shall prove: 

1- That, according to the rules of the company’s place of incorporation, the company is allowed to develop activities in the jurisdiction where it has been incorporated (that is not an “off shore” company).

2- That the company develops an economically effective business outside Argentina. 

The IGJ will evaluate whether the activities performed outside Argentina are relevant – from an economic perspective – with respect of the value of the assets to be held and/or operated by the Argentine company. In other words, the value of the assets located outside Argentina should be relevant and substantial with respect of the local ones. In principle, this requirement may be complied with if the Company owns certain assets which, according to the regulations, are suitable to prove effective business outside Argentina and then issue a certificate stating this ownership (the company should own outside Argentina one or more agencies, branches or current representations, and/or non-current assets or exploitation rights over assets belonging to third parties (non-current) and/or shareholding in companies (not subject to public offer) and or regularly performs investment transaction in stock exchanges or stock markets, as established in its corporate purpose.)

3- The identity of its partners.

In addition, with respect to companies incorporated in low tax jurisdictions (tax heavens) the IGJ might apply a more restrictive criteria and make additional requirements.

In the case where foreign companies are not able to comply with these additional requirements such foreign companies may request their registration as a “vehicle” entity, provided a direct or indirect shareholder of such vehicle does complies with such requirements. In this case, the foreign company would be registered for the sole purpose of being vehicle for investing in other companies. 

(ii) Drafting and execution of the deed containing the articles of incorporation and the Bylaws of the new entity: 

Information as of corporate name, corporate purpose, capital, shareholders, etc., shall be defined prior to execution of articles of incorporation and Bylaws.  As of today, and prior to the inclusion of the SAUs in the ACL, the IGJ criteria was that the maximum participation allowed to be owned by a sole shareholder/quotaholder is 98% of the capital stock and the other 2% of the capital stock should be owned by at least another shareholder/quotaholder based on the requirement of “plurality of partners”. Therefore the Inspección General de Justicia would in principle not register companies controlled by a shareholder/quotaholder holding over 98% of voting shares of the capital. 

(iii) Constitution of the Directors’ / Managers’ guarantee pursuant to the provisions of IGJ General Resolution 7/2015:

Directors of corporations and managers of limited liability companies hall constitute a guarantee which shall consist of bonds, public securities, or national or foreign currency deposited in financial entities, or depositories, on behalf of the corporation, banking guarantees, or contingency insurance or insurance against liabilities to third parties. The amount shall be equal for each director and never below the 60% or the capital stock, as per a maximum of $ 50,000 and a minimum of $10,000 per director/manager.

(v) Publication for one day in the official gazette informing the constitution of the company 

(vi)  Deposit of 25% of the capital stock at Banco de la Nación Argentina

At least 25% of the capital stock must be paid in at the time of incorporation. The remaining 75% may be paid in during a term not exceeding two years from that date. Once the company is registered with the IGJ the amount is refunded to the company.

(vii) Registration of the Bylaws of the new entity at the Public Registry of Commerce. 
Articles of incorporation and bylaws must be submitted to the Registry of Commerce, who shall verify compliance with all regulations applicable to corporations or limited liability companies at their inception. 

(viii) Licenses 

Upon approval of the formation of a corporation or limited liability company, no further license to do business is required, except in specially regulated activities (e.g., banking, insurance, pharma, broadcasting and telecommunications, among others). Certain other administrative acts are necessary to assure the company is fully operative, including filing for a federal tax identification number and registering in the social security system. Activities such as import-export transactions, supply distribution to the public sector, and industrial operations will also require additional registrations with some regulatory agencies. 

III. (ii) Registration of a branch

The installation of a branch of a foreign entity requires the registration of its organizational documents before the Public Registry of Commerce. This registration is required pursuant to Section 118 of the ACL and converts such entity into an Argentine taxpayer.

IV. Other Forms of Investment Entity 

1. Partnerships 

Generally speaking, partnerships are entities in which the participants' liability is unlimited. Partnerships in Argentina generally take the form of a Sociedad Colectiva. All the partners are jointly and severally liable for the obligations of the partnership, once its assets have been exhausted. No minimum capital is required and liquidation of partnerships requires unanimous consent. 

2. Joint Ventures (UT) 

The joint venture vehicle most commonly used in Argentina is the Unión Transitoria ("UT"). 

A UT is a group of corporations and/or individuals organized under a structure that supports the economy of each of the parties to the UT, without losing their economic and legal individuality. A UT is not a juristic person (corporation or otherwise). Although they are treated as such for certain purposes including labor law, social security contributions and for value added and turnover tax.  With respect to other taxes, such as income tax and the tax on assets, UTs are considered as transparent entities, and such taxes are therefore payable in the hands of the members.  

A non-resident corporation may be a member of an Argentine UT subject to it complying with the same kind of registration proceedings with the IGJ as those applicable to a branch of a foreign company. All UTs and their representatives must be registered with the IGJ of the jurisdiction of incorporation (i.e. the City of Buenos Aires or one of the provinces). 

Pursuant to Section 1463 CCC, a UT is a contractual means by which the parties thereto join efforts to develop or perform a specific work, service or supply, within or outside Argentina as well as any work or service complementary or supplementary thereto. UT’s existence is temporary in the sense that it is limited to the duration of the work or service to be performed. Therefore, usually the purpose of UT is referred to the duration of the works or services to be rendered.

The UT’s representative should be appointed in the UTcontract, it could be a physical or a juristic person and should have sufficient empowerment of any and all the UT members so as to exercise all rights and be bound by all obligations related to the development and performance of the work or service. Its appointment should be registered before the IGJ. The representation could be singular or plural and the appointment could refer to a member of the UT or any other third party.

Majorities for approval of the UT’s decisions could be freely agreed upon by its members; failure to set forth the majority regime in the contract shall entail the applicability of the general principle that all decisions should be taken by unanimous consent of all the parties thereto (Section 1468 CCC). 

Section 1467 sets forth the general principal that members of the UT are not jointly and severally liable (responsables solidarios) neither for the acts and operations to be developed or executed by them, nor for the obligations vis-à-vis third parties.

Since the UT is not a juristic person, its constitution does not release or limit its members’ liability vis-à-vis third parties, in case of breach of the commitments undertaken by the UT´s representative. Although not a juristic person, the UT can be employer and have a tax number. 
Joint ventures other than UTEs are also permitted under the general principles of law. 

3. Trusts 

Law No. 24,441 of January 1995 introduced the trust concept into Argentine law. It has been a pillar that allowed innovative financial techniques to be introduced into Argentine real estate and other projects financing. Since this law was passed, a number of major projects have been started using the trust as part of the legal structure.  Law No. 24,441 was repealed on August 2015 and its provisions were mostly included in the new Civil and Commercial Code, which maintained the regulation with some minor changes.

This vehicle allows the intervening partners (whether developers, financiers or constructors) to isolate the property, the subject matter of the operation, from other assets and creditors, and ensures that the project is not jeopardized by extraneous factors. Trusts also permit securitization of funds flowing from projects, thus opening up access to the capital markets for financing purposes. 

A trust will be created upon the transfer of certain assets by one person (the settlor) to another person (the trustee), who undertakes to exercise the rights attributable to ownership of such assets for the benefit of a person designated in the relevant agreement as the beneficiary (the beneficiary) and to transfer the assets, upon the expiry of the trust term or upon fulfillment of a certain condition, to the settlor, beneficiary or trustee. 

Pursuant to Argentine law, assets held in a trust form a separate estate from the estates of the trustee and the settlor. They therefore will not be affected by any individual or joint actions brought by the trustee’s or settlor's creditors, except in the case of fraud by the settlor.   

The law contains specific regulations regarding financial trusts. The trustee of a financial trust may only be a financial entity or a corporation specifically authorized by the Argentine Securities Commission to act as financial trustee. 

V. Mergers and Spin-offs 

1. Mergers 

The Argentine Companies Law regulates mergers.  The law provides for two types of mergers: 

a) mergers by consolidation, where two or more companies transfer their assets and liabilities to set up a new company which, as consideration, issues shares to the shareholders of the merged companies, which are then dissolved; and 

b) mergers by absorption, where one or more companies (the absorbed companies) transfer their assets and liabilities to an existing company which, as consideration, issues shares to the shareholders of the absorbed companies, which are then dissolved. 

Creditor's Rights - In order to protect creditors' rights, a notice of merger must be published in the Official Gazette in each company's jurisdiction and in a newspaper with nationwide circulation. 

Right of withdrawal - Whenever shareholders of a company approve by resolution a merger in which their company is not the surviving company, any shareholder who voted against such a resolution or did not attend the meeting at which the resolution was approved may withdraw from the company and receive the value of the relevant shares, determined on the basis of the company's most recent audited balance sheet (i.e., the merger balance sheet). 

Registration - The law requires that the merger be recorded at the Public Registry of Commerce. If the merger, the capital increase or modification of the charter or by-laws of the absorbing company are not registered, the merger will have no legal effect as far as third parties are concerned. 

Taxation -To encourage the aforesaid business re-organizations, Argentine tax law provides, in principle, that the transfer of assets as a result of such mergers shall not be levied with certain taxes (income, VAT, gross income tax, among others), provided that certain conditions are satisfied. 

2. Spin-offs 

Argentine law defines a spin-off as an operation by which a company: 

a) separates off part of its assets and liabilities from its existing assets and liabilities and either (i) creates (together with another company) a new company to which these assets or liabilities are transferred; or (ii) merges such assets and liabilities into one or more existing companies (in the latter case the rules applicable to mergers will apply); 

b) separates off part of its assets and liabilities from its existing assets and liabilities and creates one or more companies to which these assets and liabilities are transferred; 

c) creates new companies into which all of its assets and liabilities are transferred. 

Creditors' Rights - Creditors in spin-offs are entitled to rights similar to those applicable to mergers. Details of the spin-off must be published in the Official Gazette in each company's jurisdiction and in a newspaper with nationwide circulation. 

Right of withdrawal - Similar rules to those applicable to mergers apply. 

Registration - Once the periods provided for rights of withdrawal, objection by creditors and application for judicial liens have elapsed, without any claims pending, the by-laws of the new company and the amendment to the by-laws of the spinning off company will be executed and registered at the IGJ and the spin-off will be effective with respect to third parties

VI. Acquisition of an Argentine business

1. Introduction

There are basically two ways of acquiring a local company, namely, the purchase of stock or the purchase of assets. The choice between one and the other will depend upon the circumstances of the target company on the basis of the following considerations:

Since the purchase of shares implies the continuity of the legal entity, it is clear that the most relevant risk is associated to hidden liabilities, particularly tax and labor ones, which in Argentina can be a very sensitive and substantial matter. Sometimes this risk can be reasonably measured after a due diligence process and covered by appropriate guarantees in the stock purchase agreements.

On the other hand, the asset purchase option provides reasonable protection against past hidden liabilities through the procedure of sale of going concerns foreseen in the Law of Transfer of Going Concerns (or Bulk Transfer Law) nr. 11,867 and federal and provincial tax regulations. This law provides for specific procedures that allow the purchaser to separate and avoid certain liabilities related to the former owner or exploiter of the business that it’s being transferred. However, tax and labor liabilities are usually transferred to the purchaser of the going concern. 

Additionally, it is worth mentioning that shares of public companies may also be purchased in the stock market through a tender offer. This procedure is regulated by the CNV. However, the relatively small number of companies listed in Argentinean securities markets and the small percentage of its total number of shares being publicly traded makes this procedure only of interest to majority shareholders willing to purchase the remaining shares in ongoing private transactions.

2. Legal Implications of Each Alternative

a. Stock Purchase

There is no specific regulation as to the provisions of a share purchase agreement and,  therefore, the parties are free to negotiate and agree on its terms, subject to the general rules applicable to contracts under Argentine law. From the perspective of the purchaser, it is important to mention that responsibility for hidden liabilities must be expressly established in the share purchase agreement because if no provision is stated in this regard, the prevailing doctrine arising from judicial precedents dictate that the seller cannot be held responsible for such liabilities.
From the tax standpoint the following considerations are to be taken into account:
- Capital gains derived from the sale of shares or other equity participations, such as quotas or a limited liability company (sociedad de responsabilidad limitada) will be subject to the Argentina Income Tax. 
- The tax treatment of capital gains for foreign persons has been recently amended. Taking this into consideration, in principle, if the owner of the shares or equity participations is a foreign person (individual or legal entity), local payor will have to withhold the tax (15%, special rate for capital gains derived from shares and equity participations) from the purchase price; such withholding will be applied on the presumed net income: the ITL presumes, for the case of sale of shares and equity participations, that the net income is 90% of the gross amount paid, resulting in an effective tax rate of 13.5%.  Also, the ITL provides that the foreign taxpayer may opt to pay tax at the rate of 15% on the actual net income, which is calculated by deducting the actual expenses incurred in Argentina in obtaining the taxable income from the gross amount; however, no regulations have been issued yet for the latter option. 
- Also, the ITL establishes that if both seller and purchaser are non-Argentine residents, the purchaser should make the withholding. However, no regulations have been issued for this situation and there are legal obstacles for the Argentine Revenue Service enforce the purchaser’s responsibility.
- Other taxes that might be applicable are the stamp taxes, which levy written agreements in certain jurisdictions.

No other taxes are applicable to stock purchases. Once the parties accomplish the preliminary steps (due diligence, letter of intent, etc.) and the deal structure is agreed upon, they are ready to negotiate and execute the acquisition agreement. Local law authorizes parties to choose the law governing the agreement, but this selection needs to be based on some reasonable point of contact with the transaction or the parties. Similar comments apply to the jurisdiction chosen by the parties (i.e. local or foreign, ordinary courts or arbitration), although this aspect is usually more flexible than the “applicable law” issue .
In order to cover the purchases or investments, security interests under Argentine law may be obtained through mortgages, pledges (including registered and floating pledges), security assignments and trusts. Such securities may be taken over movable and immovable properties, shares, cash and receivables.

A mortgage and/or a pledge will generally secure the principal amount, accrued interest, and other related exenses owed by a debtor to its creditor.
Mortgages, under Argentine law, may be granted over real estate, ships and aircraft. All mortgages must be registered with the relevant public registry in order to become effective vis-à-vis third parties. In connection with pledges, the Argentine  Commercial Code provides that unless the debtor and creditor agree upon a special sale proceeding, the pledged asset must be sold by public auction which shall be duly announced through the Official Gazette.
Furthermore, pledges over shares must be reported to the issuing company or the registrar (and must be recorded in the stock registry book of the involved company). Such pledge only takes effect vis-à-vis the company and third parties upon its registration in the aforementioned company’s book.

b. Transfer of Going Concern (“TGC”)

The purchase of all or part of a company's assets qualifies as a transfer of a going concern, governed by Law No. 11,867 (the "TGC”). Its purpose is to protect creditors from the transfer of the debtor's assets, which represent the guaranty of its credits.

The following considerations apply to this structure:

The selling party is a local company, which will survive the sale.
The purchaser of an on-going concern may identify and limit the liabilities that are transferred with the business. Such limitation will be granted if the sale of assets is implemented through the procedure set forth by the TGC.
  • In most cases, the TGC involves the transfer of personnel. Labor regulations impose joint and several liability on the seller and the buyer of a TGC for labor obligations. In this case, there is no legal mechanism to avoid such liability for the purchaser, which should be properly covered by the usual representations and warranties in the TGC agreement. However, one should note that employees of the going concern company may or may not be transferred to the new owner of the business, but the employees have the right to remain with their prior employer if they so wish. The seller and the purchaser may not compel the employees to accept the transfer to a new employer. Normally, when the employee does not wish to be transferred, he/she will be terminated after the payment of all applicable severance indemnities.
  • The TGC provides for a special procedure, which basically consists of the announcement of the transfer in certain publications so the creditors have the opportunity to oppose to it,
  • unless they receive full payment of their credits or satisfactory guarantees of their cancellation. Lack of compliance with the described procedure does not affect the validity of the transaction, but the buyer will be jointly responsible with the seller for the debts of the going concern up to the amount of the price.
Under tax law, and insofar as federal taxes are concerned, a specific notification must be given to the federal tax authorities at least 15 working days before the transfer of going concern takes place. The federal tax authority has a three-month term to assess undetermined liabilities. After that period has elapsed without any assessment by the tax authorities, the buyer is released from any responsibility arising from those contingent liabilities related to federal taxes.
  • The tax regime applicable to a TGC is the following:
  • Income tax. The seller will be subject to the payment of income tax if a profit arises as a consequence of the sale of the going concern. In order to determine the existence of such
  • eventual profit, income tax law provides for specific rules of valuation of the different assets of the going concern.
  • Value added tax. This tax will be applicable on the transfer of movable goods, but not to the transfer of real estate. Presently the tax rate is 10.5% or 21% depending on the type of
  • assets.
  • Stamp taxes. The TGC agreement could be subject to these taxes in accordance with the rules described above for the share purchase agreement.
  • Turnover tax. This local tax applies to movable property (like inventory) other than fixed assets, and is calculated on the gross revenue of such property.
  • The applicable tax rate is on average.


Jorge Tützer (tutzer@rctzz.com.ar) 
Matias Zaefferer (zaefferer@rctzz.com.ar)
Hernan D. Camarero (camarero@rctzz.com.ar)
Mariana Vazquez (vazquez@rctzz.com.ar) 
Dolores Gallo (gallo@rctzz.com.ar)