TerraLex Cross-Border Guide to Cross-Border Merger & Acquisition Guide

In general, there are no restrictions on foreign investment, although investment in some sensitive industries and ownership of border land and land in excess of certain areas may be subject to limitations. As from December 27, 2011, acquisition of rural lands by foreign persons (individuals and legal entities) is limited to 1,000 hectares (approximately 2,500 acres) in certain cluster areas. In addition, foreign persons, in the aggregate, may not own more than 15% of all rural land in Argentina; and, of that 15%, no more than 30% may be owned by foreign persons of the same nationality

Currently, there are no regulations on exchange and/or currency controls specifically related to Mergers and Acquisitions.

There are incentives to support foreign and local investment, from national and provincial standpoints.

In principle, employees are not entitled to management representation and/or to be consulted in relation to corporate transactions, except in some privatized companies which have a special regime.

It is regulated by local Employment Contract Law, which is a public policy law. The parties can only improve the legal benefits of the employee.

It is regulated by local Employment Contract Law, which is a public policy law. The parties can only improve the legal benefits of the employee.

The sale of shares is subject to the income tax, regardless of whether the seller is an individual or a legal entity, either foreign or domestic. The rate is 15% when the seller is an individual or a foreign company, and 30% when it is a legal entity domiciled in Argentina.

The document implementing the sale may be subject to the stamp tax, depending on the place of execution and the place of incorporation of the company whose shares are sold.

The sale of assets and real estate is subject to transfer taxes and stamp tax (the latter depending on the place of execution and the location of the assets/real estate sold).

The issuance of shares is not subject to taxes.

Transactions should be notified when the total turnover of the acquiring and target group of companies exceeds, in Argentina, the amount of AR Pesos AR$2.64 billion (US$44 million approximately). If the entire turnover corresponds to the acquiring company, the transaction should be notified.

The following transactions do not require merger control even though the above mentioned threshold is exceeded:

• when the purchaser already held more than 50% of the stock capital;
• in those cases of acquisition of bonds, debentures, shares without voting rights or securities of companies;
• in the case of purchase of a single company by a single foreign company which did not previously hold assets or shares in other companies in Argentina;
• purchase of wound-up companies (which have not done business in Argentina during the last year); or
• when the price of the transaction and the value of the assets located in Argentina are absorbed, acquired, transferred, or controlled do not exceed, each of them AR Pesos AR$528 million (US$8.8 million approximately), unless that during the prior twelve-month term transactions have been consummated which in their aggregate exceed such amount or AR Pesos AR$1.584 billion (US$26.4 million approximately) during the last 36 months, always provided that in both cases the same market is involved.

Documents commonly produced and executed at signing meetings include – but are not limited to – board resolutions approving the transaction and authorizing the execution of the related agreements, the acquisition or subscription agreement (including a disclosure document comprising representations and warranties of the parties), stock transfer notices, resignation letters and mutual release agreements with the resigning directors and officers as well as appointment of new directors and officers, new employment agreements with officers and key employees and shareholders agreements.

This is not required.

This is not required.

Proof of identity and authority to sign are generally required, as well as certification of signatures and capacity by a notary public. Special powers of attorney may be granted to a third person to act on behalf of the parties. In case such powers are granted outside Argentina, legalization thereof by the Argentine Consulate of through the Apostille procedure provided for in the Hague Convention of October 5, 1961, may be required.

A distinction must be made between simple contracts, which in some cases can be made orally, those contracts that require special forms (e.g. purchase of vehicles, transfer of trademarks), and those that require a notarial deed (e.g. purchase of real estate). It is common practice that the parties have their signatures and capacities certified by a notary public.

As evidence of the agreement of the company for the execution of a contract, a specific authorization from the board or the shareholders is usually required. Companies are represented by their legal representative (in general, the president of the Board). In addition, the board can grant a power of attorney in favor of an individual to sign on behalf of the company.

A distinction must be made between simple contracts, which in some cases can be made orally, those contracts that require special forms (e.g. purchase of vehicles, transfer of trademarks), and those that require a notarial deed (e.g. purchase of real estate). It is common practice that the parties have their signatures and capacities certified by a notary public.

It is necessary to provide sufficient evidence that the person who signs on behalf of a foreign company is duly authorized to do so. A translation of the official documents empowering the representative duly certified at the Argentine Consulate or through the Apostille (Hague Convention abolishing the requirements for legalization for foreign public documents) may be required. In some cases, the foreign company may have to obtain a local tax ID. If the foreign company shall engage regularly in activities in Argentina, it shall set up a branch.

Notaries are not typically involved in asset and share purchases, but solely for purposes of certifying the signatures and capacities of the parties. However, notarial deeds are required for the purchase of real estate, constitution of mortgages, and other special cases.

A notary cannot change the terms of the transaction.

The notarial fees depend on the value of the transaction and on the type of document involved, and are usually negotiable.

No, unless the notary needs special certificates to issue a notarial deed (e.g. property certificates from Real Estate Register in case of transfer of real estate).

The sale of shares is formalized by a shareholders agreement. Likewise, the selling shareholder must send the company a notarized notice of the transfer of shares in accordance with Article 215 of the General Argentine Companies Act No. 19,550. In addition, a board meeting must be held to record the transfer of shares, order the cancellation of the corresponding share certificates, and order the issuance of new ones held by the new shareholders.

The shareholders' meeting may decide at any time to appoint the company's directors. Furthermore, upon the expiration of its term, the shareholders' meeting will appoint replacement directors. The bylaws will specify the term for which the director is elected. However, the director will remain in office until replaced.

Shares are transferred by means of a share transfer document, and written notice of such transfer shall be made to the company for it to register the transfer in the stock ledger and to issue a new share certificate in the name of the purchaser.

Yes, by means of a power of attorney. If the power of attorney is granted outside Argentina, the legalization described in the notary power shall be required.

Restrictions shall depend on the terms of the power of attorney. For example, under local law an attorney shall be authorized to delegate their power unless it is expressly prohibited to do so under the power.

A faxed document could be admitted in court as evidence of due execution, but it could be subject to objection or challenged by the other party.

Yes. Legislation has been enacted that provides for the admissibility of digital signatures, although it is not commonly used as of today.

Yes. The counterparts will be taken together as evidence of the agreement.

Yes. Such undertakings may be strictly enforced, or damages may be requested.

Yes, closing can be subject to a condition precedent.

No, unless the notary needs special certificates to issue a notarial deed (e.g. property certificates from Real Estate Register in case of transfer of real estate).

In general, the parties rely on the representations and warranties of the other parties. Financial institutions providing financing for acquisitions, however, typically require legal opinions.

The timetable depends on the terms of the transaction and whether notifications or consents are required, and there is no specific difference in timing between an asset and a share deal.

Yes. In general, two years.