On May 9, 2018, the Argentine Congress passed the Productive Financing Law. This law introduces significant reforms to Capital Markets Law No. 26,831 (“CML”) with the objective of achieving a modern financial regulatory framework that contributes to the development of the country's economy.

The Productive Financing Law was finally sanctioned by the House of Representatives (House), where the bill was started, after having received approval from the Senate with some modifications.

Said changes, which were mostly technical in nature, were introduced by the Unicameral Commission of National Economy and Investment upon dealing with the bill.  In the main formal aspects were modified, and various articles were deleted because they were identical to the wording of the Law already in force. Additionally, some amendments were directed to adjust the bill according to the reforms introduced to the Argentine tax system.

The reforms were as follows:

• Promotion of financing to micro-, small and medium-sized enterprises in the capital market. New financial instruments were introduced, such as the “MSMEs’ Electronic Credit Invoice" (“Factura de Crédito Electrónica Mipyme”) with the purpose of facilitating the access of micro-, small, and medium-sized enterprises (“MSMEs”) to the capital markets.

• Modifications to the extent of powers of the Argentine Securities and Exchange Commission (“CNV”, after its acronym in Spanish) and its funding sources. Although it’s the CNV’s regulatory function has been strengthened and it has been granted powers  to conduct investigations and impose sanctions according to the terms of the Capital Markets’ Law (“LMC” after its acronym in Spanish), in general the extent of its powers have been reduced. In contrast, the origin of its resources was increased to optimize its functioning.

• Modifications to preferential subscription rights in a public offering. In the case of capital increases of shares or bonds convertible into shares offered through public offering, such right must be exercised through the placement procedure determined in the respective prospectus, under certain conditions. The norm of non-applicability of the preferential right is established, except in those cases in which the company bylaws indicate otherwise.

• Reform of regulatory framework for public offerings of acquisition. The regulatory framework for public offerings of acquisition (“OPA”, after its acronym in Spanish) has been modified substantially to protect the investor in the public offering regime and correct certain situations where conflict might arise.

• Modifications to Law of Common Investment Funds No. 24,083. Certain provisions established by said law were repealed, new guidelines were introduced according to the current dynamics and development of this investment vehicle, the creation of Open and Closed common investment funds (“FCIs,” after their acronym in Spanish) was authorized with the objective of saving for voluntary retirement. Moreover, the Law incorporated the possibility of Open and Closed FCIs to be incorporated with the capacity of reproducing the behavior of a financial or stock market index or basket of assets. Also, the creation of funds for qualified investors was established, and new guidelines were introduced regarding the liquidation of the Open FCIs and the functioning of the ordinary and extraordinary assemblies of the Closed FCIs.

• Modifications to Law on Negotiable Obligations No. 23,576. The aim, primarily, is to modernize the regime with the objective of a greater and more efficient use of this type of instrument. Specifically, it was aimed at streamlining the issuance and utilization of negotiable obligations, adding, for example, that issuance can be approved by the administrative body of the company if it is provided for in the company bylaws; however, the entry into the public offering regime must necessarily be resolved by assembly of the shareholders.

• Collateral Agents for financial collectives. In financing contracts with two or more lenders, the parties may agree to the creation of mortgage and pledge guarantees in favor of a Collateral Agent, who will act for the benefit of the creditors, and that, in such case, the secured loans may be able to be transferred to third parties, who will be beneficiaries of the guarantee in the same terms as the assignor, not being applicable; therefore, the attachment provided for in Section 2186 of the Argentine Civil and Commercial Code. In this way, the holder of the guarantee is dissociated from the holders of the secured loans, and the transfer of the credits is permitted without the necessity of modifying the mortgage and pledge guarantees. 

• Repos (repurchase agreements) and derivatives. Such operations are expressly regulated and include provisions that permit exercising the rights under the clauses of anticipated resolution, settlement and compensation, as well as executing the margins and guarantees in scenarios of insolvency, if certain conditions are met. The CNV is the enforcement authority for these provisions.

For more information about each one of the changes introduced by the Financial Collective Law, please see “Productive Financing Bill”. Concerning derivatives specifically, see "Repos and derivatives in the Capital Markets Reform Bill".