Representatives of Foreign Companies: Changes Regarding Guarantees

General Resolution IGJ 5/2024 was published in the Official Gazette on February 23, 2024, becoming effective the following day. It introduced amendments to the guarantee regime representatives of foreign companies must comply with if they are registered within the jurisdiction of the City of Buenos Aires.

The Resolution amends article 3 of General Resolution IGJ 2/2020, as amended by General Resolution IGJ 6/2020, by removing the obligation of representatives of foreign companies registered under article 123 of the General Companies Law 19550 (LGS) to provide a guarantee similar to that directors of corporations and managers of limited liability companies provide. Likewise, the Resolution incorporates changes regarding the sums of such guarantees.

Until now, representatives of foreign companies—whether registered under article 118, paragraph 3 or article 123 of the LGS—had to establish and maintain a guarantee equivalent to five times the minimum capital established for local corporations. The recitals of the Resolution provide some grounds for excluding this requirement:

•             Foreign companies registered under article 118 of the LGS act directly in Argentina, bearing equal responsibility for their actions within Argentina, while companies incorporated abroad registered under article 123 act as shareholders or partners of a local company, which ultimately carries out the activity and assumes responsibility for its operations, subject to Argentinian law.

•             Representatives of foreign companies registered under article 118 of the ACL act as attorneys-in-fact; their function is to manage the branch or operation of the company in Argentina. On the other hand, representatives of foreign companies registered under article 123 also act as attorneys-in-fact, but their function is limited to participating in the incorporation or acquisition of shareholding in local companies and, eventually, in such companies’ shareholders’ or unit holders’ meetings on behalf of the foreign company.

In sum, regarding foreign companies, the obligation remains in force only for representatives of those companies registered under article 118 of the LGS.

Moreover, the new wording of article 3 provides that the amount of the guarantee for each representative must be equivalent to 60% of the minimum capital established for corporations incorporated in Argentina, in force on the date the documents instructing the guarantee were submitted; or 60% of the capital allocated to the branch (if applicable), subject to the minimum and maximum limits in article 76, paragraph 4 of General Resolution IGJ 7/2015. Therefore, the amount of the guarantee must under no circumstances be lower than ARS 300,000 nor exceed ARS 1,000,000.