Transference of shares under the Program of Participated Property

1.    Facts

Camuzzi Gas Pampeana S.A. (the “Company”) was created under the Program of Participated Property (“PPP”) regulated by Law No 23,696, within the scope of the privatization of Gas del Estado, a state-owned company. After the privatization, the capital structure in the Company was 20% of class “A” shares owned by the State, 70% of class “B” shares owned by Sodigas Pampeana S.A. and 10% of class “C” shares owned by the Company’s employees. Also, as a consequence of the acquisition, a trust agreement (fideicomiso) between the State and the Banco de la Nación Argentina (the “Bank”), and a share syndication agreement were signed. Such share syndication agreement created an executive committee to represent the employees that acquired shares (the “Committee”), and established rules for the syndicated shareholders’ meetings.

In compliance with Decree No 584/1993 and Law No 23,696 the General Transfer Agreement provided general guidelines for the acquisition of shares under the PPP. It ruled that if class “C” shares became available, they must be offered first to the employees, and only if they did not accept them could the offer be made to third parties. Additionally, at a meeting of syndicated shareholders it was approved to grant a right of first refusal in favor of the other shareholders of the Company in the event the employees did not exercise their right of first refusal.

Class “C” shares became available and the employees did not exercise their first refusal right.   The Committee required by a note to the Bank to offer the available shares to the other shareholders of the Company. On the other hand the Committee invited several companies to consider the transaction. One of them was Recupero Energético S.A., which made an offer to the Bank to acquire all the available shares. At the same time, Sodigas Pampeana S.A., principal shareholder of the Company, notified the Bank that it also offered to purchase the available shares at the same price offered by Recupero Energético S.A.

The Bank notified both offers to the Committee. The syndicated shareholders held a meeting that resolved to sell the shares to Sodigas Pampeana S.A. In these circumstances Recupero Energético S.A. initiated a civil action against the Committee’s members, the Company and Sodigas Pampeana S.A., based on contractual and pre-contractual liability for damages, losses and expectation damages suffered due to the withdrawal of the offer to participate in the purchase of shares that they had made. 

2.    Ruling of Division “D” of the Commercial Court of Appeals

Division “D” upheld the lower court’s resolution without granting the requested compensation. In essence, the ruling held that Recupero Energético S.A. received an invitation to participate in the transaction, but not an offer to buy shares.

Regarding pre-contractual and contractual liability in the matter, the Court of Appeals ruled that:

i)     Pre-contractual liability: for the purpose of determining pre-contractual liability, Division “D” considered that at the pre-contractual stage there is no obligation to give all the information, but only to provide the information required to avoid inducing the other party to an error. It stressed the indisputable validity of right of first refusal clauses or covenants under Argentine law, whether included in by-laws or private shareholders agreements. Division “D” held that the Company was not compelled to inform the existence of a right of first refusal in favor of its principal shareholder to Recupero Energético S.A., because the claimant had never alleged or proved that such lack of information had caused a mistake when it made its offer. Division “D” concluded that no pre-contractual liability was possible, as not having informed a right of first refusal at the pre-contractual stage is not punishable per se, but to be punishable would have had to cause a mistake or other defect in the consent of the other party. 

ii)    Contractual liability: to determine contractual liability, Division “D” analyzed the legal nature of the PPP and considered, following the Supreme Court of Justice’s criteria, that it was a method to acquire shares based on State regulations, which combines elements of civil and corporate law. Division “D” held that, even though the method to purchase shares under a PPP has a special legal framework (including Law N° 23.696 and Decree 584/93), the consent to perfect the acquisition is ruled by civil law, as in any other private contract. So, the State only regulates general aspects but, ultimately, it is an operation agreed by private shareholders. Division “D” understood (based on the analysis of Section 1,148 of the Civil Code) that for an offer to exist it must include all the essential specifications of the agreement, in order that if the offer is accepted, the transaction could be concluded without needing further statements from the parties. In this case neither in the note addressed to the Bank, nor in the invitation sent to Recupero Energético S.A., had the Committee indicated the share price, which is an essential specification of purchase agreements. Consequently, Division D resolved that, as the offer was not complete, those communications could only be interpreted as a mere invitation to negotiate or offer, which does not cause legal effects or bind the parties; and therefore, there was no contractual liability.