*At the time this article is written, this issue is still awaiting a definitive sentence
On September 16, 2020, the Commercial Court Nº 24, Secretary Nº 48, granted a precautionary measure allowing SAS entities to continue operating, requested by the Argentine Association of Entrepreneurs (ASEA-Asociación de Emprendedores de Argentina) and others, thus revoking General Resolutions of the Inspection Board of Legal Entities (IGJ) 5/2020; 9/2020; 17/2020; 20/2020; 22/2020; 23/2020 and, in a subsidiary way, 4/2020 (unpublished), within the framework of a writ of amparo requesting the nullity thereof for being considered contrary to the Constitution. As already informed in this article, the Law to support Entrepreneurial Capital was partially postponed due to mentioned Resolutions.
The Judicial Branch has not yet ruled on this case and the conflict seems to be a long-term one considering its characteristics; however, this measure sets the grounds for further similar actions as a positive sign towards the entrepreneurial sector in Argentina. In the current context, it is one of the most damaged sectors, not only for economic factors but also for the lack of legal certainty due to the constant change of rules. We understand this measure benefits the current market needs and that it is a good legal resort to avoid more damages in such a challenging economic environment. SAS operation is beneficial for our economy and to ban this type of companies represents a serious economic and social risk.
This measure has been fostered by different business groups and by lawyers of the entrepreneurial ecosystem seeking relief, considering that mentioned Resolutions are clearly arbitrary, that are contrary to the Law to support Entrepreneurial Capital Nº 27.349, that are unconstitutional and that go beyond the ruling power of IGJ. Upon filing the amparo action, they request from the Judicial Branch to determine the lack of legitimacy and their preliminary suspension for being considered contrary to the entrepreneurship interests they represent.
This conflict arose when the new authorities at IGJ took office. One of their first decisions was to suspend SAS operation aiming to ban definitively this new legal figure, created by the previous government. Even with merits (inexpensive, easy, speedy, improves formality, etc.) and mistakes (lack of control over the legal person), the SAS legal figure was a beneficial tool to encourage and develop new business ventures all over the country.
This can be evidenced trough the fact that, upon SAS suspension, this corporate type represented 41% approximately of the companies registered with IGJ (according to IGJ official sources). Through IGJ ruling power (Law Nº 22.315) and exceeding the powers conferred upon this entity (according to our opinion and to the opinion of the Court involved, apparently), the refuted Regulations pretended to amend the laws passed by Congress in a clear attempt to exceed its functions, seriously affecting legal certainty.
What are the provisions of these refuted Resolutions, that are suspended from now on? We can say that some of these Resolutions are likely to be reinstalled, others are likely to be amended and others shall be repealed upon Court decision on this case. For the time being, all mentioned Resolutions do NOT apply.
A brief detail there follows:
5/2020: It reinstated the validity of General Resolution IGJ 7/2005 regarding corporate purpose, it also limited the possibility of complementary activities and entitled IGJ to decide if the initial share capital was suitable or not for the activities to be developed.
9/2020: Among other measures it stipulated the obligation for SAS entities to submit their accounting statement and balance sheets by digital means before IGJ, revoking Section 46 of General Resolution 6/2017 whereby SAS entities were exempted from this obligation; this Resolution also restricted the autonomy of the will in the incorporation process, even in the case of companies within the scope of Section 299 of the Companies Act or not.
17/2020: It provided a 90 days period to enable all SAS entities incorporated without the digital signature of all their partners, to rectify this deficiency. This information has already been supplied in this article.
20/2020: It stated the obligation to register with the IGJ any Power of Attorney granted by the SAS company’s managers domiciled abroad to their representatives in Argentina, limited only to members of the Administration Board with the faculty to object such Powers of Attorney.
22/2020: In a clear attempt to go beyond its ruling power, IGJ stated the need to coordinate, together with the Real Estate Registry of the City of Buenos Aires, an inspection of the real estate owned by SAS entities. Based on the collected information, IGJ will determine if such property is affected to the development of the economic activities. If not (according to IGJ criteria) such property will be considered as partners’ private property, piercing the “corporate veil”, enabling IGJ to declare the dissolution and LIQUIDATION. Moreover, such inspections could apply to Real Estate Registries of other jurisdictions, if necessary.
23/2020: It amended SAS “standard by-laws” arguing that the by-laws provided by General Resolution 6/2017 is incomplete. This Resolution (in my opinion) is the most reasonable one although it is an obstacle to encourage and develop companies in Argentina.
Commercial Court N° 24, in a clear setback to IGJ authorities’ cosmovision, approved the provisional precautionary suspension of the Resolutions refuted by ASEA until final order is issued.
We understand this measure is a support to Simplified Stock Companies; even if SAS are dissolved in the future, they will be granted reasonable transition terms in order to be reorganized to run their business without interruption (not instantly as pretended by the refuted Resolutions).
To conclude, Court decision is still pending on this issue and an appeal is likely to arise by any of the parties involved.