Argentina's Law of Corporations No. 19550. A Brief Analysis.

Under Argentine law, a foreign corporation may carry out its business on an on-going basis in Argentina either through a subsidiary or a branch ("Sucursal").

Pursuant to the Law, a corporation is formed by at least two shareholders (either physical or juridical persons). Said minimum, must be maintained during the life of the company.

Any of them can hold 99% of the corporate capital, and the other one may hold the balance.

The legal capacity of a corporation is limited to the fulfillment of its corporate purpose, therefore, the purpose of corporation must be concise and determined.

The corporation must have its legal domicile in the Republic of Argentina.

Shares must have equal value, and must be in a nominative form and they usually have one vote per share. However, if desired, different classes of stock with multiple voting rights may be issued. Furthermore, classes of shares (e.g. Class "A", "B", etc.), can be issued granting to each class the right to appoint a certain number of directors on a pro-rata basis with the class participation in the corporate capital, e.g. if class "A" represents 60% of the corporate capital, Class "A" shareholders could have the right to appoint 60% of the members of the Board of Directors.

The corporate capital must be fully subscribed at the time of incorporation. At such moment, at least 25% of the social capital must be paid in and deposited in cash with "Banco de la Nación Argentina". After the registration of the company with the Public Registry of Commerce of the City of Buenos Aires, said deposit is released. The remaining 75% of the capital may be paid in a period of up to two years from the date of incorporation of the company.

The duration of the corporation's life must be stated. A ninety-nine year term is frequently used.

There is a minimum amount of capital required ($ 12,000.- equivalent approximately to US$ 4,000). Please note that under Argentine Law when speaking about capital, the concept of corporate capital is the same as the concept of subscribed capital.

The deed of incorporation is executed through a notary public.

Shareholders' liability is in principle, under Argentine law, limited to their subscribed investment in capital stock of the corporation. Nevertheless, if the corporation, performs any act while in formation, prior to receiving all final incorporation approvals and registrations, its founding shareholders and the members of the Board of Directors shall have unlimited, joint and several liability, except for those transactions which are specifically authorized in the deed of incorporation. Such liability can be assumed by the corporation if, within three months after its registration, the Board of Directors assumes the liability and notifies the Shareholders' Meeting.

Under Argentine law, a "Síndico" (Comptroller) representing the shareholders, usually is provided as an additional element of control and supervision. If the corporate capital is less than $ 2,100,000 the corporation may obviate the appointment of a Síndico but, in this case, the appointment of an alternate director is required by the Law. The Síndico is elected annually by the Shareholders' Meeting and must be either a lawyer or an accountant.

Members of the Board of Directors need not to be shareholders. The absolute majority of the Board members must have its real domicile in Argentina. They are appointed by the Shareholders' Meeting. A director can delegate his right to vote in the Board Meetings (by proxy), but only to another Director. However, proxies are not computed for quorum purposes (quorum must be the presence of, at least, the absolute majority of the Directors). The Board of Directors shall meet at least once every three months. If the company has no Síndico an alternate Director is required.

The Board appoints its President and Vice-President.

Five percent of the annual profits must be transferred to a reserve account, called "legal reserve" until said reserve is equal to 20% of the corporate capital. It provides additional security for creditors and is not available for dividend distributions.

At least one Annual Shareholders' Meeting must be held within four months after the end of the fiscal year. It must consider the Annual Financial Statements. The Annual Financial Statements must be certified by a public accountant.

We would like to point out that, if it is the purpose of the local company is to have a consolidated Balance Sheet, it would be convenient to fix the date of the closing of the local company's fiscal year on the same date as that of the closing date for the Corporation's fiscal year.

Hourbeigt Ruiz Martinez & Padilla