Following with our series of articles on Corporate Governance in Argentina Corporations1, we will now deal with the board's duties, guarantees, insurance, and fees, as well as with different acts and activities the directors must refrain from engaging in.
Director's general fiduciary duties are set out by Article Number 59 of the General Companies Law Number 19,550 (Ley General de Sociedades or LGS by its Spanish acronym): they must perform their tasks loyally and with the diligence of good business people. Failing to meet these duties or infringing the law, the articles of association or by-laws, causing damages by fraud, abuse of authority or gross misconduct, make directors unlimited, jointly and severally liable vis-à-vis the company, its shareholders and third parties for the damages arising out of the relevant acts or omissions (LGS, Articles Number 59, and Article Number 274, first paragraph, specifically providing for corporations).
Nonetheless, the imputation of liability shall be made taking into consideration the individual performance when duties have been assigned on a personal basis by what is laid down in the articles of association, the bylaws, or decided by a shareholders meeting. In the latter case, the decision of the shareholders 'meeting, and the appointment of the persons who are to fill the positions must be registered in the Public Registry as a requirement for the application of the said individual liability (LGS, Article Number 274, second paragraph).
A director may exempt himself / herself from liability as long as he/she objects in writing to the resolution - and gives notice to the syndic if any - before his liability be reported to the board of directors, the syndic, the shareholders meeting, the competent authority or a judicial action be initiated (LGS, Article Number 274, last paragraph).
The liability of the directors and managers with respect to the corporation may be extinguished on approval of their performance, or through express resignation or transaction, resolved by the shareholders meeting, if such liability is not on account of the infringement of the law, the articles of association or by-laws and provided there were no opposition from five percent of the share capital, at least. The extinguishment shall be innefective in the case of bankruptcy (LGS, Article Number 275).
Further to the above, directors of public companies are subject to additional and tougher loyalty's duties (Capital Markets...