Mergers And Acquisitions In Argentina – Stock Purchase Agreements: Preliminary Negotiations And Structuring Of The Transaction

Author:Mr Mario Eduardo Castro Sammartino
Profession:Castro Sammartino & Pierini
 
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In one of our previous articles, we have covered the basics of mergers and acquisitions in Argentina (see in our Legal Blog: Investments in Argentina - Legal framework, procedures and further issues to be considered by foreign investors). Following, we will explain the procedures to close a stock purchase transaction regarding mergers and acquisitions in Argentina.

Conditions to be a shareholder of an Argentine company

Under Argentine Law, foreign individuals and companies incorporated abroad are guaranteed the same rights than citizens and domestic companies. Except for few regulated activities and transactions, foreign individuals and companies may wholly own the shares of a domestic corporation.

As for foreign companies, a prior registration procedure before the Public Registry is mandatory to purchase stock shares of a company incorporated in Argentina (see in our Legal Blog our article Doing Business in Argentina Foreign Companies Previous Registration).

Structuring of the transaction

Preliminary negotiations

Term sheets, letters of intent and memorandums of understanding are usual practice in stock acquisition in Argentina. Lock-up and voting agreements may also by entered into and legally binding among the parties under Argentine law.

The new Civil and Commercial Code (Código Civil y Comercial de la Nación - CCCN), effective as of August 1, 2015, has introduced the regulation of preliminary negotiations (Articles Number 990 through 993). As a general principle, the parties have freedom to conduct preliminary negotiations and leave them at any time (Article Number 990). However, during such preliminary negotiations the parties must act in good faith not to unjustifiably frustrate them, even when no offer has been made (Article Number 991, first paragraph). The parties must also maintain confidentiality of the privileged information disclosed during preliminary negotiations (Article Number 992).

Letters of intent are expressly regulated by the CCCN, in Article Number 993, setting out that the instruments whereby one or all of the parties express their consent to negotiate on a certain basis, limited to matters related to a future contract, are to be construed restrictively and can only have a binding effect as an offer provided that they meet the relevant requirements (Article Number 993).

When drafting preliminary instruments under Argentine law, the parties should be aware of the CCCN's provisions on partial agreements, to avoid...

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