Minority Shareholder Rights In Argentina: The Need For Prevention And Dispute Resolutions Methods

Author:Mr Mario Eduardo Castro Sammartino
Profession:Castro Sammartino & Pierini

When partnering to do business, it should always be considered the rights the Argentine General Companies Law Number 19,550 (Ley General de Sociedades Nº 19,550 or LGS for its Spanish acronym) grant to minority shareholders or partners - many of them with no minimum shareholding requirement -, such as:

Partners may examine the company's books and papers and require the reports which they consider relevant. Unless otherwise stated in the by-laws, this right may not be exercised in companies with appointed statutory auditing bodies (e.g. syndics) (LGS, Article Number 55); Being the case of companies with internal auditing bodies foreseen by the by-laws, shareholders representing not less than two percent of the capital may: Request the syndics at any time information on the subjects falling within the syndics' competence (LGS, Article Number 294, Section 6); and Denounce to the syndics what they consider may affect the course of business. They syndics must investigate the issues, mention them in a verbal report to the shareholders meeting and make the comments and proposals which may be relevant. Further, the syndics may immediately call a shareholders meeting to resolve in this respect when the situation under investigation does not receive from the Board of Directors the treatment which they consider adequate and they judge it necessary to act with urgency (LGS, Article Number 294, Section 11); A corporation's shareholder representing at least five percent of the stock capital (provided the by-laws not establish a lesser holding) may request the board - or the Syndic - summons a shareholders' meetings, indicating the subjects to be dealt with. The meeting shall be called to be held within the following forty days. If the board or the syndic were to omit to convene the meeting, the affected shareholder might request it be done by the companies' controlling authority or judicially (LGS, Article Number 236); To exercise cumulative voting rights to try to secure representation in the board of directors of a corporation, up to one-third of the positions to be elected (LGS, Article Number 263); Shareholders of a corporation may judicially challenge any shareholders' resolution carried in infringement of the law or the articles of association or the by-laws, as long as they have not voted for the relevant decision or they have been absent from the meeting. The petition must be filed within three months of the closing of the meeting...

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