1. Corporate law Basics Last updated 30 Nov 11 Latin American Law

3. Today’s topics Civilian business organizations –Types: “hub and spoke” –Rules (mandatory / default) Organizational basics –Formation Promoter / notary / authorization / registration Single act or public subscription Constitutive documents –Structure Shareholders / managers Oversight: board / supervisory council Centrality of shareholder meeting –Liability Promoter liability for pre-formation agreements “Piercing corporate veil” Director/manager liability

4. Model for borrowing Gain perspective Discover truths Impose / power Value of knowing other legal systems State directed economy …

5. Business organizations …

6. Latin American (Spanish) 1.sociedad anónima (SA) 2.sociedad cerrada 3.sociedad colectiva 4.sociedad en comandita (sociedad comanditaria) 5.sociedad de empresas (en participación) 6.sociedad de inversiones 7.sociedad de responsabilidad limitada (SRL) 8.sociedad filial 9.sociedad matriz 10.sociedad por acciones (SpA) 11.sociedad pública (corporación) 12.sociedad unipersonal United States A.Corporation B.close corporation (not “closed”) C.general partnership D.government agency E.limited partnership F.joint venture G.individual corporation H.investment company (mutual fund) I.limited liability company J.parent company K.subsidiary company 1-A / 2-B / 3-C / 4-E / 5-F / 6-H / 7-I / 8-K / 9-J / 10-A / 11-D / 12-G

7. “Hub and spoke” (civilian bus orgs) Argentina Business Organizations Act Title II Norms for legal entities ------ Registration Voting Limited liability Associations, foundations Limited liability companies Partnerships Corporations

8. Form an Argentine business …

9. Form an SRL / LLC SRL – Argentina reserve a company name with a specific governmental form (IGJ form #3) have company members' signatures verified by a notary deposit subscribed capital in the national bank publish an announcement of the company's formation in the Official Bulletin pay the incorporation fee register the corporation obtain books for company record-keeping submit books to a notary for certification obtain a tax 'password’ obtain a tax identification number register for sales taxes with the local government register with the Social Security Administration obtain employment insurance submit company books to Labor Ministry for certification LLC – US ensure name availability within your state of organization develop an operating agreement file the articles of organization apply for a tax identification number Sam Wellborn

10. Constitution Instrument 1.Name (must include SA)SA 2.Purpose 3.Classes / rights of shares 4.Amount of capital 5.Subscription terms 6.Identity of shareholders 7.Election of directors 8.Company domicile What are company “statutes”?

11. Promoters Notary Public Registry Judge Members Bank Company Board of Trustees Supervisory Council FORMATION STRUCTURE Single act Public subscription Directorate Comptroller Winslow Taylor

12. Argentina is “a chronically unstable, endemically corrupt polity with a rich history of dictatorship, economic mismanagement and the occasional political lunacy.” In Argentina, the culture has created a “tendency towards individualism, unwillingness to engage in teamwork and a lack of trust in people.”

13. Inspeccion General de Justicia Secretary of State (foreign corporation) Winslow Taylor Corporate federalism? Form Argentine branch of US corporation? Form US branch of Argentine corporation?

14. According to Olivares, all Argentine shareholders enjoy the right to cumulative voting (one-third of the board vacancies) right to be informed in advance of the shareholder meeting matters pre-emptive right (right to purchase pro rata in any stock offering) right to request judicial oversight of the company “as a preventive measure … serious danger to the company.” right to dividends. Sam Wellborn Compare to US? Shs better off in Argentina?

15. Argentina Business Organizations Act Article 59: The managers of the organization shall act loyally and exercise the level of care of a good businessman. If they neglect their obligations they are responsible unlimitedly and jointly for any harm that may result from their acts or omissions. Taryn Kadar How do you run the business? Who might sue you? Piercing the veil? BJR?

16. A business purpose plays a significant role in Argentine corporate law. In Argentina, the description of a corporation’s objective must be “precise and definite.” Section 54 of the ACL provides that shareholders of a local corporation shall be held unlimitedly and jointly and severally liable if such corporation has been used as a mere vehicle to pursue goals alien to the corporate purpose, breach the law or the public order or to impair third parties rights [student]

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18. The measure of a corporate law system is how it deals with executive compensation …

20. Invest in Argentine company? Grupo Financiero Galicia (GGAL)

21. IESE Business School in Spain: Argentine life is “characterized by making the least possible effort, ignoring the law and seeking individual advantage over any other interest.” Do “ethics codes” reassure foreign investors? Jen Beatty