Disclosure Requirements - Argentina
Disclosure category 2
In order to comply with the applicable legislation, customers entering into transactions in the Argentinian domestic market consent, and are hereby deemed to consent, to disclosure and to the appointment of the requestor as their attorney-in-fact, under power of attorney, to collect from CBL directly or through any custodian such information as is required to be disclosed. Customers who do not want to grant such authority to CBL should refrain from holding such securities in their account with CBL.
Background and legal basis
Under Argentine law, the disclosure obligation falls on the account holder, in this case CBL, which unless otherwise specifically provided, is considered in this market to be the final beneficial owner of securities held by CBL customers on their accounts opened with CBL.
Beneficial owners that is, CBL, are required by law to disclose:
- their tax ID to the local tax authority:
The Administración Federal de Ingresos Públicos (AFIP), the local tax authority, issued Resolution 3210 of 28 October 2011, as amended by Resolutions 3356 of 3 August 2012 and 3421 of 26 December 2012 by which it is required to CBL’s relevant counterparties (e.g., a local bank, the local securities clearing system - Caja de Valores S.A.) to disclose, through an electronic filing with the tax authority: (i) CBL’s tax ID1; (ii) information with respect to the foreign exchange transactions executed by CBL in Argentina; and (iii) all transactions related to the securities held by CBL in the local clearing system.
- that they are non-residents of Argentina when they want to repatriate portfolio investments in Argentina under the exceptions to repatriation limit:
Since 11 February 2002, repatriation of portfolio investments by non-Argentine residents is subject to foreign exchange controls and regulations imposed by the Argentine Central Bank. CBL only offers the possibility to repatriate proceeds of settlement in local markets of portfolio investments of non-Argentine residents when available pursuant to the regulations set forth, from time to time, by the Argentine Central Bank, which varies depending on the type of investments (for example, Sovereign Securities issued by Argentina, equity or bonds issued by private issuers). In all cases, CBL will have to evidence that its customers are non-Argentine residents. Please refer to Clearstream Creation Link Guide for Argentina, section “Foreign exchange – repatriation regulations” for further information on the applicable procedure.
Since foreign exchange criminal regime applies to CBL, its directors, legal representatives, agents, and attorneys in fact, CBL must ensure to comply with Argentine foreign exchange rules and requirements in order to avoid any fines and penalties.
Foreign ownership limits
Under Argentine law, there are applicable foreign investment limits for certain sector of activities:
Media and communication
Foreign investors are only allowed to hold shares representing up to 30% of the capital and/or votes of an Argentine media and communication entity, as long as this percentage does not give the foreign investor the direct or indirect control of the local entity (Article 20 of Law No. 26,522). Such percentage may be increased only in case of reciprocity that is, if and to the extent to which the country of origin of the foreign investor permits an Argentinian investor to participate in media companies located in its own country in excess of that limit (Article 2 of Law No. 25,720).
Media and communication companies comprise newspapers, magazines, publishing companies, broadcasting services, production of visual and digital contents, advertising companies, and internet providers.
In the particular case of broadcasting companies, no foreign individual can directly purchase stock. If the purchaser is a non-resident legal entity, specific advice should be sought.
The acquisition of shares of a media and communication company by a foreign legal entity requires the prior approval of the federal communications authority named Autoridad Federal de Servicios de Comunicación Audiovisión (AFSCA). For that purpose, the foreign legal entity acquiring the shares shall make the applicable filings with AFSCA. The regulations require disclosing the information regarding the final beneficial owner that will hold the shares. Non-compliance with the foreign investment thresholds are deemed a serious fault and the controlling authority shall terminate the local company’s license.
Gas and Energy
Although there is not a legal specific limitation for foreign investments, the regulations do not allow gas/energy generator or distributor companies to have a controlling interest in a gas/energy transportation company, irrespective of the place of incorporation or nationality of the shareholders of the local companies). Any acquisition of shares of a gas/energy company requires the prior approval of the respective controlling authorities, Ente Nacional Regulador del Gas (ENARGAS) and Ente Nacional Regulador de la Electricidad (ENRE). To that end, the local company shall make the relevant filings with the authorities, including but not limited to the information of the final beneficial owner that will hold the shares. Upon non-compliance of the limitations set forth in this paragraph, the authorities will terminate the respective licenses and impose fines on the local company.
Under the Rural Lands Law No. 26,737, the direct or indirect foreign ownership and possession of rural land are restricted and require the prior approval by the Rural Lands Registry. For purposes of the Rural Lands Law, “foreign ownership” means any acquisition, transfer or assignment of rights over rural land (including minority equity interests) performed in favour of any of the following, among others: (i) foreign individuals other than those exempted by the law; (ii) legal entities where more than 51% of the stock is directly owned by foreign individuals or entities or in which the latter control the entity’s decision-making process; and (iii) legal entities which are controlled by foreign entities or individuals through a number of votes sufficient to prevail in the local entity’s decision-making process.
The most relevant restrictions under the Rural Lands Law are as follows: (i) foreign ownership or possession of rural land shall not exceed 15% of the total amount of rural land in the Argentine territory. This percentage is to be calculated also in relation to the territory of the province or municipality where the relevant land is located; (ii) foreign owners from the same nationality cannot hold rural land exceeding 30% of the 15% mentioned in (i) above at the national, provincial and municipality levels; (iii) ownership or possession by the same foreign owner shall not exceed (y) 1,000 hectares in the “core area” of Argentina, or (z) certain number of hectares in other regions of the country (which number of hectares must be set by the regulator vis-à-vis the 1,000-hectare threshold applicable in the “core area”); and (iv) foreign entities or individuals are prevented from becoming owners or possessors of rural lands that comprise or are adjacent to “permanent and significant bodies of water”.
Pursuant to the Rural Lands Law, the transfer of proprietary or possessory rights over rural land in favour of foreign entities or individuals requires the prior approval by the Rural Lands Registry. Note that the transfer of shares between parent companies holding direct or indirect control of an entity owning or possessing rural land in Argentina should also be disclosed to the Rural Lands Registry.
In case of a breach of its provisions, the Rural Lands Law sets forth the sanctions that would apply in addition to the absolute, total and incurable nullity of the relevant transaction. Depending on the seriousness of the infringement and the background of the offender, the sanctions applied by the Rural Lands Registry to the parties of the transaction and the professionals that intervene in the transaction are: (i) warnings; (ii) fines: for an amount equal to up to 1% of the value of the transaction or the fiscal value of the rural land, whichever is higher; (iii) disqualification for 6 (six) months to 2 (two) years to request the prior approval from the Rural Lands Registry.
Regulatory prior authorisations
Under Argentine law, the acquisition of equity securities (including shares, ADSs and convertible bonds) or assets of companies involved in certain industries (broadcasting, banks, insurance companies, privatised companies) must secure the prior authorization from the applicable controlling authorities.
When a foreign or local investor wishes to acquire shares, or ADSs of a local bank or financial institution, which a) exceeds 5% of the capital stock of the relevant local bank or financial institution, or b) at the criteria of the Argentine Central Bank, may alter the structure of the relevant shareholdings of such local bank or financial institution, the transaction will be subject to the prior approval from the Argentine Central Bank. In addition, in the event of a public offering of a local bank or financial institution, after the offering takes place, the relevant local bank or financial institution will be required to disclose to the Argentine Central Bank the name, nationality and address of any investor who has purchased shares or ADSs representing more than 2% of its capital stock.
With respect to insurance companies, transactions such as mergers and acquisitions, acquisition of equity securities (including shares and ADSs), or purchase of certain assets, as defined on Article 46 of the Insurance Companies Law No. 20,091, issued on 11 January 1973, must be authorised by the Argentine insurance regulator, named the Superintendence of Insurance Companies, prior to the effective transfer of the shares or the assets, as applicable.
When referring to privatised companies, depending on what was established in the terms and conditions of the bidding process, certain restrictions may be imposed on the acquisition of shares of the privatised companies (for example, that a percentage of the shares must be owned by the State). However, this process must be analysed on a case by case basis.
Non-financial reports to the Argentine Central Bank
Local companies must report to the Argentine Central Bank, through an electronic filing with a local financial institution, whenever they register participations of non-residents equal to or higher than 10% of their stock or votes (that is, foreign direct investments).
This report is mandatory only when the equity value of the local company reaches at least USD 500,000. It must be made twice a year, and includes personal and accounting information about the foreign shareholder.
Additional disclosure requirements
Reports to the Comisión Nacional de Valores ("CNV") (the Argentine Securities Commission)
Individuals or legal entities acquiring or selling, by any means, directly or indirectly, shares that give the right to 5% or more of the voting rights at a shareholders meeting of a public company must report the terms and conditions of the transaction to the CNV immediately after the trading, within the same trading day, as per paragraph (g) of Article 99 of the Capital Market Law No. 26,831. Further details may be found on the CNV regulations under Article 12, Section VI, Title X entitled "Transparency in the Public Offering Environment".
Mandatory Tender Offering Rules
Under the Capital Market Law, and the rules issued by the CNV, any investor seeking to obtain direct or indirect control of a public company by acquiring a "significant interest" (see below) in the voting shares, pre-emptive rights, options, convertible notes or any similar securities that can give the right to own or buy, or can be turned into, shares, must file a public offering or a securities exchange addressed to the holders of these securities. A "significant interest" is an interest equal to 15% or 51% or more of a company's shares and votes, depending on the circumstances. The mandatory tender offer regime applies as follows: (a) If a bidder (whether or not a shareholder) intends to obtain an interest of 15% or over, it must launch an offer to acquire at least 50% of the target's shares; (b) If a shareholder already holds at least a 15% interest, but less than 51%, and seeks to obtain a 6% or more additional interest within a 12-month period, it must make an offer to acquire at least 10% of the target's shares; and (c) If a bidder (whether or not a shareholder) intends to obtain an interest of 51% or over, it must make an offer to acquire 100% of the target's shares. Further details may be found on the CNV regulations sections 9 to 12, Chapter II, Title III entitled "Takeover bids and mandatory redemption".
Obligation to report thresholds crossing
Disclosure of the information should be addressed in Spanish and via web-based through the forms available on the CNV website.
Time frame for disclosure is immediately after trading, within the same trading day.
As per Article 132 of the Capital Market Law, the failure to comply with its provisions is subject to the following sanctions:
- Warning, which may also include the obligation to publish the warning issued by the CNV in the Official Gazette and in 2 national newspapers, the cost of which shall be borne by the person warned;
- Fines from AR$ 5,000 to AR$ 20,000,000, which can be raised up to 5 times of the benefit obtained or the damage caused as a consequence of the illicit action, if any of them is higher;
- Disqualification of up to 5 years to act as director, administrator, syndic, member of the oversight committee, certifying accountant or external auditor or manager of authorized markets or registered agents or of any entity under oversight of the CNV;
- Suspension of up to 2 years to make a public offering or, if applicable, of the authorization to act in public offerings; and
- Prohibition to make public offerings of securities or, if applicable, of the authorization to act in public offerings of securities.
For the purpose of determining the aforementioned penalties, the CNV will take particular note of the damage caused, or the benefit incurred, by the investor that did not comply with the applicable regulation.
Reports to the Office of Companies (in the city of Buenos Aires, the "Inspección General de Justicia")
The regulations of the CNV provide that in order to vote in the Shareholders’ meetings of local companies, the appointed representatives of the legal entities that are foreign shareholders of local companies (irrespective of the percentage of their holdings in the stock or votes of such company) must be registered with the Office of Companies of the City of Buenos Aires, in accordance to Article 123 of the Companies Law No. 19,550, and file certain information regarding the foreign legal entity’s assets and shareholders to the Office of Companies on a yearly basis. Foreign individuals are exempted from this obligation.
The Argentine Antitrust Law No. 25,156 requires the parties to notify and obtain the approval of the Antitrust Authority for certain economic concentration transactions resulting in the control or substantial influence, directly or indirectly, independently, or jointly with another company, of a business. Transactions that must be notified to the Antitrust Authority include mergers, transfers of ongoing concerns, stock acquisitions, shareholders agreements, joint venture agreements and other agreements granting de jure or de facto control or substantial influence over management decisions of a business.
A transaction should be notified to the Antitrust Authority by both the acquirer and the seller to the transaction if: (a) the combined Argentine annual net sales of the acquiring group and the acquired business during the last fiscal period exceed AR$200 million, and (b) either the amount of the Argentine portion of the transaction or the value of the assets in Argentina to be transferred, exceeds AR$20 million. Please note that both thresholds must be met in order for the transaction to be subject to approval by the Antitrust Authority.
According to Article 33 of the Argentina Companies Law No. 19,550, if a company becomes the owner of 25% or more of the stock of another company, a formal notification of that fact must be issued to the board of the latter, who should confirm receipt of such notification.
It remains the sole responsibility of the customer to ensure compliance with local disclosure requirements. If a local requirement is not met, it is the customer who will be liable to any related penalty. Customers are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.
Generally, each time a reporting obligation exists under the local law and CBL has to comply with such reporting, the customer undertakes to provide CBL with any relevant information required by CBL in order to ensure compliance with those local requirements, and CBL shall not be liable for any damages suffered by the customer and/or the beneficial owner that may result from such disclosure or other measures taken by CBL. The customer will hold CBL harmless from, and indemnify CBL for any liability resulting from the customer's failure to provide complete and accurate information in relation thereto.
1. CBL has already obtained its local tax ID (CDI) from the local tax authority, to which certain transactions performed by CBL in Argentina are linked.