Entrepreneurs Law – Simplified Corporations
On March 28, 2017, the National Senate unanimously approved the Entrepreneurs Law, which aims to support the entrepreneurial activity in the country and its international expansion, as well as to generate enterprising capital all over Argentina. The enforcement authority will be the Secretary of Entrepreneurs and the Small and Medium-Sized Enterprises of the Ministry of Production.

It is considered that an entrepreneurship, for the purposes of the law, is any productive activity developed by a new legal entity or one with no more than 7 years since incorporation. The main benefit set by the new regulation is taxwise: investments in entrepreneurial capital will be deducted from income tax, under the conditions to be established by the regulation.

Likewise, the law creates the Fiduciary Fund for the Entrepreneurial Capital Development (FONDCE, in Spanish) with a 30 years term in order to act as a financial and administration trust with public-private resources that will be applied to the granting of loans, non-refundable contributions and capital contributions, among others.

One of the key points of the law is the implementation of what is known as “crowdfunding” or Collective Financing System, to be enforced by the National Securities Commission, and to be configured through a financing platform constituted by authorized corporations whose main purpose will be contacting the entrepreneurs with the investors. The participation of these investors in collective financing projects will be through the ownership of shares, the acquisitions of loan stock convertible into shares or the participation in a trust. Argentina is the first Latin American country that regulates this instrument that was being used in practice and that will allow the participation of investors in projects throughout the country.

This new regulation also creates a new legal figure, the Simplified Corporation (S.A.S., in Spanish). Among the key points of this new entity, it is worth highlighting the following ones:

(i) Simplification and celerity of the proceeding, which could be completed in 24 hours.

(ii) Variety of incorporation instruments, allowing for public deed, private acts and/or digital media with digital signature.

(iii) It can be incorporated by one or several individuals or entities, with the exception that a single-member Simplified Corporation cannot constitute nor participate in another single-member Simplified Corporation. Any company of the Business Associations Law can be transformed into a Simplified Corporation.

(iv) It is allowed for the company to have a plural corporate purpose if it is clear and precise, without requiring the multiple activities to be connected between them. This modifies the regimen of the Business Associations Law, which used to require a unique and determined corporate purpose.

(v) The capital is divided into shares and cannot be less than two times the minimum vital and movable salary at the time of the incorporation.

(vi) The shareholders limit their liability to the payment of the shares that they subscribe or acquire, being unlimited and jointly liable in respect of such payment. The cash contributions must be 25% paid-in and the in-kind contributions 100% at the time of its subscription.

(vii) The administrators can be appointed for an indefinite period.

(viii) Board and Shareholders meeting through electronic means allowing the participants to communicate simultaneously are allowed.

(ix) The corporate books can be carried by electronic means, with the exception of the Inventory and Balance Book. The By-Laws of the Simplified Corporations, its amendments as well as the powers of attorney and revocations can also be granted by electronic notarized protocols.

(x) Immediate opening of a bank account and tax ID granting (CUIT, in Spanish), without the need of providing address proof.

For the incorporation of a Simplified Corporation, the company must be domiciled in the City of Buenos Aires, and whoever starts the filing must have tax ID and a level 2 tax code at least. A holder administrator with tax ID and level 3 tax code must be appointed to oversee the relationship with the AFIP. If a single-member company is incorporated, a third party must be appointed as Alternate Administrator.

Although the new corporate type is created as a response to the needs of the entrepreneurial capital, especially in technology areas, the law does not limit its use to other types of projects.

This new corporate type seeks a more efficient use of technological developments and the recognition of a system much closer to reality and operative needs of small sized companies.