Understanding Limited Liability Companies (SRL) in Argentina
Liquidation of Commercial Companies
Once a commercial company is dissolved, it begins the last stage of its life. It proceeds to sell the assets constituting its capital, cancels debts, and distributes the remainder among the partners in proportion to their capital. This process is called liquidation.
Regular, Irregular, and De Facto Companies
The principle of legality provides the basis for the organization and operation of each type of company. To be considered a regular commercial company, it must fulfill the requirements demanded by its type and be mandatorily registered.
If the instrument that gives birth to the company is signed but not registered, the company will be considered irregular because it does not respect the legal form provided by law, followed by compulsory registration.
If a company operates in the market without its partners being bound by any written contract and is not organized according to the social types covered by the law, it is considered a de facto company.
In a regular company, the company’s assets are liable for its debts. In irregular and de facto companies, there are consequences that directly impact the personal assets of the partners.
Argentine Commercial Companies Law 19550: Limited Liability Companies (SRL)
Article 146: Capital and Partner Liability
The capital is divided into shares. Partners limit their liability to the integration of the shares they subscribe to or acquire, without prejudice to the guarantee referred to in Article 150. The number of members shall not exceed fifty.
Article 147: Company Name
The company name may include the name of one or more partners and must contain the words “Sociedad de Responsabilidad Limitada,” its abbreviation, or the acronym “SRL.” Omitting this makes the manager jointly and severally liable for acts that take place under these conditions.
Article 148: Social Contributions
Social contributions must have equal value, which is ten pesos ($10) or multiples thereof.
Article 149: Capital Subscription and Integration
The capital must be fully subscribed to at the time of incorporation. Cash contributions should be integrated into a minimum of twenty-five percent (25%) and completed within two (2) years. Compliance will be credited at the time of ordering the enrollment in the Public Registry of Commerce, with proof of deposit in an official bank. Contributions in kind must be fully integrated, and their value is justified under Article 51. If members choose to conduct a valuation through judicial expertise, the responsibility for the completion of the valuation is placed on them by Article 150.
Article 157: Management
- Designation: The administration and representation of the company correspond to one or more managers, partners or not, designated for a specified or unspecified period in the establishing contract or later. Alternates may be selected in case of vacancy.
- Plural Management: If management is plural, the contract may provide the functions that each manager is responsible for in the administration or enforce a collegial administration. If silent, it means that any manager can perform any act of administration.
- Rights and Obligations: Managers have the same rights, obligations, prohibitions, and incompatibilities as the directors of a corporation. They cannot participate, on their own or through others, in events that compete with the company’s interests unless expressly authorized unanimously by the partners.
- Responsibility: Managers will be responsible individually or jointly, according to the management and regulation of its operation in the contract. If a plurality of managers participated in these events, the court may fix the part that each corresponds to in repairing the damage, according to their personal performance. The relevant provisions concerning the liability of directors apply when management is collegial.
- Revocability: Revocability may not be limited, except when the appointment was an express condition of the company’s constitution. In this case, Article 129, second part, will apply, and dissenting members have the right to recess.
Article 158: Control
- Optional Control: A monitoring body, syndicate, or supervisory board can be established, governed by the provisions of the contract.
- Mandatory Audit: The syndicate or the supervisory board is mandatory for companies whose capital reaches the level determined by Article 299, paragraph 2).
- Additional Rules: Both optional and mandatory control additionally apply the rules of the corporation. The powers and duties of these bodies may not be lower than those established for such a company when required.