Equity capital markets in Argentina: regulatory overview

A Q&A guide to equity capital markets law in Argentina.

The Q&A gives an overview of main equity markets/exchanges, regulators and legislation, listing requirements, offering structures, advisers, prospectus/offer document, marketing, bookbuilding, underwriting, timetables, stabilisation, tax, continuing obligations and de-listing.

To compare answers across multiple jurisdictions visit the Equity Capital Markets Country Q&A tool

This Q&A is part of the global guide to equity capital markets law. For a full list of jurisdictional Q&As visit www.practicallaw.com/equitycapitalmarkets-guide.

Contents

Main equity markets/exchanges

1. What are the main equity markets/exchanges in your jurisdiction? Outline the main market activity and deals in the past year.

Main equity markets/exchanges

The main equity exchange in Argentina is the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires) (BCBA) (www.bcba.sba.com.ar), which works with an associated market, the Buenos Aires Securities Market (Mercado de Valores de Buenos Aires) (MERVAL) (www.merval.com.ar). The MERVAL is also the most significant Argentinean market where equity securities issued by corporations are traded.

Law No 26,831 (Capital Market Law) has established the creation of a new market the Argentinean Exchange Market (Bolsa y Mercado Argentino) (B&MA). No legal term has been set out for its creation, although on 5 June 2014 the extraordinary shareholders' meeting of MERVAL approved the constitution of the B&MA. This new market, still subject to the authorisation of the CNV, will be controlled by an 80% stake by MERVAL and the remaining 20% by other Argentinean exchanges, including the BCBA. The B&MA has not been approved by the CNV yet.

Each authorised market in Argentina, including the MERVAL and the Electronic Open Market (Mercado Abierto Electrónico) (MAE) (www.mae.com.ar), a debt securities market, has its own regulations and requirements, including:

  • Reporting systems.

  • Administrative procedures.

  • Registry and customer information.

  • Transactions records.

  • The nature of the assets permitted to be traded.

  • The scope of the transactions.

  • The requirements to be fulfilled by each of the agents involved in market transactions.

As a general principle, an agent can act and operate within different authorised securities markets in Argentina, as long as that agent is duly registered and authorised with each relevant authorised securities market.

Market activity and deals

There are six foreign companies out of a total of 101 companies listing their shares on the MERVAL through the BCBA. Argentinean Depositary Certificates (Certificados de Depósito Argentino) (CEDEAR) and Securities' Certificates (Certificados de Valores) (CEVA), which can include underlying equity securities, are also listed on the MERVAL through the BCBA (see Question 3, Foreign companies).

By the end of 2014 the index composed exclusively of equities shown an increase in the market activities. During 2014, in trading terms, YPF (YPFD) stood out with 24.3%, Tenaris (TS) with 14.7% and Grupo Financiero Galicia (GGAL) with 12.9 % of total operated in stocks.

Also, during 2014 Petrolera Pampa S.A. issued an Initial Public Offering of 59,700,000 book-entry common shares, representing 50% of its share capital.

 
2. What are the main regulators and legislation that applies to the equity markets/exchanges in your jurisdiction?

Regulatory bodies

The regulatory body responsible for regulating the equity markets/exchanges is the National Securities Commission (Comisión Nacional de Valores) (CNV) (www.cnv.gob.ar), a national entity that is separate from the central government and has jurisdiction over Argentina. The CNV supervises:

  • Companies authorised to issue and offer securities (including shares) to the public in Argentina.

  • The trading of securities (whether or not such securities are issued in Argentina) in the Argentinean secondary market.

  • All individuals and legal entities involved by any means in the public offering of securities (including IPOs of securities) and secondary market transactions involving securities.

Legislative framework

Law No 26,831 (Capital Market Law) is the main law regulating the activities performed in connection with the public offering of securities.

In its capacity as regulator, the CNV issues regulations (CNV Regulations) which, together with the Capital Market Law (as amended) and other legal sources (the most relevant of which is the Executive Power Decree No 1023/2012), constitute the regulatory framework for:

  • The capital market players and securities traded in the market (including shares).

  • The secondary market trading of securities.

In addition, each market/exchange issues its own regulations that, together with the CNV Regulations, apply to securities' transactions.

Corporations' Law No 19,550 (as amended) also applies to shares.

 

Equity offerings

3. What are the main requirements for a primary listing on the main markets/exchanges?

Main requirements

A primary listing on the main markets/exchanges requires:

  • Prior authorisation by the CNV to both:

    • enter the public offer regime; and

    • issue and place shares on the market through a public offer.

  • Prior authorisation by the relevant exchange to list the shares, and by the relevant markets to trade the shares.

The requirements necessary to be authorised both by the CNV and the exchanges/markets are similar, and include filing with the regulatory authorities certain information related to the issuer and to the shares to be placed on the market, which must be evaluated by those authorities' staff of lawyers and accountants. This documentation includes the following:

  • A prospectus (see Questions 10 to 13).

  • Corporate approvals and modification of bye-laws in accordance with public offer regulations.

  • Agreements entered into with agents of the transaction.

  • Risk rating reports, if applicable..

The company must also pay a filing fee, and certain publications must be made, including, for example, a summary of the prospectus and a notice announcing the placement period to investors. If securities are to be listed and traded on a local market such as the MERVAL or MAE, similar notices and costs must be published and paid for.

The company is subject to ongoing reporting requirements, which include:

  • Quarterly and year-end financial statements (see Question 21).

  • Reports in relation to material events that may affect the value of its securities.

  • Reporting any changes in its corporate structure and authorities.

Foreign companies

Foreign entities can file a request to the CNV to make a public offer of their securities (CNV Regulation). The documentation required is similar to that applicable to local companies.

Before filing its request with the CNV, the foreign entity must establish a branch, and register its offices with the Argentinean General Inspection of Justice (Inspección General de Justicia) (IGJ) or the equivalent provincial (local) business companies' registration authority. Among other documents, the entity must file a copy of its:

  • Articles of incorporation and bye-laws.

  • Certificate of incorporation evidencing that the entity is duly registered and validly existing.

  • Corporate resolution appointing a legal representative and establishing a domicile in Argentina.

Where the foreign entity is carrying on business in Argentina on a continuous basis, it will be considered to have a permanent establishment or tax presence in Argentina, and will be subject to Argentinean taxation.

Other vehicles to allow the sale and offer of equity issued by foreign entities, with or without the issuer's sponsorship or participation, were created under CNV Regulations. In such cases, equity is deposited with a local custodian and offered in Argentina through structures similar to US American Depositary Receipts (ADRs) (that is, CEDEAR and CEVA) (see Question 1).

Minimum size requirements

There are no minimum size requirements.

Trading record and accounts

There are no minimum trading record or working capital requirements.

Financial statements for listed companies must be prepared according to the requirements of the CNV Regulations, including that, except for certain limited cases, listed companies must follow the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) for fiscal years starting 1 January 2012.

Minimum shares in public hands

The BCBA regulation sets out that the corporate purpose, the equity capital, economic and financial situation must justify the access to the market. There is no unanimous criterion for such requirements and the analysis is discretional to the administrative authority.

There is no unanimous criterion of what constitutes a "market access justification". Each scenario must be evaluated on a case-by-case basis.

 
4. What are the main requirements for a secondary listing on the main markets/exchanges?

The main requirements for a secondary listing are similar to those required for an IPO.

 
5. What are the main ways of structuring an IPO?

As part of an IPO an issuer must first request from the CNV a general authorisation to publicly offer its shares to the market (see Question 3). The issuer must provide the CNV and the markets/exchanges with some general corporate and business information to give the markets/exchanges a clear understanding of its business. Once the issuer is authorised to make a public offer of its shares, such general information does not need to be provided by the issuer as part of the process of a successive placing of shares (it is only required for the purposes of updating, where changes have occurred).

An IPO can be made either:

  • Through the offer to the market of existing shares, in which case the funds raised will be collected by the shareholder selling/placing the shares on the market.

  • Through the offer to subscribe to new shares to be issued by the company, in which case the funds raised will be collected by the company issuing the shares.

An IPO can be postponed at any stage, until the primary placement period of the shares on the market is closed and the transaction is settled. Even if the primary placement period has been initiated, the placement can be suspended and postponed, or cancelled, in which case it can be initiated again when market conditions are favourable.

 
6. What are the main ways of structuring a subsequent equity offering?

In a subsequent equity offering the issuer is already authorised to make a public offer of its shares. Consequently, the issuer must only:

  • Provide to the CNV and the markets/exchanges information related to the shares to be issued.

  • Update any relevant corporate or business information.

In addition, a subsequent equity offering can be made through the offer of existing shares or by subscription (see Question 5).

 
7. What are the advantages and disadvantages of rights issues/other types of follow on equity offerings?

There are no other types of equity offerings other than equity shares in public offerings. The main advantage of equity shares in public offerings, for companies, is financing. For shareholders, there is a different tax treatment for those who hold equity shares which are not subject to a public offering.

 
8. What are the main steps for a company applying for a primary listing of its shares? Is the procedure different for a foreign company and is a foreign company likely to seek a listing for shares or depositary receipts?

Procedure for a primary listing

Pre-filing. The main steps and related documents in pre-filing include the following:

  • Preparation of documentation, including a prospectus and special financial statements, if necessary. Due diligence takes place at this stage.

  • A shareholders' meeting approving the request to enter the public offer regime, the modification of its bye-laws (to the extent required) and the appointment of the person responsible for dealing with the market (Responsable de las Relaciones con el Mercado). Selling shareholders must express their intention to sell their shares (if applicable) and must resign their pre-emptive rights (if applicable).

  • The registration of amendments to the bye-laws before the Superintendency of Corporations.

  • A board of directors' meeting (which takes place after the shareholders' meeting approving the request to enter the public offer regime) deciding to submit the company to the public offer regime, and the issuing, placing by public offer and listing of company shares.

Filing. The main steps and related documents in filing include the following:

  • Filing before the CNV of a request to be admitted to the public offer regime in connection with its share capital, to be decided by the CNV. Filing a request for listing of shares before the MERVAL, through the BCBA which is the entity in charge of analyzing and authorizing the listing of shares in the MERVAL.

  • Filing of documentation with the market carrying the electronic platform where the primary placement will take place.

  • Pre-marketing of the placement.

  • Amendments to the preliminary prospectus and clarifications to the BCBA, and so on.

  • Courtesy visit to the company by BCBA officers. Verification of the company's administrative capacity to be admitted to the public offer regime.

  • Risk rating report. The CNV Regulation allows the issuer not to have its shares evaluated by a risk rating company. However, in that case a specific warning must be included in the prospectus.

  • The BCBA authorises the company to list its shares on the MERVAL, conditional on the prior authorisation of the CNV to make the public offer of the shares. The BCBA then delivers the file to the CNV.

  • Filing of a definitive prospectus with the CNV and the BCBA.

  • The authorisation to enter the public offer regime and place the shares through public offer by the CNV.

  • The execution of contracts related to the transaction.

  • The publication of prospectus in the MERVAL through the BCBA daily bulletin.

  • A placement period and receipt of subscription offers.

  • Price determination and a confirmation of offers received.

  • The publication of a placement result.

  • Settlement.

Procedure for a foreign company

The procedure applicable to foreign companies when listing shares is similar to that applicable to local companies.

 

Advisers: equity offering

9. Outline the role of advisers used and main documents produced in an equity offering. Does it differ for an IPO?

The advisers and agents in an equity offering do not differ from those used in an IPO. However, the advisers and agents in an equity offering can vary depending on the needs of the transaction:

  • Arranger/lead manager. Hired by the issuer for structuring and co-ordinating all the activities included in the transaction.

  • Financial advisor. Hired by the issuer to assist it in determining the subscription price of the shares.

  • Legal advisor. The lawyer or law firm hired by the issuer gives legal advice in all the legal and regulatory aspects of the issuing, drafts the transaction documents and performs the necessary filings before the regulatory authorities. Frequently, the arranger and the issuer have their own legal advisors. If the shares are placed outside Argentina, then the issuer hires a foreign law firm practising law in that jurisdiction.

  • Placement agent. Hired by the issuer to market the offer and co-ordinate the placement of the shares.

  • Risk rating company. Hired by the issuer to make the risk rating evaluation of the shares to be placed on the market. The CNV Regulations allow the issuer not to have its shares evaluated by a risk rating company. However, in that case a specific warning must be included in the prospectus. Risk rating companies are regulated and monitored by the CNV. A risk rating evaluation is necessary if the shares are to be distributed among certain institutional investors, such as insurance companies.

  • Auditor. The accountant or accountant firm hired by the issuer to audit the financial statements and other accounting information related to the transaction.

The prospectus is the main document produced in an equity offering. There are also other ancillary documents, such as shareholders' minutes and notices that must be published (see Question 3).

 

Equity prospectus/main offering document

10. When is a prospectus (or other main offering document) required? What are the main publication, regulatory filing or delivery requirements?

Prospectus (or other main offering document)

A prospectus is always required in a public offer of shares unless an exemption exists (see Question 11).

Main publication, regulatory filing or delivery requirements

Sufficient copies of the prospectus must be printed to cover the demand of potential investors and be published in the news bulletins of the exchanges/markets where the shares will be listed or offered. The prospectus must also be available at the issuer's and placement agents' registered addresses.

 
11. What are the main exemptions from the requirements for publication or delivery of a prospectus (or other main offering document)?

A prospectus is not required when issuing shares (CNV Regulations):

  • By capitalisation of reserves, accounting adjustments or profits or other special accounts registered in the financial statements.

  • Where the shareholders' pre-emptive rights were suspended.

  • By conversion of shares or exchange by other securities, when these are performed in accordance with their original terms and conditions.

The publication and delivery of a definitive prospectus can be made only if the CNV has issued a definitive authorisation to make a public offer of the shares (CNV Regulations). Before this stage, the company can only perform limited marketing actions, which includes distribution of a preliminary prospectus on a limited and restricted basis.

The disclosure of information before the public offering authorisation is conditional on the following, among other things:

  • A special undertaking must be included in the first page of the preliminary prospectus, in red ink and bold characters, announcing that the authorisation is still pending.

  • At the time of applying for the public offering authorisation, the issuer must:

    • disclose if the issue will be publicised through the distribution of a preliminary prospectus; and

    • submit a copy of the preliminary prospectus to the CNV.

The preliminary prospectus must be replaced by the final prospectus once the public offering of the shares is authorised. It must then be made available to the interested parties or intermediaries with any and all amendments introduced to it at the request of the CNV, removing the special legend. In no event can the distribution of the preliminary prospectus be made before the application for the public offering authorisation of the relevant issuing.

 
12. What are the main content or disclosure requirements for a prospectus (or other main offering document)? What main categories of information are included?

The main categories of information that must be contained in a prospectus include (CNV Regulations):

  • Mandatory undertakings related to the responsibility of the issuer for the information contained in the prospectus.

  • Information on directors, senior management, advisors, auditors and members of the supervisory board (statutory controllers).

  • Statistical data and estimated schedule of the offering, including:

    • number of shares to be offered;

    • subscription price or method to establish the subscription price;

    • expected issue amount;

    • percentage represented by the placement of the issue in the capital stock after the offering and price/book value ratio; and

    • the offering method and schedule.

  • Key information on the issuer, including:

    • accounting and financial information, which will be provided on a consolidated, summarised and comparative basis for the previous three fiscal years and as of the closing date, or as from its incorporation in the case of a shorter life;

    • indices, which must be shown for the previous three fiscal years, or from its incorporation in the case of a shorter life including, among other things, those related to liquidity, financial position, fixed assets and profitability;

    • capitalisation and indebtedness;

    • reasons for the offering and use of proceeds;

    • risk factors.

  • Other information of the issuer, such as:

    • history and development of the issuer;

    • description of business;

    • issuer's structure and organisation; and

    • economic group, and fixed assets.

  • Operating and financial summary information and prospects, which consists of an analysis of the issuer's financial position and results of operations for each fiscal year and intermediate periods for which financial statements have been required, including the causes for any significant changes made from one year to another in the accounts of the financial statements, as thoroughly as necessary in order to comprise all of the issuer's businesses. In this regard, the following information must be provided together with any other information necessary for the investor to understand the issuer's financial position, the changes in such financial position and the result of its operations:

    • operating income;

    • liquidity and capital resources;

    • research and development, patents, licences, and so on;

    • trend information.

  • Principal shareholders and transactions with related parties.

  • Accounting information, including financial statements for the previous three fiscal years and for the last interim period subsequent to the closing of the previous fiscal year, and other accounting information and material changes. Financial statements for listed companies must be prepared according to the requirements of the CNV Regulations, including that, except for certain limited cases, listed companies must follow the IFRS, issued by the IASB for fiscal years starting 1 January 2012.

  • Details of the offering and listing, distribution plan, the markets where the shares will be listed and traded, the selling shareholders (if any), dilution and issuing expenses.

  • Additional information, including information related to the company's capital stock, bye-laws, relevant contracts, exchange controls, taxes, dividends and paying agents, among other things.

 
13. How is the prospectus (or other main offering document) prepared? Who is responsible and/or may be liable for its contents?

The issuer's directors and statutory controllers are responsible for the information contained in the prospectus (CNV Regulations). In addition, the arrangers and placement agents participating in a share issuing must diligently review the information contained in the prospectus. The experts or third parties giving their opinion about certain sections of the prospectus will be responsible for those sections.

Any purchaser of the shares offered through a prospectus can initiate legal actions before a civil or a commercial court against these persons. Proof of any damages suffered as a consequence must be evidenced.

The Argentinean Congress passed Law No 26,733 in January 2012, which introduced certain white collar crimes into the Argentinean Criminal Code for:

  • Financial intermediation and securities intermediation.

  • Other financial and capital markets activities, such as:

    • insider trading;

    • manipulation of prices; and

    • other illegal activities.

Persons offering securities or financial instruments, dissimulating or hiding or providing deceptive facts or circumstances, including in the offering documents, can now also be subject to the penalty of imprisonment.

 

Marketing equity offerings

14. How are offered equity securities marketed?

Equity securities can be marketed either through a public or a private offer.

A "public offer" of securities is defined as the invitation to the general public in Argentina, or to specific groups of persons (either individuals or legal entities) in Argentina, to participate in any type of transaction with securities, whether made by the issuer of the securities or by individuals or entities that are dedicated exclusively or non-exclusively to trading in securities through (section 2, Law No 26,831):

  • Personal offerings.

  • Publications in writing (for example, newspapers, magazines).

  • Radio or television transmissions.

  • Posting or signs.

  • Pamphlets.

  • Electronic media.

  • Communications or any other means of diffusion.

Argentinean securities laws do not provide for exemptions or the exclusion of certain types of transactions from the public offering regulation (Law No 26,831). Whenever a transaction is performed within the frame of the public offering definition, that transaction will be subject to the Argentinean securities laws. The Argentine securities laws do not include exemptions or safe harbours such as those that are set out, for example, under US securities laws.

Although there is no specific regulation governing the nature and type of communication with the public, in some cases, such as in the case of telephone calls, whether or not the activity constitutes a public offer is subject to evaluation. In most cases, specific calls or one-to-one visits to Argentinean residents does not constitute a violation of the law, while the establishment of automatic call systems to a variety of prospective or existing clients or toll-free lines may constitute restricted activity.

A transaction with securities will not be deemed a public offer and will not be subject to Argentinean securities laws and regulations to the extent the offer is not made to the public or to specific groups of persons, but to individuals or legal entities on a one-to-one limited basis, regardless of the nature of such persons (that is, a private offer).

In 2013 the CNV modified the legal framework applicable to the placing of securities through public offers (CNV Regulations).

The main changes were the following:

  • The CNV Regulations also applies to placements of shares, commercial papers (short-term bonds), mutual funds and closed mutual funds (fondos comunes de inversion cerrados). Previously, the CNV Regulations only imposed certain requisites for placement of certain securities, that is, trusts and negotiable obligations.

  • A bidding or auction is required. Previously, placements could be made through a bookbuilding process or similar.

  • The placement must be made exclusively through an electronic platform carried by an exchange/market duly authorised by the CNV. Previously, registered agents authorized by the CNV to act as placement agents would use forms and lists to register subscription orders.

  • Investors must make their offers exclusively through an authorised agent in the country. Previously, investors could make their offers directly to the placement agent.

  • Discrimination between investors is not allowed, since the acceptance of subscription offers is only as a result of price and rate competition between investors.

The offering must be made exclusively through a bid or auction (for example, a Dutch auction, a modified Dutch auction or an English auction), within an electronic platform that can only be accessed by authorised agent throughout the country. Such a platform must be carried by a market, and must have the prior approval of the CNV. This new placement system is effective from 1 March 2012.

However, other existing regulations provide that the issuer, acting by itself or through its placement agents, must perform marketing efforts, so that the offer effectively reaches the market in general. Among other actions, such marketing can include:

  • Informative meetings held with potential investors.

  • Publications in newspapers and exchanges' or markets' bulletins.

  • Distribution of a prospectus.

  • Electronic publications for four days in the electronic platform where the offer is to be made.

  • Other means of mass media or personal communications to potential investors.

The marketing requirements set out above do not apply in the case of public offerings of securities issued by the federal government, the provinces, the City of Buenos Aires, the municipalities, self-governing entities and governmental corporations (section 83, Law No 26,831).

Preliminary marketing

Until the CNV issues its final authorisation for the company to a make public offer of its securities, the company can only perform certain limited marketing activities, which include distribution of a preliminary prospectus (see Question 11), and holding informative meetings, on a limited and restricted basis. Informative meetings can only be held before the public offering authorisation if the relevant application to the CNV has been submitted.

The notice and the holding of informative meetings must fulfil the following requirements:

  • Calls can only be issued in a personalised fashion by the issuer, and/or by any authorised intermediaries in charge of co-ordinating the placement.

  • The calls must include a paragraph indicating that the CNV has not yet made a decision about the application for public offering authorisation of the marketable securities.

  • The meetings must be held in locations guaranteeing exclusive access by the persons being invited.

  • The meetings must be held with the sole purpose of submitting information, which must be consistent with the information included in the preliminary offering circular.

  • During the period going from the distribution of the preliminary offering circular and the authorisation for the public offering of the marketable securities by the CNV, the issuers and/or institutions chosen by the issuer to place the issue within the country may receive indications of interest to purchase shares. Such indications will not be binding.

  • The issuer and/or the institutions chosen to place the issue must send a copy of the final offering circular to each of the attendants of the informative meetings within five days following the granting of the applicable authorisation for public offering. If information of a general character was disclosed based on the preliminary offering circular, the issuer and/or the institutions chosen for the placement must ensure (sufficiently prior to the placement of the issue through public offering) the disclosure of the information of the final offering circular is in the same conditions as those granted to the preliminary offering circular. The offering circular cannot include any references to the placement price when the price has not been established as of the date of distribution.

 
15. Outline any potential liability for publishing research reports by participating agents and ways used to avoid such liability.

Any research made by brokers/dealers participating in a particular placement of shares that is published for the acknowledgement of the public in general can carry liability for potential investors. Brokers/dealers can help avoid any liability arising from their performing research reports by diligently reviewing the information contained in it and checking that, as requested by the CNV Regulations, the information is in line with (and does not go beyond) the prospectus.

 

Bookbuilding

16. Is the bookbuilding procedure used and in what circumstances? How is any related retail offer dealt with? How are orders confirmed?

Public placements in Argentina through the bookbuilding system are no longer permitted under the CNV Regulations (which is effective from 1 March 2012) (see Question 14). Only offerings made through a bid or auction following the requirements of the CNV Regulations are permitted. Orders are placed and confirmed through an electronic platform that can only be accessed by authorised agents throughout the country.

 

Underwriting: equity offering

17. How is the underwriting for an equity offering typically structured? What are the key terms of the underwriting agreement and what is a typical underwriting fee and/or commission?

Although it is still unclear how the underwriting process will work within the new bidding or auction process implemented by the CNV Regulations (see Question 14), it is likely that the underwriting agreement will have to be entered into before the initiation of the placement period, the underwriter will have to place a purchase order through an authorised agent during the placement period, and it will affect only the shares that were not subscribed to by the investors (through a stand-by underwriting).

Other classes of underwriting (for example, firm underwriting) will have to be analysed by the CNV and consulted with between the CNV and the entities carrying the electronic platforms.

There are no typical underwriting fees. Fees must be agreed on a case-by-case basis.

 

Timetable: equity offerings

18. What is the timetable for a typical equity offering? Does it differ for an IPO?

The timetable ranges from two to three months, including drafting of the prospectus and other related documentation, calling and holding a shareholders' meeting and obtaining the authorities' approval. If the offering takes place for the first time (IPO), then additional time must be allowed for the preparation of documentation and obtaining of the corresponding authorisation from the CNV and the MERVAL. IPO transactions can take four to six months.

 

Stabilisation

19. Are there rules on price stabilisation and market manipulation in connection with an equity offering?

Market manipulation

The CNV Regulations currently impose fines for market manipulation. Law No 26,733 introduced certain white collar crimes into the Argentinean Criminal Code for certain financial and capital markets activities, such as manipulation of prices (see Question 13). Persons increasing or decreasing the price of merchandises or securities through the release of false news, pretend negotiations or coalition of the main holders of merchandise, for the purposes of price fixing, or enhancing liquidity (in the case of securities), are also subject to the penalty of imprisonment.

Price stabilisation

The CNV Regulations expressly authorise price stabilisation activities when made by broker/dealers in primary placements, and provided the following requirements are met:

  • Price stabilisation must not be made beyond 30 days from the first trading day of the securities.

  • The prospectus must warn investors about the possibility of performing price stabilisation, its duration and conditions.

  • Price stabilisation will be made only by those agents involved in the organisation/co-ordination of the placement and distribution.

  • Price stabilisation must be oriented to mitigate the decrease of the trading price, with respect to the initial price.

  • Price stabilisation must not be made for prices higher than the price traded between parties unrelated to the distribution and placement, or to the price of the initial offer.

  • The exchanges/markets must identify and publish the stabilisation transactions.

Price stabilisation can also be made in the secondary markets, with the prior authorisation of the CNV. The exchanges/markets can issue additional regulations to price stabilisation transactions.

 

Tax: equity issues

20. What are the main tax issues when issuing and listing equity securities?

In principle, dividends paid on equity securities issued by Argentinean companies are not subject to income tax. However, the Argentinean Income Tax Law provides that for payment of dividends that exceed the gains determined by the Argentinean Income Tax Law, accumulated at the end of the immediately preceding fiscal year at the date of the payment, the issuer can withhold 35% above such a surplus. This withholding is not applicable if the issuer pays dividends through the delivery of bonus shares.

Gains derived from the sale or exchange of ordinary shares of an Argentinean issuer made by resident individuals who do not sell shares on a regular basis are not subject to income tax.

Gains derived from the sale or exchange of ordinary shares of an Argentinean issuer made by resident individuals selling shares on a regular basis are subject to income tax.

The law does not provide a specific definition of "selling shares on a regular basis", though it can be understood as someone who repeatedly performs this activity, keeping within some kind of schedule.

Capital gains obtained by non-residents or foreign companies for the sale or exchange of ordinary shares are exempt from income tax (Decree No 2,284/91).

Capital gains obtained by Argentinean companies from the sale or exchange of ordinary shares are subject to income tax.

 

Continuing obligations

21. What are the main areas of continuing obligations applicable to listed companies and the legislation that applies?

The continuing obligations of companies listing their shares are generally of the three following types:

  • Disclosure of corporate information, all of which must comply with specific regulatory requirements, such as:

    • appointment of new members of the board of directors and statutory controllers;

    • approval of annual financial statements;

    • modification of bye-laws, and so on.

  • Disclosure of annual and quarterly financial statements, which must comply with specific regulatory requirements from the CNV and the relevant market (for example, the MERVAL).

  • Disclosure of any fact or situation that, due to its magnitude, can substantially affect the placement of the company's shares or their trading (material events (hechos relevantes)). Specifically, the CNV requires the issuers to disclose, among other things, the following:

    • facts of any nature that substantially affect, or can substantially affect, the economic, financial situation or assets of the controlled or controlling entities of the company listing its shares, including any sale or encumbrance of any relevant part of its assets;

    • syndication agreements between shareholders; and

    • any contract that is economically relevant entered into directly or indirectly, by directors, statutory controllers or managers, or with entities controlled by the same.

 
22. Do the continuing obligations apply to listed foreign companies and to issuers of depositary receipts?

The continuing obligations applicable to listed local companies also apply to listed foreign companies (see Question 21). For financial information, the CNV can allow foreign companies to exclusively provide to the local authorities the same information that has been submitted to authorities from its country of origin. In some cases, certain accounting information must also be provided in accordance with Argentine general accepted accounting principles and according to other local requirements, such as the conversion of certain monetary information into pesos.

Foreign companies must also provide information about the trading of the shares in foreign markets, such as trading volumes and share prices.

Issuers of depositary receipts (Argentinean Depositary Certificates (Certificados de Depósito Argentino) (CEDEAR)) must provide copies of all information submitted by the issuer of the deposited shares, as well as copies of all relevant public information related to the issuer of shares. In addition, issuers of depositary receipts must:

  • Provide information related to the depositary receipts issued and redeemed.

  • Prepare and submit annual and quarterly financial statements.

Depositary receipts programmes can also be sponsored by the issuer of the shares deposited under the programme. The issuer of the shares must request the authorisation of the CNV and the relevant market/exchange to make a public offer of the depositary receipts and listing of the depositary receipts. Certain financial and corporate information must also be submitted.

 
23. What are the penalties for breaching the continuing obligations?

The penalties for breaching the continuing obligations depend on the materiality and nature of the breach. Penalties for dissimulating, hiding or providing deceptive facts or circumstances to the authorities range from an administrative sanction (from warnings to monetary fines) to imprisonment (Law No 26,733) (see Question 13).

 

Market abuse and insider dealing

24. What are the restrictions on market abuse and insider dealing?

Restrictions on market abuse/insider dealing

Law 26,831 set out certain types of conduct as contrary to the principle of transparency:

  • Abuse of insider information. The following people cannot rely on any non-public or insider information to obtain, for himself or for others, benefits of any kind, resultant both from the purchase or sale of securities or any other transaction relating to the public offer regime:

    • directors, supervisory board members, shareholders and shareholder representatives;

    • anyone who by their work, profession or duties within an issuer company or registered entity, per se or through an intermediary, has access to non-public or insider information;

    • public officials and those managers, officers and employees of risk rating agents, and of public or private control agencies, including the CNV, markets and deposit agents, and any other person who, by reason of their duties have access to non-public or inside information.

These provisions will also apply to those persons referred to under section 35 of Law 24,083, as amended. In such cases, the positive price differential obtained by those who have unduly availed themselves of insider information resultant from any trading operation made within a six-month period, relating to any securities of issuers with whom they are related, shall be deemed for, and be recoverable by, the issuer without prejudice to the penalties that may correspond to the offender. If the issuer fails to initiate the appropriate action or to act appropriately within 60 days of being notified to do so, or if it will not drive the action diligently after notification, actions to remedy the abuse of insider information can be performed by any shareholder.

  • Manipulation and deceit. Issuers, registered agents, investors or any other operator or participant in the authorised market, must refrain from acting, either directly per se or through an intermediary, in initial offers or secondary markets, practices or conducts intending to allow manipulation of prices or volumes of securities, therefore disrupting the normal development of supply and demand. Likewise, such persons should refrain from engaging in deceptive practices or conduct likely to deceive any participant in these markets, in connection with the purchase or sale of any securities in the public offer, either through the use of devices, misrepresentations or inaccuracies, or omitting essential facts, or through any act, practice or course of action that may have misleading and harmful effects on any person in the market.

When determining the sanction for any of those behaviours, the CNV will regard as an aggravating circumstance the fact that the conduct sanctioned was made by a controlling shareholder, administrators, managers, trustees of all persons subject to the supervision of the CNV or officers of the supervisory bodies.

  • Prohibition to participate or tender in the public offer in an unauthorised manner. Any natural or legal person involved, offering itself or offering services in the public offer of securities, without proper authorisation of the CNV, will be subject to administrative sanctions without prejudice to the criminal penalties that could apply.

Penalties for market abuse/insider dealing

Any individual or legal person of any nature infringing provisions under Law No 26,831 and its regulations, without prejudice to any criminal or civil liability it may incur, can be subject to the following fines/sanctions:

  • A warning, which may be accompanied by the obligation to publish the operative part of the resolution in the Official Gazette of the Republic of Argentina, and in up to two newspapers of wide national circulation at the expense of the person penalised.

  • A fine from ARS5,000 to ARS20 million, which can also be raised to five times the profit gained or loss caused as a result of illegal actions (whichever is the greater).

  • Disqualification for up to five years to act as director, manager/administrator, trustee, member of the supervisory board, expert accountant or external auditor or manager of authorised markets and of registered agents, or of any other entity under the CNV's control.

  • Suspension of up to two years from making a public offer or, where appropriate, of the authority to act in the public offering environment. As for mutual funds, the infringer can only undertake common administrative acts and execute requests for redemption of units. To that end, the infringer can sell the portfolio assets with the CNV control.

  • Prohibition on making a public offering of securities or, where appropriate, a ban on acting in the public offering environment for securities.

 

De-listing

25. When can a company be de-listed?

Voluntary de-listing

Voluntary de-listing is possible in the following cases:

  • By a majority shareholder owning at least 95% of the share capital, through a process that enables it to enforce the acquisition of 100% of the company's shares at a fair price.

  • Under the BCBA regulation, by the decision of a shareholders' meeting, provided that:

    • at least shareholders representing 75% of the share capital are present at the meeting; and

    • the votes against the decision to de-list the company do not exceed 10% of the share capital.

Compulsory de-listing by a regulator

The CNV can order the compulsory loss of authorisation to make public offers. An exchange like the BCBA can order the de-listing of a company.

Compulsory loss of authorisation to make public offers and compulsory de-listing occur in the following cases:

  • Extinction of the company by:

    • merger;

    • shareholders' decision;

    • expiration of term;

    • expiration of corporate purpose or inability to comply with it.

  • Loss of legal authorisations to conduct business (if applicable).

  • Bankruptcy or administrative liquidation.

  • Material breach of the stock exchange's listing regulation.

 

Reform

26. Are there any proposals for reform of equity capital markets/exchanges? Are these proposals likely to come into force and, if so, when?

Law No 26,831 established that the existing markets must ensure that their structure is in line with the CNV Regulations and obtain a new authorisation to operate, on or before 31 December 2014. As a consequence, several reforms and amendments will be introduced in the future.

 

Online resources

Online resources

National Securities Commission (Comisión Nacional de Valores) (CNV)

W www.cnv.gob.ar

Description. The official website of the National Securities Commission.

Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires) (BCBA)

W www.bolsar.com/VistasDL/PaginaPrincipal.aspx

Description. The official website of the Buenos Aires Stock Exchange.

Legislative Information & Documentation Centre, Ministry of Economy of Argentina (Información Legislativa y Documental) (InfoLEG)

W www.infoleg.gov.ar

Description. The official website of the Legislative Information & Documentation Centre, Ministry of Economy of Argentina.



Contributor profiles

Sebastian Luegmayer, Partner

Estudio O’Farrell

T +5411-4346-1000
F +5411-4341-8496
E luegmayers@eof.com.ar
W www.estudio-ofarrell.com.ar

Professional qualifications. Universidad de Belgrano, 2001; Masters in Finance, Universidad del CEMA, 2003

Areas of practice. Capital markets; finance.

Recent transactions.

  • Several capital markets transactions since 2002.

  • Financing transactions advising local and international clients.

  • Expertise on financial derivatives.

Publications. Mr Luegmayer has written several articles in Argentine law magazines relating to legal aspects of derivatives.

Catalina M Beccar Varela, Associate

Estudio O’Farrell

T +5411-4346-1000
F +5411-4341-8496
E beccarc@eof.com.ar
W www.estudio-ofarrell.com.ar

Professional qualifications. Pontificia Universidad Católica, Argentina, 2013

Areas of practice. Capital markets; corporate.

Recent transactions.

  • Structuring, negotiation and documentation of derivatives as well as advising clients in various corporate matters.


{ "siteName" : "PLC", "objType" : "PLC_Doc_C", "objID" : "1247617466026", "objName" : "Equity capital markets in Argentina, regulatory overview", "userID" : "2", "objUrl" : "http://uk.practicallaw.com/cs/Satellite/resource/2-518-9076?null", "pageType" : "Resource", "academicUserID" : "", "contentAccessed" : "true", "analyticsPermCookie" : "22e97be00:15afba9b95a:6f61", "analyticsSessionCookie" : "22e97be00:15afba9b95a:6f62", "statisticSensorPath" : "http://analytics.practicallaw.com/sensor/statistic" }