COVID-19 | Legal Analysis Center
October 6th, 2020
Original Version March 30th, 2020
*Updates added in October 6th, 2020 are in colour blue
As a consequence of the declaration of sanitary emergency, and the social isolation ordered by the National Government, many challenges have arisen for companies, among others as well as important, with regards to:
- Board meetings;
- Shareholders’ meetings;
- Compliance with corporate and accounting filings with the regulatory authorities.
The aforementioned topics acquire significant relevance since many companies will have to approve their financial statements and hold their annual Shareholders’ Meetings.
As a result of the prohibition for circulation and/or mobility established by Decree Nbr. 297/2020, and its extensions, prohibition that, in principle, would affect shareholders, members of the board and members of the statutory committee of every company, there are certain alternatives in order to provide solutions to the problems described below, taking into consideration whether the problems affect private or public companies.
The following analysis shall be made taking into consideration the particular situation of each company.
1. Private companies
A. Board and Shareholders’ meetings
As a general rule, art. 158 of the Argentine Civil and Commercial Code (the “CCyC”) establishes that legal entities’ bylaws should contain clauses regarding the government and management of the company. Nevertheless, in absence of treatment of the issue in the legal entities’ bylaws, the CCyC authorizes legal entities to hold Shareholders’ meetings remotely as well as self-convened Shareholders’ meetings.
Shareholders’ meetings held remotely must comply with the following:
- All shareholders should consent on having the meeting remotely.
- The means of communication must allow the participants to communicate simultaneously with each other.
- The minutes should be signed by the Chairman and another director, stating the adopted means of communication.
- The records should be kept, according to the means used to communicate.
Furthermore, the Public Registry of Commerce of the City of Buenos Aires (the “IGJ”) – regulatory authority for legal entities domiciled in the City of Buenos Aires-, issued the Resolution 11/2020 which allows to hold remote meetings for both the Board and Shareholders’ meetings as long as said possibility is included in their bylaws, in accordance with the provisions of art. 158 of the CCyC. The aforementioned resolution also allows those legal entities whose bylaws do not contain a provision related to remote meetings to hold Board and Shareholders’ meetings remotely during the term of the mandatory and preventive social isolation introduced by Decree Nbr. 297/2020 remains effective, including all its extensions, that are affective up to this date.
In either situation, the following requirements must be guaranteed:
- free access of all participants to the meeting;
- the possibility of participating of the meeting through a platform that allows the simultaneous transmission of audio and video;
- the participation with voice and vote of all members;
- the meeting must be recorded in a digital form;
- the legal representative of the company must keep a digital copy of the meeting for a 5-year term and said copy must be available in case any shareholder requests it;
- the minute of the meeting must be copied to the corresponding corporate book, stating the name of each participant and said minute must be signed by the legal representative; and
- the summon to the meeting must inform in a clear and simple manner the chosen communication channel, and the access method in order to allow the participation of all members.
On the other hand, the Public Registry of Commerce of the Province of Buenos Aires (“DPPJ”) has communicated through Disposition DPPJ 30/2020, that it will admit (as long as the measures that restrict the meeting of people established in the framework of the health emergency are maintained) the Board’s and Shareholders’ meetings of the legal persons subject to the jurisdiction of the Province of Buenos Aires that are held remotely, through the use of computer or digital media or platforms with simultaneous audio and video reproduction between the participants, and which are of free access for those entitled to participate, even if such procedures are not provided for in their contracts or registered bylaws. Compliance with the following requirements must be proven:
a) That the call to the meeting complied with the current regulations applicable to the relevant act to be held, having indicated in it:
- The digital platform on which the meeting will take place.
- The complete description of the conditions of access for all persons entitled to participate.
- The identification of the person who will operate the platform as its administrator. If not indicated, it will be presumed that the operation is in charge of the legal representative of the entity.
- The term granted to the members or shareholders to oppose the holding of the meeting by remote means, which may not be less than 5 days. If no term is stated, it will be understood that the opposition can be presented until the day before the meeting. The lack of express opposition will be considered by the DPPJ as tacit consent to the holding of the meeting by means of remote communication.
- The establishment of a special electronic address to which the oppositions or express conformities with the holding of the meeting by remote means must be sent, as well as any other prior communication related to it.
The publication of announcements at the legal address will not be accepted as a means of convocation. Those entities that have this medium as the only alternative must supplement it by publishing the call for 1 day in a newspaper with wide circulation in the town where the legal address is located, or by personal communication to each member.
b) That in the development of the meeting the fundamental rights of the members or shareholders were respected, according to the applicable contractual or statutory provisions, namely:
- Right to information: Accrediting that the documentation to be treated was made available to the members or shareholders with the corresponding anticipation, by means that do not demand special requirements, beyond the accreditation of the quality of shareholder or member.
- Right to participate and deliberate: Accrediting that all those who decided to participate had the possibility of connecting to the simultaneous audio and video transmission platform, expressly stating in the minutes who asked to speak and to whom it was granted.
- Right to participate in the vote: Stating in the minutes how many votes were cast in each vote, indicating if they were positive, negative or abstentions.
c) That the Board will guarantee the safekeeping and custody of all the simultaneous audio and image recording in a digital medium that allows its subsequent free reproduction at the simple request of a legitimate person, for at least 5 years after the act has been held.
d) The quorum for the meeting, in accordance with the regulations applicable to the type of entity in question. In case of not being able to comply with it, it may be supplied by means of a sworn statement of the legal representative of the entity, with the same content, which must include the manifestation of the circumstances that made compliance impossible.
e) The incorporation to the Agenda and the express treatment of the following points:
- The call to hold the meeting by means of remote communication, the existence of express conformities and oppositions.
- Consideration of the quorum to meet.
- The description of the medium or digital platform used to carry out the meeting, and the conditions for keeping the records.
f). That the minutes were signed, at least, by the President and another administrator. If the entity had a unipersonal administration, the signature of the sole administrator will be admitted.
In addition, the DPPJ clarified that remote meetings will not be admitted for those acts that by statutory or regulatory provision are expressly excluded from this modality. Moreover, in the processes of election of authorities that have a secret vote, only remote meetings will be admitted when a single list is presented.
Besides, the DPPJ declared that every person that was entitled to participate in the meeting, has the right to request a copy of the digital file in which the complete audio and image of the meeting has been saved. Likewise, the DPPJ has stated that said file may be required by the competent judicial or administrative authorities. In all cases, the Board will be responsible for guaranteeing its free and correct reproduction.
As regards the companies which are not subject to the IGJ’s control, and in the absence of a provision in their bylaws authorizing remote meetings, in accordance with the provisions of art. 158 of the CCyC and based on the current emergency context, the shareholders could hold Shareholders’ meetings remotely in order to discuss urgent matters in case a delay in such treatment could cause a damage to the company as long as all partners agree with holding the meeting in those conditions.
Also, taking into consideration the current emergency situation, upon the need of having an urgent matter considered by the Board and in the event the delay of such treatment could either cause damage to the company or affect the continuity of its activity, it could be considered justified the need of the Board to hold meetings remotely.
Resolution 29/2020 of the IGJ established that this authority will be able to exercise its control powers over remote meetings, applying analogically the provisions set forth in Resolution IGJ 7/2015, as long as they are compatible. Moreover, it establishes that all publications summing to shareholders meetings must include the fiscal ID (CUIT) of the company and inform a contact email, which will be used for notification purposes. Finally, it provides the possibility of start and carry on totally remotely the proceedings of request the assistance of inspectors by an interested party to meetings -held either remotely or not-, via the official web of the IGJ (https://www.argentina.gob.ar/justicia/igj) and according to the terms set forth therein.
B. Filings within Public Registries of Commerce.
The ongoing situation, resulting from the application of the Decree Nbr. 297/2020, and all its extensions, that are effective up to this date, has also generated the impossibility for companies domiciled in the City of Buenos Aires and in the Province of Buenos Aires to comply with the filings established by Resolution IGJ 07/2015 and Disposition DPPJ 45/15 within the terms established in the aforementioned resolutions.
Through Resolution IGJ 10/2020 (“Res. IGJ 10/2020”) the IGJ suspended until March 30th, 2020, inclusive, the prescribed periods for: (i) submitting responses to requirements made by the IGJ regarding ongoing procedures; and (ii) submitting the reporting requirement set through Decree Nbr. 142.277/43 and Resolution IGJ 8/15. In accordance with the successive extensions of the mandatory and precautionary social isolation originally established by Decree Nbr. 297/2020, this term was first extended by Resolution IGJ 13/2020 (“Res. IGJ 13/2020”) until April 12th, inclusive, then extended by Resolution IGJ 15/2020 (“Res. IGJ 25/2020”) until April 26th, inclusive, then extended by Resolution 19/2020 until May 10th, 2020, and finally extended by Resolution IGJ 24/2020 until May 24th, inclusive.
Through Resolution IGJ 28/2020 the IGJ suspended all deadlines from March 20th to May 24th, 2020. This suspension will be extended automatically following the extensions of the suspension of deadlines in national administrative procedures mentioned below.
After a period of time in which the attention to the public of the IGJ was suspended, this authority IGJ informed through its web site that as of March 22nd, 2020, there will be reduced public attention, with prior appointment and only for some procedures authorized by the IGJ. The list of those procedures is continuously updated and can be obtained at the IGJ website: https://www.argentina.gob.ar/justicia/igj.
On the other hand, the DPPJ established through Disposition DPPJ 12/2020: (i) a 180 days term during which the public attention will be made with prior appointment granted via e-mail; (ii) the suspension for a 180 days term for filing the response to any observation made by the DPPJ in ongoing procedures; (iii) to grant an extension of 180 days to file the previous and post filings regarding ordinary and extraordinary Shareholders’ meetings, if the meeting has been held during the current sanitary emergency; (iv) an authorization for civil associations, foundations, mutual associations and companies subject to permanent governmental control to send via e-mail every filing related to Shareholders’ meetings. Said period has been extended for ninety (90) days, through Disposition DPPJ 28/2020.
The DPPJ also announced through its web site that there will be public attention with prior appointment obtained through the email addresses informed by this authority on its web site. Detailed information on e-mail procedures and digitally legalized accounting documentation can be found in Dispositions DPPJ 17/2020 and 21/2020, respectively.
2. Public companies
A. Board and Shareholders’ meetings
I. Board meetings
The Capital Markets Law Nbr. 26,831 (“CML”) allows Board meetings of public companies to be held remotely. The requirements are: i) that there is simultaneous transmission of sound, images and words; and ii) that the procedure is provided in the bylaws.
The statutory advisors must indicate the validity of the decisions taken in the meeting held remotely.
Unless the bylaws state otherwise, only the Board members that are physically present shall be counted for the purposes of the quorum. Likewise, the bylaws must establish the way in which the participation of remote members will be recorded in the minutes.
The minutes must be prepared and signed within 5 business days as of the meeting by the members present and the representative of the statutory advisors’ committee. Considering the prevailing emergency situation, it would be reasonable to interpret that said period will take effect from the day in which the cessation of the social, preventive and compulsory isolation becomes effective.
The Securities Exchange Commission (the “CNV”), through General Resolution 830/2020, published in the Official Gazette on April 5th, 2020, established that, during the period in which the free circulation of people in general is prohibited, limited or restricted as a consequence of the sanitary emergency, public companies, even those whose bylaws do not include this possibility, could hold Board meetings remotely, as long as the requisites provided in art. 61 CML, mentioned above, are fulfilled[i]. Therefore, by this Resolution, the problems and risks that we mentioned in the previous version of this report, regarding the possibilities of the declaration of irregularity and ineffectiveness of the act, an administrative summary from the CNV, and eventual nullity and liability actions against Board members and statutory committee, were solved.
Likewise, the abovementioned Resolution of the CNV determined that, in case the possibility of holding remote Board meetings is not included in the bylaws of a company, the first Shareholders´ meeting physically held by said company once the emergency measures are lifted, must ratify the resolutions adopted in the Board meetings hold remotely as an express item in the agenda. For that purpose, the quorum required for extraordinary Shareholders´ meetings shall be needed, as well as the majorities required for the amendment of the bylaws.
II. Shareholders’ meetings.
The CML also allows that the companies’ bylaws include the possibility of holding remote Shareholders’ meetings, for which the CNV must regulate the means and conditions necessary to grant security and transparency to the meeting.
Art. 61 of Regulatory Decree Nbr. 471/2018 states that, when the bylaws of the public companies allow for the possibility of holding Shareholders’ meetings remotely, communication channels must be established that allow the simultaneous transmission of sound, images and words, ensuring the principle of equal treatment of the participants.
There should be a record in the Shareholders’ meetings’ minutes of the shareholders that are participating in the meetings and the means through which they joined in the event remotely, the place where they were, and the technical mechanisms used.
The celebration of a remote Shareholders’ meeting must be reported to the CNV five working days in advance to the day in which the meeting will be held. The CNV may designate one or more inspectors with oversight powers to attend the meeting.
In the case of proxies, the power of attorney, sufficiently authenticated, must be sent to the CNV five business days before the meeting.
The entities that make use of this possibility must present before the CNV the procedures to be used for their approval.
As mentioned in the previous item -in relation to Board meetings of public companies and in line with the regulations applicable to private companies-, through General Resolution 830/2020 the CNV established that, during the period in which the free circulation of people in general is prohibited, limited or restricted as a consequence of the sanitary emergency, public companies, even those whose bylaws do not include this possibility, could hold Shareholders´ meetings remotely, as long as they fulfill the following requirements:
- The company must guarantee the free accessibility to the meetings to all shareholders, with voice and vote.
- The communication channel must allow the simultaneous transmission of sound, images and words during the meeting. It must also allow the recording of the meeting in a digital form.
- The summon to the meeting and it´s publication must inform in a clear and simple manner the chosen communication channel, the access method in order to allow the participation of all members, and the proceedings determined to vote. In addition, it must include an email address, in accordance to the provisions of the next item.
- The shareholders will inform their attendance by email to the email address informed by the company for such purposes. In case of attending by an attorney in fact, the shareholders must send to the company, 5 business days in advance, the power of attorney sufficiently authenticated.
- There should be a record in the Shareholders’ meetings’ minutes of the persons that participated in the meeting, the nature of their participation (per se or by an attorney in fact), the place where they were, and the technical mechanisms used.
- The records of the meeting should be kept by the company in a digital form for 5 years. The records should be available to any shareholder that requests them.
- The statutory committee will oversee the compliance of all the applicable regulations during the meeting.
Additionally, according to this Resolution, those companies whose bylaws do not include the possibility of holding Shareholders´ meetings remotely must also comply with the following requisites:
- In addition to the publications requested by the law and its bylaws, the company must publish the summon to the meeting by all reasonably necessary means in order to ensure the rights of its shareholders.
- The meeting shall need the quorum required for extraordinary Shareholders´ meetings, and consider as the first item on the agenda to be held remotely with the majorities required for the amendment of the bylaws.
Those companies that have already summoned their Shareholders´ meetings in compliance with the legal terms, before April 6th, 2020 -date in this Resolution came into force-, in order to hold those meetings remotely, shall publish a new summon to the meeting by the legal and statutory means, complying with the requisites of this Resolution.
Notwithstanding the foregoing, the CNV has issued a communication announcing that those public companies that, due to the number of attendees and/or the characteristics of the meeting, consider that they cannot carry out the meeting in due time for the approval of their financial statements closed on December 31st, 2019, they will be granted, exceptionally, an extension to celebrate the meeting. For this, they must notify them at email@example.com of the impediments and make the request in a justifiable way, so that it is immediately merited for a response.
As far in advance as possible, this route could be used in case the company runs into complications for the celebration of the meeting.
In those cases, in which the meetings are held, the CNV recommends compliance with the recommendations issued by the Ministry of Health and encourage as much as possible the attendance of shareholders at the minute by proxy, in order to minimize the amount of attendees.
B. Filings before the CNV.
Decree Nbr. 298/2020 suspended deadlines of national administrative procedures until March 31, 2020, notwithstanding the validity of the acts already carried out or to be fulfilled. Such term was successively extended and is effective up to this date.
Even though, General Resolution 840/2020 of the CNV exempts from the suspension of the course of the administrative deadlines mentioned in the previous paragraph, the inspection and investigation procedures initiated, ex officio or by complaint, in exercise of the powers of inspection and investigation provided for in articles 19 and 20 of Law No. 26,831. Similarly, General Resolution 847/2020 of the CNV exempts from the suspension of terms of Decree 298/2020 the extra-situ supervision procedures that, during the ASPO, are carried out jointly with the Financial Information Unit (“UIF”).
For its part, in Title XVIII of “Transitory Provisions” of the CNV Regulations, Chapter XII of “Measures in the Framework of the ASPO”, the CNV has been incorporating articles extending the submission deadlines for the annual financial statements with closing as of 01/31/2020, and for the intermediate financial statements, with closing as of 02/29/2020, for issuers, closed mutual funds, financial trusts that are in the public offering of negotiable securities, “PyMES CNV” (in relation to their annual financial statements and the quarterly summary accounting report for said periods), “PyMES CNV GARANTIZADA” (in relation to their annual financial statements for said periods), and issuers that exclusively make public offering of securities representing short-term debt (in relation to the quarterly summary accounting information described in art. 65, Chapter V, Title II CNV Regulations, for said periods).
Finally, General Resolution 842/2020 of the CNV established that the financial entities authorized to operate under the terms of Law Nbr. 21,526, which are also authorized to issue public securities or shares and/or also those that are registered with the CNV for their activities related to the capital market, and also the public companies whose main assets and results are made of and originate from investments in financial entities and present their financial statements observing the regulations established by the Central Bank of the Argentine Republic (the “BCRA”), in the terms of art. 2 of Chapter I of Title IV of the CNV Regulations, shall file their financial statements within the terms to be established by the BCRA for such purposes.
The CNV decided to close in-person attention at their Reception Desk and enabled a series of emails so that presentations and queries can be made virtually. These emails are available on its website. Only the presentations and documentation sent from those email addresses previously declared on the AIF, or from the new email address that the company reports to the CNV from the previously declared email address will be considered valid, and will be the valid email from which you will send or receive notifications for the purposes of the filings.
By means of a communication to the public companies, CNV has informed that the procedures that require administrative compliance and involve mergers and split-offs, must follow the same procedure until the corresponding prospectus is published. Submissions and subsequent processing, due to the formalities they require and the intervention of other registration agencies, will be subject to the lifting of the emergency measures, or the publication of new measures to overcome the difficulties.
The CNV has communicated to the public companies that the obligation to send through the AIF all the documentation and information that by regulatory requirement must be sent, remains in force.
We remain available to assist you in evaluating these circumstances and choosing the best possible solution.
[i] As a reasonable interpretation of this Resolution, we understand that the reference to art. 61 CML would not include the requisite of the physical presence of the Board members for the purposes of the quorum.
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