J. JOINT VENTURES

2.213 A Joint Venture is a contract whereby corporations or individual entrepreneurs join in order to develop or perform given work, services or specific supplies in Argentina or abroad. Under the Joint Venture any works and services supplementary and accessory to the main purpose may be carried out also.

2.214 The contract closely resembles the contract for an Association for Collaboration, as regards requirements for members, formalities and content, and registration with the Companies Supervisory Agency.

2.215 Nevertheless, a Joint Venture operates differently to an Association for Collaboration, and this determines certain specific legal provisions for the former, as follows:

a) The name of the joint venture is made up with the name of one or more of the members followed by the words "Joint Venture".

b) Duration of the venture is the duration of the work, service or supply that is the object of same.

c) They are not submitted to inspection by the Federal Anti- Trust Agency.

d) The representative's name and domicile must be included in the contract. He cannot be removed without cause, except by unanimous resolution of the members. In the presence of just cause the removal may be resolved by absolute majority vote.

e) Unless otherwise provided in the contract, members are not, prima facie, jointly liable for acts and operations they must develop or execute, or for obligations contracted with third parties.

f) Agreements must be unanimously approved, unless otherwise provided in the contract.

g) The bankruptcy of a member or the incapacity or death of an individual entrepreneur will not cause the contract to lapse provided the remaining members agree on how the obligations assumed by the defaulter are to be performed.

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K. CHANGES IN CORPORATE STRUCTURE

2.216 Transformation is the adoption by a company of another of the types provided, which does not carry dissolution of same or alteration of its rights and obligations.¹ This means that as the legal entity is still the original entity after the transformation all tax and custom rights and obligations are retained by the transformed company. The transformation can be motivated by reasons of company reorganization, or by certain events foreseen in the law, as follows:

1) In the case of married couples, if one of the spouses becomes a partner of his spouse in a company that is not a share company or limited partnership, the company must be transformed within a period of six months or either of the spouses must transfer his or her part to another member or a third party within the same time limit.

2) When there is an undistributed estate (e.g. a commercial or industrial establishment), the law provides that, if there are heirs under age, they must be members of a limited liability company, so the company must be transformed into an authorized type of company.

3) A limited partnership is dissolved when, all the unlimited partners having died, been affected by bankruptcy proceedings, become incompetent or disqualified, the company is not regularized or transformed within a period of three months.

2.217 As regards its effects on members liability, transformation does not affect their prior joint and unlimited responsibility, even in the case of obligations that must be met subsequently, unless expressly consented by the creditors. Nor is their liability affected until such time as the transformation is registered with the Public Register of Commerce, in case of exercising the right of withdrawal. However the company members that are unlimitedly liable and administrators guarantee withdrawing members jointly and unlimitedly any company obligation assumed from the time withdrawal was effected up to registration of same. On the other hand, though in accordance with the above, members assuming unlimited liability as a result of the transformation are not responsible for prior company obligations unless expressly accepted.

2.218 Members preferences are not affected by transformation, unless otherwise agreed in the transformation agreement.

2.219 Transformation calls for compliance with the following requirements:

1) Unanimous agreement of members, unless otherwise provided in the bylaws or a special majority is established for some types of companies such as corporations.

2) Drawing up of a special balance sheet closed at a date not exceeding one month from that of the transformation agreement and placed at the members disposal at the company offices not less than fifteen days in advance of the agreement. The special balance sheet must be approved with the same majorities established for approval of the annual balance sheet.

3) Execution of an instrument for transformation by competent agencies of the transforming company and concurrence of new partners, with a statement of the retiring members, the capital they represent and compliance with the formalities of the new type of company adopted.

4) Publication for one day in the Official Gazette that corresponds to the domicile of the company, and its branches. This notice must contain:

a) Date of company resolution approving transformation.

b) Date of transformation instrument.

c) The previous corporate name or denomination and the name or denomination adopted, that must be clearly identified with the company that is being transformed.

d)Members that retire or are incorporated and the capital they represent.

e) Amendments that affect the following company data: domicile, object, duration, capital, administration and controlling agencies, name of members of same and duration in office, and closing date of fiscal year.

5) Registration of the transformation instrument together with a signed copy of its balance sheet with the Public Register of Commerce and further registers required according to the type of company, the nature of its assets and the applicable taxation. These registrations must be ordered and carried out by the judge or authority in charge of the Public Register of Commerce once publication has taken place.

2.220 Administrators are jointly and unlimitidly liable for any damages resulting from default in publication or registration.

2.221 Members wishing to withdraw, must exercise this right within fifteen days from the company resolution, unless otherwise limited by the contract or by provisions for certain types of companies. They are entitled to reimbursement based on the transformation balance sheet.

2.222 The transformation agreement may be rendered null and void while it has not been registered, in two cases:

1) Unanimous agreement of the members, unless another majority has been agreed upon, or the majority established for certain types of companies.

2) Lapsing of the agreement when not registered with the Public Register of Commerce within three months of execution, unless this period is not sufficient for normal compliance of this requirement with the intervening authority.

In both cases, if the agreement has been published, another publication is necessary for the sole purpose of announcing the lapsing of same.

2. Merger and Spin-off

2.223 The law provides the same regime for both forms of merger, namely: creation of a new company deriving from the dissolution, without liquidation, of two or more companies, and incorporation of one or more companies, by an already existing company.

2.224 The new company, or the incorporating company, acquires entitlement to all rights and obligations of the dissolved companies, thus producing total transfer of their respective worth upon the definite merger agreement or the statutes of a new company or the increase in capital which the incorporating company had to effect being registered with the Public Register of Commerce. The transfer of assets and liabilities is legally accomplished upon registration, so that notification or consent by third parties is not required.

2.225 Merger proceedings commence with a preliminary merger undertaking executed by the companies representatives and containing:

1) Explanation of motives and aims of the merger.

2) Special merger balance sheets of each company prepared by their managers containing a Syndics report and closed as at the same date that must be within three months of execution of the undertaking and prepared on a similar basis and with similar assessment criteria.

3) Coefficient of exchange of the corporate participations, quotas or shares.

4) Proposed contract or bylaws for the new company or amendments to contract or bylaws of the absorbing company, whichever applies.

5) Limitations agreed by the companies concerning their respective business administrations, and guaranties established for compliance with normal activity up to registration of the merger.

2.226 This preliminary merger undertaking must be submitted to the merging companies in approval, with the same requirements that are necessary to amend the company contract or bylaws. Copies of the preliminary merger undertaking and of the special merger balance sheets, including syndics report, must be at members or shareholders disposal, at the offices of the respective companies, not less than fifteen days before the merger is to be considered.

2.227 Publication of notice during three days in the gazette in the jurisdiction of each company and in one of the newspapers broadly circulated in Argentina is required. This publication, containing relevant information on former and new companies, valuation of their assets and liabilities, and the preliminary merger undertaking and dates of company resolutions is mainly directed to allowing opposition by previous creditors, that must be filed within fifteen days from the last publication of the notice. Although, oppositions do not impede carrying out the merger, the law provides that definitive agreement may not be concluded until twenty days after the precedingly indicated period has elapsed, so as to permit creditors opposing the merger, that have not been guaranteed or paid off already, to obtain legal attachment.

2.228 Partners preferences are not affected by merger, except otherwise agreed in the merger agreement. Partners wishing to withdraw must exercise this right within fifteen days from the company resolution, unless otherwise limited by the contract or by provisions for certain types of companies. They are entitled to a reimbursement based on the merger balance sheet.

2.229 The definite merger agreement must be granted by the representatives of the companies and must contain:

1) The company resolutions approving the merger.

2) A list of members exercising withdrawal right and the capital they represent in each company.

3) A list of creditors opposing the merger, that have been guaranteed or have obtained legal attachment, and a list of such as have been paid off, with a report of their incidence on the special merger balance sheets.

4) The special merger balance sheets and a consolidated balance sheet for the merging companies prepared in columns.

2.230 The agreement must be registered with the Public Register of Commerce and, when companies that are dissolved through the merger are registered in different jurisdictions, it must be informed that for each such jurisdiction the publicity and registration requirements for the dissolution of companies have been met.

2.231 In organizing a merged company the requirements to be met are as provided for organizing companies in accordance with the type adopted. In case of absorption, it is sufficient to comply with the regulations applicable to the amendment of bylaws or partnership contract.

In both cases, cancellation of the registration of the dissolved companies must be carried out by the administrators of the new or absorbing company, respectively, with no publication required. Unless otherwise provided in the preliminary merger agreement, the administrators will be in charge of the management and representation of the company as from the final merger agreement. Such as have exercised this duty up to that time will be suspended, except for demanding cancellation of the final merger agreement on justified grounds and prior to the registration of same.

2.232 The preliminary merger agreement may be rendered null and void if all approving corporate resolutions have not been obtained within a period of three months. The company resolutions may in turn be revoked if the final agreement has not been executed, with the same requirements established for the respective conclusion and provided this does not damage the companies, their members or third parties.

2.233 In Argentine law a spin-off takes place when a company allocates part of its assets to merge with companies that exist already, or to participate with said companies in establishing a new company, or to organize on its own one or more companies. The same legal provisions apply in the case of a split-up. In the case of a spin-off/merger the provisions for mergers apply.

2.234 A spin-off requires:

1) A corporate resolution approving the spin-off, the bylaws of the new company and/or the spun-off company's bylaw amendment, and the special balance sheet for the purpose. When one or more companies are established, the requirements to be met are as stipulated for establishing companies, according to the type of company in question. In the case of the spun-off company it is sufficient to comply with the regulations applicable to the amendment of bylaws or of the partnership contract.

2) The special balance sheet must not date back over three months from the date of the resolution adopted by the company, and must be drawn up as a statement of net worth.

3) The company resolution approving the spin-off must indicate the participations or shares allocated to the members or shareholders of the divided company pro rata to their holdings in the said company, that must be canceled in case of a capital reduction.

4) Notice must be published during three days in the official gazette of the jurisdiction of each company and in one of the newspapers of broad circulation in Argentina, containing relevant information on new and spun-off companies and their respective accounts.

5) Creditors have the same right to oppose as have the merger creditors.

6) When the time periods for withdrawal rights, opposition and attachments have expired, the spin-off agreement must be registered with the Public Register of Commerce.

2.235 Members preferences are not affected by a spin-off unless otherwise stipulated in the spin-off agreement. Members wishing to withdraw must exercise this right within fifteen days from the company resolution, unless otherwise limited by contract or by stipulation for certain types of companies. They are entitled to reimbursement based on the spin-off balance sheet.

3. Tax Free Reorganization of Companies

2.236 The tax free reorganization of companies includes both mergers and spin-offs and is governed by articles 82 to 88 of Law l9550 and 77 and ensuing articles of the Income Tax Law.

2.237 The Income Tax Law in its article 77 provides that in the event of a reorganization of companies in the terms described therein, any results springing from the said reorganization will not be assessable for the tax provided the continuing entity pursues the activity of the restructured companies or another activity kindred thereto during a period of not less than two years; and provided, further, that in said cases the fiscal rights and obligations that are listed expressly will be transferred to the continuing company. Said rights and obligations include any tax losses that have not lapsed, balances pending imputation springing from positive adjustments for inflation, balances for tax franchises, etc. It is well to recall, in addition, that under the Value Added (VAT) Tax Law any transfers effected as a result of a reorganization are not considered sales.

2.238 A change of activity before the said period has elapsed will operate as a resolutory condition.

2.239 For the purposes indicated in the law:

a) Merger of Companies is understood to signify when two or more companies are dissolved, without being liquidated, in order to set up a new company, or when an existing company incorporates one or more other companies that, without going into liquidation, are dissolved, provided that at least in the first case, eighty per cent (80%) of the capital of the new entity at the time of the merger corresponds to the holders of the preceding companies; in the case of incorporation, the value of the participation that corresponds to the holders of the incorporated company or companies in the capital of the incorporating company must represent at least eighty per cent (80%) of the capital of the incorporated company or companies.

b) Spin-off or division of companies means when a company allocates part of its capital to an existing company or participates with an existing company in creating a new company or when it allocates part of its capital to establishing a new company or when it splits into new juridically and economically independent companies provided that, at the time of the spin-off or division, the value of the participation corresponding to the holders of the spun-off company or in the capital of the company formed on establishing with the former a new company shall not represent less than eighty per cent (80%) of the capital allocated to such ends or, in the case of the setting up of a new company or of splitting into new companies, provided at least eighty per cent (80%) of the capital of the new entity or entities, taken as a whole, belongs to the holders of the preceding entity.

2.240 Article 112 of the decree regulating Income Tax provides that "the holder or holders of the preceding company or companies must maintain during a period of not less than two years as from the date of reorganization, a participation of not less than what they would have held at that time in the capital of the continuing entity or entities." This provision refers to a participating sum, so that the obligation exists only of maintaining the amount of the nominal capital that springs from the calculation of percentages mentioned above.

2.241 In addition, at the date of reorganization the companies must be in operation, they must have pursued similar or connected activities during the twelve months prior to the date of reorganization and the reorganization must be communicated to the Tax Bureau within one hundred and eighty days from the date of reorganization in the manner and with the requirements specified in general resolution N 2245/80.

2.242 "Date of reorganization" is understood to be the date on which operations commence in the manner resulting from the reorganization. Said date may coincide with the date of the reorganization balance sheet, board meeting, meeting of members, minutes of shareholders' meeting, expiry date for oppositions, final reorganization commitment, registration with the proper Public Register or any other the parties may stipulate.

4. Dissolution and Liquidation

2.243 Partial termination of a partnership contract signifies the specific extinction of the position as a member with regard to an individual member, so that it does not affect the existence of the company itself. Apart from what might be provided in the bylaws, partial dissolution is established by law in the following cases:

1) Death of a member, in general, limited, capital and industry and participation partnerships. In general and limited partnerships it may be agreed that the partnership will continue with the heirs as a member, in which case they can request to become a silent partner as a condition for their incorporation.

2) Fair cause for excluding a member in the above mentioned companies as well as in limited liability companies, and unlimited partners of limited partnerships holding share capital. This involves serious failure on the part of a member in complying with his duties, as well as incapacity, disqualification, a decree of bankruptcy; these latter instances, however, do not apply to limited liability companies.

2.244 The exclusion right must be exercised within ninety days of becoming aware of the circumstance of exclusion. If exclusion is resolved by the company, the action must be taken by its representative or whoever the remaining members appoint if the exclusion refers to the administrators. If it is exercised individually by one of the members it must be upheld by a meeting of all of the members called for the purpose.

2.245 Although an excluded member is entitled to a sum of money representing the value of his share at the date exclusion is requested, he must share profits and losses if there are operations pending and the company is entitled to withhold his share until such time as the operations are completed. In addition, he cannot demand delivery of his part when it consists of a contribution of use and benefit if this contribution is indispensable to the working of the company. However, his part must be paid to him in cash.

2.246 The dissolution of a company springs from the following:

1) Decision of the members.

2) Lapsing of the period for which it was constituted.

3) Fulfillment of the condition to which its existence was subordinated.

4) Achievement of company purpose or impossibility to do so.

5) Loss of company capital, unless the members agree to the total or partial refunding of same or its increase.

6) Declaration of bankruptcy, unless there is a convention or resolving agreement.

7) Merger.

8) Reduction to one of the number of members, if the company is not regularized within a period of three months, during which that member will be unlimitedly liable for company obligations.

9) Definite approval of cancellation of public offering or quotation of shares. The dissolution can be annulled by resolution taken at an extraordinary meeting, called within sixty days and with a majority of more than 50% of the capital.

10) Definite resolution to withdraw authorization to operate when special laws require such authorization because of the object of the company.

Nevertheless, dissolution would not be effective if there is any doubt as to of said circumstances.

2.247 Dissolution may be avoided through extension, that must be resolved before time limitation of the company has expired, or by renewal. Both require unanimous agreement of the members, unless otherwise stipulated and what is provided for share capital companies and limited liability companies. Nevertheless, renewal can only be effective by means of the same majorities before appointment of the liquidator has been registered; however the administrators will be jointly and severally liable for all operations except for urgent matters or such as are necessary to initiate liquidation. Subsequently (once the appointment of the liquidator has been registered), renewal can only be effected through unanimous agreement, for every type of company.

2.248 In the case of partnerships (except for the capital represented by shares in Limited Partnerships with Share Capital) and Limited Liability Companies, they cannot be extended or renewed if there is a personal creditor of a partner holding an attachment on his capital interest that has not been met.

2.249 Once the duration of a company has elapsed, or dissolution has been agreed or declared in courts, managers may only attend urgent matters and must take the necessary steps to start liquidation. For any other operation they will be jointly and severally liable vis-a-vis third parties and members, without prejudice to the responsibility of the latter.

2.250 Liquidation and representation of the company during same is, generally in charge of the managers, except for special cases or agreement to the contrary, in which event the liquidator must be appointed within thirty days from when the winding-up begins.

2.251 Within thirty days of appointment -a period which the members may extend up to one hundred and thirty days- the liquidators must draw up an inventory and balance sheet of the company's net worth, for consideration by the members. They must also report to the members every three months.

2.252 If all company liabilities are sufficiently secured, a partial distribution may be effected. This may be decided directly by the liquidator or at any member's request, except in the case of share companies in which it must be requested by shareholders representing ten percent of the capital. The partial distribution agreement must be published in the same manner and with the same effects provided for capital reduction.

2.253 Once the company liabilities have been fully met, the liquidators must draw up a final balance sheet -that will also be a rendering of accounts- together with the proposed distribution; they will refund the capital shares and, unless otherwise provided in the contract, the surplus will be distributed pro rata to each member's share in the profits. The balance sheet and distribution program must be communicated to the members, who are entitled to contest same within fifteen days. The applicable legal action must be filed within the next ensuing sixty days.

2.254 The approved balance sheet and distribution program must be registered with the Public Register of Commerce in order to proceed to comply with same. Once the winding up is concluded, registration of the company bylaws with the Public Register of Commerce must be canceled. The members (or if they have not decided the point, the officer in charge of the Public Register of Commerce) will resolve who is to have the custody of the company books and the rest of the company documentation.

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