When incorporating a business in a new country, it’s important to come to grips with local business law and ensure your company remains fully compliant, from the first day of launch right through to your growth and expansion. If you’re unaware of legislation and don’t follow the books, then the chances of being penalized or reprimanded down the line increase. This can have ongoing negative consequences for you and your business.
Business law in Argentina may be very different from business law in your own country, with the government working to provide employment reassurances for citizens, reduce corruption in the country, and create a business environment that’s fair, competitive and safe for all.
Below, we offer an introduction to corporate legal compliance in Argentina and share with you some of the ways you can protect your firm from negligence or non-compliance.
Overview on foreign direct investment
Even though foreign direct investment (FDI) in the country is encouraged, Argentina strongly supports the growth of local businesses and puts a strong focus on ventures that serve the people of the country. This may be the reason why Argentina’s foreign direct investment inflows vary greatly from year to year, as the country simply makes it difficult for some foreign investors to establish a company. A 2018 World Investment Report published by the UNCTAD revealed Argentina had doubled its FDI inflows between 2016/2017, reaching US$11.9 billion by the end of the year.
Countries including the US, Spain and the Netherlands represent more than half of all FDI in the country, although investment remains low. The World Bank‘s 2018 Doing Business report shows that Argentina is currently ranked at 117th out of 190 countries. This suggests Argentina still upholds restrictions that put businesses off from setting up locally. That does, however, mean there is less competition for businesses with a strong value proposition and the right entry strategy. There is an opportunity to make a greater splash before the country’s economy fully recovers.
Low minimum capital a key drawcard
One of the things Argentina does offer in favor of investors is low startup costs. This is why many businesses choose Argentina to incorporate a Latin American hub. The minimum capital required for incorporating a Limited Liability Company in the country is just US $300, which reduces barriers to entry and enables businesses to start operations as quickly as possible.
With a growing number of exciting startups in Argentina to watch, the country’s economy will experience an influx of new businesses in the coming years. With such little startup capital required, investors and entrepreneurs with varied investment capital can get started.
Whether you’re a foreign investor looking to form a company in Argentina or a local entrepreneur, understanding the laws surrounding directorship is crucial for long-term growth. All Argentine companies are required to have a majority of resident directors. If you’re not from the country, then you will need to find local business partners or pay for a company to represent your firm and serve as a director in order to bypass the requirements for company incorporation.
You must lodge annual company returns, confirming the details of your company. This includes names and addresses of your directors, the address of the principal business site, and details on your shareholders and their shareholdings. It’s important to keep a record of all of your shareholders’ and directors’ personal information and make them aware their personal information will be submitted to the government.
It’s also important to note that, whilst company secretaries are not required when forming a new business in Argentina, they are recommended to ensure Corporation Act compliance.
Authorize repatriation of profits
Whether launching a new business in Argentina or an Argentine sales branch of a multinational company, you must get authorization from the Central Bank for the repatriation of all profits. This is critical – even more so if you have a foreign director or shareholder – in order to deliver profits and assets to the right people without falling foul of the law.
When growing your business in Argentina, it’s recommended to work with an accountant or bookkeeper who can keep on top of your finances and ensure compliance. Indeed, failure to provide your corporation’s appropriate profit and losses can result in fines or prosecution. It’s not worth the risk of doing it on your own alongside the other demands that forming a new business requires. Be aware that you cannot remove assets from your company and distribute them to shareholders as and when desired. Playing by the books will ensure your business stays within the law and enjoys long-term success.
Data protection and discrimination
Argentina’s Data Protection Law (known as Bill No. MEN-2018-147-APN-PTE) was recently overhauled, and re-designed to prevent companies from disclosing private information about an individual, whether that be a customer or an employee. The new bill is in line with the European Union’s General Data Protection Regulation and includes accountability obligation for all companies.
Gender laws in Argentina should also be considered. It’s illegal to discriminate against an employee based on their gender, race, religion or sexual orientation. Make sure you weave this consideration into your recruitment strategy to ensure compliance, and create a diverse team to bolster your growth.
Regulations for healthy competition
Finally, Argentina’s anti-trust laws were designed to stop firms from creating or entering into contracts that would create monopolies. Permission must first be granted to your proposed business activities to ensure the market remains fair and competitive.
What’s more, Argentina’s Commercial Practices Code has a policy on preventing dominant companies in the country forcing out competitors using predatory techniques such as unreasonable pricing and operating non-profitable stores.
Work with Biz Latin Hub
It’s vital to seek corporate law advice when starting a business in Argentina. Biz Latin Hub is best placed to assist in your entry or expansion into Argentina and Latin America. Whether you have spotted a gap in the market and want to operate in the country, or have plans to expand but need guidance on compliance, our team of lawyers and legal experts are on hand to help.
To find out more, contact us on [email protected], and check our site regularly for more guides and assistance on operating legally in Argentina in order to maximise your profitability.
Watch our short video below for insights on what makes Argentina a smart choice for doing business.