ARGENTINA Law and Practice Contributed by: Agustin Ferrari, Hernán Alal and Astrid Nottebohm, Naveira, Truffat, Martínez, Ferrari & Mallo Abogados
8.4 Independent Outside Advice In Argentina, unlike in other markets, although the Board of Directors is the body formally responsible for deciding to proceed with an acquisition, sale, merger, or other type of transaction, in most cases such transactions are carried out following instruc - tions from company shareholders. However, these types of transactions typically do not proceed without the involvement of external account - ing, financial, and legal advisors to mitigate potential liabilities. These external advisors work closely with the compa - ny’s internal teams to assess the terms, risks, advan - tages and disadvantages of the potential transaction. That said, in practice, it is usually the shareholders who ultimately decide whether to move forward with a deal. 8.5 Conflicts of Interest In Argentina, shareholder involvement in the com - pany’s affairs is common. In practice, the roles of shareholders and directors are often blurred, along with their respective interests. It is not uncommon to see board members who also hold shares in the com - pany or, conversely, “nominee directors” – individuals who occupy a board position merely to comply with regulatory requirements. In the case of nominee directors, board decisions are typically made following shareholder instructions rath - er than based on an independent analysis of opportu - nity, merit, or convenience. Due to these dynamics and potential conflicts of inter - est, it is common to see liability claims against the board in cases of insolvency or shareholder disputes. It is important to highlight that, under General Corpo - rate Law, directors are personally, jointly, and unlimit - edly liable to the company, its shareholders, and third parties for mismanagement, violations of the law, the company’s bylaws or regulations, and for any dam - ages caused by fraud, abuse of authority, or gross negligence.
However, the burden of proof lies with the party alleg - ing the damage, making evidence-gathering a critical stage in these proceedings.
9. Defensive Measures 9.1 Hostile Tender Offers
Hostile bids are permitted under local law. However, public companies in Argentina typically have a small percentage of their capital publicly traded, with the majority held by a limited group of shareholders, thus preventing activism and making hostile bids ineffec - tive and uncommon. 9.2 Directors’ Use of Defensive Measures Even though there are no explicit rules on defensive strategies against hostile bids, directors might use certain defensive measures, provided that they owe a duty of loyalty to the company and its shareholders and must act with “the due care of a good business - man”. Therefore, they should seek what is best for the company instead of their personal benefit. It should be considered that civil liability may apply when damage arises because of the directors’ actions. CNV rules provide that, if a hostile takeover attempt is made, the board must: i) assess whether the offer price is fair and advise shareholders on whether to accept or reject it; ii) remain neutral and continue regular business operations without deviation; and iii) share any relevant company information that could influence shareholder decisions. CNV rules expressly establish that when a public ten - der offer has been launched, the board must refrain from: • approving the issuance of shares, bonds of any kind, and other securities or negotiable instruments that grant the right to subscribe or acquire them, except when executing prior specific agreements authorised by the shareholders’ meeting; • directly or indirectly carrying out transactions involving the securities affected by the offer with the intention of disrupting it; and
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