ARGENTINA Law and Practice Contributed by: Agustin Ferrari and Astrid Nottebohm, Naveira, Truffat, Martínez, Ferrari & Mallo Abogados
8. Duties of Directors 8.1 Principal Directors’ Duties
tal and a need for specialised bodies. They are also frequently implemented in joint ventures and other cases requiring specialised govern - ance structures. In such cases, the purpose of these committees is to allow shareholders to maintain some level of control over specific business units. It is worth noting that the General Corporate Law allows the bylaws of corporations to establish executive committees within the Board of Direc - tors. These committees may only be composed of Board members. However, the creation of executive committees does not alter the obliga - tions and responsibilities of the Board members. 8.3 Business Judgement Rule Since takeovers are very rare in Argentina, there is no substantive case law with respect to the board of directors in takeover situations. 8.4 Independent Outside Advice In Argentina, unlike in other markets, although the Board of Directors is the body formally responsi - ble for deciding to proceed with an acquisition, sale, merger, or other type of transaction, in most cases such transactions are carried out following instructions from company shareholders. However, these types of transactions typically do not proceed without the involvement of exter - nal accounting, financial, and legal advisors to mitigate potential liabilities. These external advisors work closely with the company’s internal teams to assess the terms, risks, advantages 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.
Directors owe a duty of loyalty to the company and its shareholders, and must act with “the due care of a good businessman” . Directors are personally and without limit liable to the company, the shareholders and third par - ties for mismanagement, violation of the law or the bylaws, and for any other damages caused by the director’s fraud, gross negligence or abuse of authority. To be released from any such liability, a director must promptly file written objections to the cor - porate resolution which caused the damage and either give notice of it to the relevant officials or file proceedings challenging the decision. In addition to civil liability (for which damages is the available remedy), criminal liability can apply where directors’ actions fall under the category of criminal offences. Civil liability is presumed once the damage aris - ing from the directors’ decision is evidenced, unless the director proves otherwise. However, for criminal liability, the director’s guilt must be proved by the prosecutor in a criminal trial. 8.2 Special or Ad Hoc Committees It is not a standard practice to establish special or ad hoc committees in business combinations. With respect to other types of committees, an audit committee is mandatory for companies that publicly offer their shares. The creation of other types of committees is commonly used in companies with widely dispersed share capi -
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