ARGENTINA Law and Practice Contributed by: Manuel Tanoira, Lucía Rivas O’Connor, Luis Merello Bas and Dolores Nazar, TCA Tanoira Cassagne
to ensure the company’s continued success after a major event. • Bonuses and performance-based incentives: In addition to equity-based incentives, cash bonuses or performance-linked incentives are frequently included in founders’ and key employees’ compensation packages. These bonuses are often tied to specific company milestones, such as revenue targets, suc - cessful funding rounds or operational goals. They serve as an immediate financial reward while promoting alignment with the compa - ny’s overall objectives. • Non-compete and non-solicitation clauses: Founder’s and employee contracts often include non-compete and non-solicitation clauses, which prevent individuals from starting a competing business or soliciting employees after they leave the company. These clauses further ensure that the com - pany’s key talents remain committed to its success in the long term. • Cultural alignment: Beyond the financial and contractual tools, company culture and the vision for the future are crucial factors in ensuring long-term commitment. When founders and key employees share a com - mon goal and feel a sense of ownership and purpose in the company, their dedication is often as strong as the financial incentives. 5.2 Securities Tools and Terms for Incentives In Argentina’s venture capital industry, equity drives incentives. Incentive units suit LLCs, while stock options and restricted stock awards fit corporations. Companies retain repurchase rights on unvested shares, sometimes vested ones too, priced by termination type. Incentives might apply to local or holding entities, balanc - ing retention with structural needs.
In Argentina, start-ups and growth companies often use equity-based incentives to align the interests of key employees and founders with the company’s success. Similar to international practices, there are key instruments employed in these types of arrangements, such as incentive units, stock options and vesting periods. 5.3 Taxation of Instruments Incentive Pool and Tax Considerations In Argentina, the design of incentive plans for founders and employees is strongly influenced by labour laws and tax regulations. One of the main considerations is whether the plan could be considered as “remuneratory” benefit, which would subject it to labour taxes upon the issu - ance of equity to employees. The labour law imposes limitations on payments in kind, cap - ping them at 20% of total compensation, which can discourage companies from offering equity- based incentives to employees. Given these constraints, many companies in Argentina structure their incentive plans in ways that minimise labour contingencies. This typi - cally involves the use of innovative frameworks that allow founders to grant shares to employ - ees while reducing the tax and labour-related risks. In recent years, there has been a trend of creating plans that are more favourable to both the company and employees by finding creative solutions to reduce the fiscal and labour burden. While the incentive plans may not always take the same form as those in jurisdictions like Del - aware (eg, stock options), Argentine founders and companies are increasingly exploring these alternatives to strike a balance between incenti - vising employees and managing tax risks.
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