Legal Advice for Boards of Directors and Company Management

What to keep in mind

Managing a company involves much more than implementing commercial decisions. Those responsible must understand their authority, observe the procedures laid down by law and the bylaws or articles of association, address conflicts of interest and evaluate the risks of significant transactions.

Article 59 of the Argentine General Companies Law requires loyalty and the diligence of a prudent businessperson. Directors of SAs are also subject to special rules concerning liability, conflicting interests and competing business activities, among other issues. Application of those provisions depends on specific conduct; a negative financial result does not automatically establish personal liability.

Legal advice may begin before a board or management meeting. It is important to confirm who must receive notice, what materials are required for meaningful deliberation, which corporate body is entitled to approve the transaction and which voting or procedural conditions apply. A commercially reasonable decision may still be vulnerable to challenge if the proper process is not followed.

For especially important transactions, including sales of significant assets, granting security, contracting with affiliated entities or reorganizing the company, the financial documents, parties' relationships and potential incompatibilities deserve close review. Where an officer has a personal interest, the applicable disclosure, abstention and approval rules must be considered.

Clear and complete minutes have a substantive purpose. Good records show what was discussed, which materials were available, who participated, what was decided and whether anyone expressed dissent or reservations. Nevertheless, correctly drafted minutes cannot, by themselves, validate an unlawful decision.

The purpose is to enable boards and managers to make informed choices with timely legal assistance and documentation appropriate to each transaction's significance.

Distinctions often confused

Frequently asked questions