Company with a lawful purpose carrying on unlawful activity (LGS art. 19)
Section 19 of the General Companies Law governs a company with a lawful purpose that carries on unlawful activity: it is dissolved and liquidated under the rules applicable to an unlawful-purpose company (art. 18), but good-faith members are exempt from the aggravated consequences.
What article 19
Section 19 sanctions unlawful activity by a company with a lawful purpose while protecting good-faith members.
Where a company having a lawful purpose engages in unlawful activities, it shall be dissolved and liquidated upon application of a party or ex officio, and the rules set forth in article 18 shall apply. Members who prove their good faith shall be excluded from the provisions of the third and fourth paragraphs of the preceding article.
Source: Law 19,550, art. 19 - InfoLEG (updated official text)
Commentary
The difference from article 18 (unlawful purpose) lies in good faith: here the purpose itself is lawful and the unlawfulness lies in the company's diverted activity; a member who proves good faith avoids unlimited liability and loss of the liquidation surplus. It is an equitable safeguard for a member who was not involved in the misconduct.
Do you need advice on this matter?
The firm is headquartered in Buenos Aires, Argentina, and advises clients worldwide.
Contact the firm