Companies Act 19,550 · Article 193 — Shareholder default in paying up shares

Shareholder default in paying up shares (art. 193 LGS)

The charter may provide for sale of subscription rights attached to shares in default, or forfeiture after notice to pay within no more than 30 days, with loss of amounts already paid. The company may also demand performance.

Source: Act 19,550

What article 193

Article 193 governs shareholder default: sale of subscription rights, forfeiture with loss of amounts paid, or enforcement of payment.

Official text · Act 19,550, art. 193

The charter may provide that subscription rights corresponding to shares in default be sold at public auction or through a stockbroker in the case of listed shares. Auction expenses and default interest shall be borne by the defaulting subscriber, without prejudice to liability for damages.

It may also provide for forfeiture of rights; in that case the sanction shall take effect after notice to pay within a period not exceeding thirty (30) days, with loss of the amounts paid. Without prejudice to the foregoing, the company may elect to enforce the subscription agreement.

Source: Law 19,550, art. 193 — InfoLEG (updated official text)

Commentary

This is the specific default regime for companies limited by shares. If the charter so provides, the company may sell the subscription rights or declare forfeiture; it may also demand the contribution due.

Sale and forfeiture require a charter provision. For forfeiture, prior notice of up to 30 days is indispensable, and the shareholder loses the amounts already paid.

Distinctions often confused

Article 193 (share companies) is not the same as Article 37 (other companies). Article 193 provides remedies specific to shareholder default; Article 37 governs partner default in other company types.

Forfeiture is not the same as Enforcement. Forfeiture extinguishes the rights and causes loss of amounts paid after notice; alternatively, the company may demand full payment.

Practical impact

A stock corporation charter should expressly provide the Article 193 remedies. Formal notice is essential when dealing with a defaulting shareholder.

Frequently asked questions

What happens if a shareholder does not pay up the shares?

Depending on the charter, the company may sell the subscription rights, declare forfeiture after up to 30 days’ notice with loss of amounts paid, or enforce the subscription agreement.

This page is informational and does not constitute legal advice nor replace professional consultation. It quotes the official text of the rule; for its application to a specific case, consult a licensed professional.

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