Companies Act 19,550 · Article 194 — Pre-emption and accretion rights

Pre-emption and accretion rights (art. 194 LGS)

Ordinary shares carry a preferential right to subscribe for new shares of the same class in proportion to the existing holding, plus an accretion right. The offer must be published and the statutory period is generally 30 days.

Source: Act 19,550

What article 194

Article 194 protects shareholders against dilution through pre-emption and accretion rights.

Official text · Act 19,550, art. 194

Ordinary shares, whether carrying single or multiple voting rights, grant their holder a preferential right to subscribe for new shares of the same class in proportion to those held, except in the case of the last paragraph of Article 216; they also grant an accretion right in proportion to the shares subscribed on each occasion.

Offer to shareholders. The company shall make the offer to shareholders by notices published for three (3) days in the legal notices newspaper and, for companies within Article 299, also in one of the newspapers of widest general circulation throughout the Republic.

Exercise period. Shareholders may exercise their option within thirty (30) days following the last publication, unless the charter provides a longer period.

Limitation. Extension. The rights recognized by this article may not be suppressed or conditioned except as provided in Article 197, and may be extended to preferred shares by the charter or by the meeting resolution authorizing the issue.

Source: Law 19,550, art. 194 — InfoLEG (updated official text)

Commentary

Pre-emption is the minority shareholder’s main protection against dilution: before outsiders, the shareholder may subscribe proportionally and may accrete into shares not taken by others.

Only Article 197 allows exceptional limitation or suspension. Compliance with publication and timing requirements is central; increases that violate pre-emption may be challenged and trigger liability.

Distinctions often confused

Pre-emption right is not the same as Accretion right. Pre-emption permits proportional subscription based on the existing holding; accretion permits taking shares left unsubscribed by others.

Suppressing pre-emption is not the same as Increasing capital. A capital increase is valid if pre-emption is respected; suppression is possible only exceptionally under Article 197.

Practical impact

Capital increases that disregard pre-emption are a common dilution dispute. Shareholders should monitor notices and exercise on time; the company should comply strictly with the procedure.

Frequently asked questions

What is the pre-emption right?

It is the right to subscribe for new shares in proportion to shares already held, before outsiders, in order to avoid dilution.

Can pre-emption rights be eliminated?

Not by a simple charter clause or ordinary majority; they may only be limited or suspended in the exceptional cases under Article 197.

How long is the exercise period?

Thirty days from the last publication of the offer, unless the charter grants a longer period.

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.

Do you need advice on this matter?

The firm is headquartered in Buenos Aires, Argentina, and advises clients worldwide.

Contact the firm