Companies Act 19,550 · Article 197 — Exceptional limitation or suspension of pre-emption

Exceptional limitation or suspension of pre-emption (art. 197 LGS)

The extraordinary meeting, with the enhanced majorities in the last paragraph of Article 244, may limit or suspend pre-emption only in particular and exceptional cases required by the corporate interest and subject to strict statutory conditions.

Source: Act 19,550

What article 197

Article 197 sets the exceptional requirements for limiting or suspending pre-emption rights.

Official text · Act 19,550, art. 197

The extraordinary shareholders’ meeting, with the majorities set out in the last paragraph of Article 244, may resolve, in particular and exceptional cases where the company’s interest so requires, to limit or suspend the pre-emption right in the subscription of new shares, subject to the following conditions:

1) The matter must be included on the agenda;

2) The shares must be paid up with contributions in kind or be issued in payment of pre-existing obligations.

Source: Law 19,550, art. 197 — InfoLEG (updated official text)

Commentary

The Article 194 right can only be displaced through this exceptional route: a concrete corporate interest, enhanced majority, express agenda item and one of the two objective statutory situations.

The rule prevents abusive dilution in favor of outsiders or the majority. Use of Article 197 outside its conditions may be challenged and may trigger liability.

Distinctions often confused

Pre-emption (Art. 194) is not the same as Exceptional limitation (Art. 197). Article 194 guarantees pre-emption; Article 197 permits limitation only exceptionally, with enhanced majorities and statutory grounds.

Practical impact

Pre-emption can only be displaced within the narrow framework of Article 197. Minority shareholders should scrutinize the agenda and the stated corporate-interest justification.

Frequently asked questions

Can shareholders be deprived of pre-emption rights?

Only exceptionally, by an extraordinary meeting with enhanced majorities, where the corporate interest requires it and for shares paid up with contributions in kind or issued in payment of pre-existing obligations.

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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