Companies Act 19,550 · Article 21 — Section IV companies

Informal or defective companies: Section IV (LGS art. 21)

Section 21 of the General Companies Law defines the scope of Section IV: a company that is not formed under one of the forms in Chapter II, omits essential requirements, or fails to comply with required formalities is governed by this special regime. Since the 2015 reform, it is the framework for so-called 'informal' or 'Section IV' companies.

Source: Act 19,550

What article 21

Section 21 identifies the companies subject to the Section IV regime (formerly 'companies not duly incorporated').

Official text · Act 19,550, art. 21

A company that is not formed in accordance with the forms provided for in Chapter II, that omits essential requirements, or that fails to comply with the formalities required by this Law shall be governed by the provisions of this Section.

Source: Law 19,550, art. 21 - InfoLEG (updated official text)

Commentary

The 2015 reform changed the paradigm: the old 'irregular or de facto company' was replaced by a more lenient regime. These companies exist, have legal personality and may operate; the agreement is enforceable among the members and against third parties who actually knew of it.

The regime covers three situations: atypical companies (those not adopting a statutory form), companies that omit essential requirements, and companies that fail to comply with formalities. Articles 22 to 26 complete the regime: enforceability of the agreement, representation, members' liability (now generally several and in equal shares unless otherwise agreed), and cure.

Distinctions often confused

Section IV company is not the same as Duly formed statutory company. The duly formed company adopts a statutory form and satisfies the formalities; a Section IV company has defects in form, requirements or formalities but nevertheless exists and operates under its own regime.

Current regime (post-2015) is not the same as Former irregular/de facto company. The current regime is more lenient: it recognizes legal personality, permits the agreement to be invoked, and provides for cure, unlike the severity of the former system.

Practical impact

Many companies operate informally or with defects. Understanding the Section IV regime - especially the possibility of cure under article 25 - is important in order to obtain the legal certainty of a duly formed company.

Frequently asked questions

Is a de facto company valid?

Yes. Under the current Section IV regime, it exists, has legal personality and may operate; the agreement is enforceable among the members and against third parties who knew of it.

Can it be regularized?

Yes. Article 25 provides a cure procedure allowing the company to adopt a statutory form and satisfy omitted requirements.

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