Companies Act 19,550 · Article 264 — Prohibitions and incompatibilities for directors

Who may not be a director (art. 264 LGS)

Article 264 of the General Companies Law lists who may not be a director or manager: those who may not engage in trade, bankrupts and persons in insolvency proceedings for the stated periods, those convicted of certain crimes, and public officials whose duties relate to the company's purpose, until two years after leaving office.

Source: Act 19,550

What article 264

Article 264 sets the prohibitions and incompatibilities for serving as director or manager.

Official text · Act 19,550, art. 264

The following may not be directors or managers:

1) Those who may not engage in trade;

2) Bankrupts due to culpable or fraudulent bankruptcy, for ten (10) years after their rehabilitation; bankrupts due to fortuitous bankruptcy or persons in insolvency proceedings, for five (5) years after their rehabilitation; directors and managers of a company whose conduct is classified as culpable or fraudulent, for ten (10) years after their rehabilitation;

3) Those convicted with an ancillary disqualification from holding public office; those convicted of theft, robbery, fraud, bribery, issuing checks without funds, and crimes against public trust; those convicted of crimes committed in the formation, operation and winding-up of companies. In all cases, for ten (10) years after the sentence has been served;

4) Public administration officials whose duties relate to the company's purpose, until two (2) years after leaving office.

Source: Law 19,550, art. 264 — InfoLEG (updated official text)

Commentary

These disqualifications aim to ensure management is left in the hands of suitable, conflict-free persons. They reach those who may not engage in trade, bankrupts and persons in insolvency proceedings (for periods depending on how the bankruptcy is classified), and those convicted of economic crimes or crimes against public trust.

Subsection 4 prevents public-private conflicts of interest: an official whose duties relate to the company's purpose may not be a director until two years after leaving office. Appointing a disqualified person is grounds for removal and may give rise to liability.

Distinctions often confused

Prohibition on being a director is not the same as Official's incompatibility. The prohibitions in subsections 1 to 3 relate to suitability and background; the incompatibility in subsection 4 protects against public-private conflicts of interest.

Practical impact

Before appointing a director, it should be verified that they are not covered by art. 264. The appointment of a disqualified person is removable and may jeopardize the validity of their acts and the liability of those who appointed them.

Frequently asked questions

Can a bankrupt person be a director?

Not while the periods of art. 264 run: depending on how the bankruptcy is classified, up to five or ten years after their rehabilitation.

Can a public official be a director?

No, if their duties relate to the company's purpose, until two years after leaving office.

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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