No profit distribution before prior losses are covered (LGS art. 71)
Section 71 of the General Companies Law prohibits profit distributions until losses from prior financial years have been covered, with an exception for compensation of managers calculated as a percentage of profits.
What article 71
Section 71 makes profit distributions conditional on first absorbing accumulated losses.
Profits may not be distributed until losses from prior financial years have been covered. Where managers, directors or statutory auditors are compensated by a percentage of profits, the meeting may in each case authorize payment even if prior losses have not been covered.
Source: Law 19,550, art. 71 - InfoLEG (updated official text)
Commentary
The rule reinforces article 68: distributable profit exists only after accumulated losses have been absorbed. It prevents distributions while the company still carries past losses, protecting capital and creditors.
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