Loss of capital: how to avoid dissolution (LGS art. 96)
Article 96 of the General Companies Law provides a way out of dissolution for loss of capital: dissolution does not occur if the members agree to restore the capital in whole or in part, or to increase it.
What article 96
Article 96 governs removal of the dissolution ground based on loss of capital through restoration or increase.
In the event of loss of the share capital, dissolution does not occur if the members agree to restore it in whole or in part or to increase it.
Source: Law 19,550, art. 96 — InfoLEG (updated official text)
Commentary
Loss of capital is a ground under article 94(5). Article 96 permits it to be neutralized: members may restore the lost capital or increase capital, avoiding dissolution. This reflects the principle of preservation of the business (art. 100).
Application of the loss of capital ground has been suspended by emergency legislation in various periods; current applicability must be checked. Restoration and increase nevertheless remain tools to recapitalize a depleted company.
Distinctions often confused
Practical impact
When losses absorb capital, members must timely choose between restoration, increase or dissolution. Properly recording the governing body’s decision is important for administrators’ liability.
Frequently asked questions
If the company loses its capital, is it dissolved?
Do you need advice on this matter?
The firm is headquartered in Buenos Aires, Argentina, and advises clients worldwide.
Contact the firm