With the aim of aligning the rules of the Argentine Securities Commission ("Comisión Nacional de Valores" or "CNV") with the recommendation of the International Financial Action Task Force ("GAFI") under the "International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation" on February 21, 2017 the CNV passed General Resolution 687/2017 (the "Resolution").
The Resolution amended the Rules of the CNV and imposed the obligation to legal entity shareholders, trusts or other legal structures to inform in detail their "Beneficial Owners" in the shareholders' meeting which they attend.
According to the GAFI, "Beneficial Owners" refers to the individual(s) who ultimately owns or controls a customer and/or the individual on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or legal structure.
Reference to "ultimately owns or controls" and "ultimate effective control" refer to situations in which ownership/control is exercised through a chain of ownership or by means of control other than direct control.
The Resolution provides:
1.The obligation of informing within five (5) business days from the shareholders' meeting trough the Autopista de Información Financiera ("AIF") as "restricted information to the CNV" under the title "Beneficial Owner", the information of the beneficial/s owner/s of the legal entity shareholders or other legal structures.
Name, nationality, domicile, date of birth, ID or passport number, Tax ID number or similar, and profession should be provided to such effect.
2. In order to participate in shareholders' meetings, the companies domiciled outside Argentina must provide evidence of their registration pursuant to Article 118 or 123 of General Companies' Law No. 19,550, and the representation must be exercised by the registered legal representative or by a duly empowered attorney-in-fact.
3. In the case of ownership under a "Trust" or similar structure a certificate must be submitted as proof of the cause of transfer of the stock to such "Trust" or similar structure.
Such certificate must also include the name, domicile or legal address, ID number or passport or registration number, authorization or incorporation of the settlor(s), trustee(s) or equivalent, beneficiary after the termination of the trust (fideicomisario) and/or beneficiary or equivalents according to the applicable regulations under which the trust or similar structure was created, the agreement and/or evidence of the registration of the agreement with the applicable Public Registry.
If the interest holdings are in the name of a foundation or similar structure, with public or private purpose, information about the founder must be provided and, if he/she is a different person, the person who made the contribution or transfer of the stock to such entity.
In addition, the legal representation must be exercised by the title-holder of the administration of the assets in the case of trusts or similar structures, and by the legal representative for other cases, or by the duly empowered attorney-in-fact.
The Resolution raises some uncertainty regarding its application. In particular, there are certain issues that could arise in relation to foreign corporate shareholders of certain jurisdictions that do not have access to the information of beneficial owners, as well as investment funds who generally do not disclose the identity of limited partners.
For example: a) if a shareholder is a foreign company listed in New York or London which is therefore owned by the public that holds its stock, will such company be required to disclose the information of its beneficial owners? Or b) if a private equity fund holds shares of a company listed in Argentina, should the fund disclose the identity of its limited partners? Or c) How should an Argentine listed company act in the event a foreign company which is its shareholder confirms its attendance to a shareholders' meeting but refrains from disclosing the identity of its respective "beneficial owners"?
Given that during the months of March and April companies' annual shareholders' meetings supervised by the CNV generally take place, we should soon have some examples regarding the practical implementation of the Resolution.
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