Latin American and Caribbean Region
International Asset-Based Lending
Non-U.S. Counsel Questionnaire
March 2009 ARGENTINA
The following questions have been answered concerning asset-based lending in Argentina:
1. Overview. Please discuss the asset-based lending environment. For example:
a. To what extent are asset-based lending structures used (e.g., revolving and term loan
facilities secured by present and future accounts and inventory, with the amount of
loans available at any time based on the value of such assets)?
b. What other forms of working-capital lending are customarily used?
c. Is factoring prevalent in your market? Is it generally done on a recourse or non-
d. Who are the main players in the lending marketplace (e.g., domestic relationship-
based banks, non-bank lenders, foreign lenders)?
In the current economic context, the most commonly used forms of working capital lending
in Argentina are term loans, typically secured either by a mortgage (hipoteca) or a lien
(prenda). Financial leases—in which a party acquires use but not title to personal or real
property—offers another significant form of working capital lending in the Argentine market.
A 1995 law expressly authorized financial trusts. This law created a secure framework for
off-balance sheet, bankruptcy-remote transactions and harbingered a boom in asset-based
financing. Having ably survived the stress tests of the 2001-2002 economic crisis, financial
trusts have remained a preferred form of securitized and asset-based lending in Argentina.
Factoring is another financial tool specifically contemplated by Argentine law. As legislated,
the factoring of accounts receivables to a lender may be done on both a recourse and non-
recourse basis. Since the country’s economic crisis of 2001, factoring has become a less
favored financing tool, replaced to a large degree by more tax-advantaged securitization
The main players in the Argentine lending marketplace include private domestic banks such
as Banco Rio (owned by Banco Santander), Banco Francés (owned by Banco Bilbao
Vizcaya) and Banco de Galicia (owned by a group of Argentine individuals). State-owned
banks, such as the Banco Nación are also prominent lenders. Multilateral lenders also
continue to fill a need for financing of capital-intensive projects.
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2. Regulatory issues.
a. Are any special licenses or regulatory approvals required for a foreign lender to (i)
make loans, (ii) take liens on collateral or (iii) use the court system?
Any institution endeavoring to accept deposits from the public must be licensed by the
central bank. If limited to lending, sporadic lending activity does not require a foreign lender
to be licensed and no specific permits are needed by a foreign lender to make loans, take
liens on collateral or to access the Argentine judicial system. If the foreign lender’s activity
is “regular” (i.e., on-going and systematic), then it must establish a subsidiary or branch
office, the activities of which will be regulated.
b. Is interest payable by a domestic company to a U.S. lender subject to withholding
Interest paid by a domestic company to a U.S. lender would be subject to withholding tax.
The general withholding tax rate on interest is 35% (e.g., this rate applies to interest on
inter-company loans). However, the effective rate may be reduced to 15.05% if payments
are made to non-resident financial institutions. In this regard, interest paid to a U.S. financial
institution will benefit from this reduced withholding rate to the extent it is overseen by a
central bank (or an equivalent agency) and it is not exempt from providing information to its
tax authorities due to bank secrecy or other type of privacy laws.
The reduced 15.05% withholding rate may also apply when payments are made to non-
resident suppliers of personal depreciable property except automobiles (whether under a
deferred compensation acquisition or a cross-border leasing agreement provided certain
conditions are met).
3. Creating liens on assets.
a. Is it possible to obtain a lien on all existing and future assets of a business entity
with a single security document, such as an enterprise mortgage?
Argentine law contemplates various types of liens over various types of assets (real
property, intellectual property, equipment, stock, contract rights, receivables, etc.) However,
it does not enable parties to create a global encumbrance over all existing and future assets
of a business with a single security document. This limitation reflects a legal policy of
recognizing security interests only over specific, identifiable assets, which exist at the time
of creating the lien. As an exception to the rules of specificity and existence, Argentine law
does allow for a floating lien (prenda flotante). Under a floating lien, a creditor may perfect
a security interest over a specified amount of fungible goods. The fungible goods may
remain part of the debtor’s fluid inventory or assets, as long as the overall value or volume
of the secured goods can be determined. In lieu of a lien, lenders often secure credit by a
global assignment (i.e., transfer of title) of existing and future receivables.
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b. How is a lien on receivables created? Can future receivables be covered in the initial
grant of security or are periodic updates to the documentation necessary? Is it
necessary to notify account debtors in order to create the lien, or is it advisable to
give such notice? Is a notice required for each receivable from the same account
debtor, or is a single notice sufficient for all present and future receivables from the
same account debtor? Are restrictions on the creation of liens on receivables
Rather than liens, secured transactions involving receivables are typically structured
through an assignment (transfer in title) of receivables. Under Argentine law, the
assignment occurs at the time of execution but perfected with respect to third parties only
from the time the obligor of the assigned right accepts or is notified of the assignment by
public instrument (i.e. by act of notary, court clerk or other public official). A single notice to
an obligor of a receivable is sufficient for all existing receivables with that obligor. As to
future receivables, the mechanics for notice to perfect an assignment remains unsettled in
Argentine law. Some courts and legal scholars accept a global notice of assignment of all
future rights to payment. Other courts and commentators hold that notice of the assignment
must occur on or after the time the receivable is created.
In the case of securitization (off-balance sheet sale of securitized assets), notice to the
obligors of an assigned receivables is not necessary.
Parties may agree to restrict the creation of liens on or assignment of receivables.
Nonetheless, this restriction would not be enforceable against a third party absent actual
c. How is a lien on inventory created? Must the lender have possession of the
inventory? Can future inventory be covered in the initial grant of security or are
periodic updates to the documentation necessary? Are retention of title claims by
suppliers commonplace? If so, do they extend to proceeds of the inventory?
In Argentina a lien on inventory is referred to as a “prenda flotante.” To create this security
interest an agreement must be signed and the debtor must maintain at all times an amount
of secured inventory equal to that specified in the security agreement (e.g., 10 tons of
wheat). After execution, a filing statement must be registered in the appropriate registry,
which is determined by the nature of the secured asset and the debtor’s domicile. In
Argentina, it is not necessary for the lender to take possession of the inventory in order to
establish a lien on inventory.
d. How is a lien on equipment created? Must the lender or its agent have possession of
the equipment? Can after-acquired inventory be covered in the initial grant of
security or are periodic updates to the documentation necessary?
An equipment lien may be created through a security agreement. The lien typically takes
the form of either a commercial pledge (prenda commercial) or registered pledge (prenda
con registro). In the case of a registered pledge, the asset remains in the possession of its
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owner and the security agreement is registered to prevent the disposition of the asset
without the creditor’s consent. With a commercial pledge, the creditor takes possession of
the secured asset to perfect the lien.
e. How is a lien on shares created? Are there any issues related to share pledges of
which foreign lenders should be aware?
Liens on shares usually involve a stock pledge (prenda de acciones) instrumented through
a stock pledge agreement. The lien is perfected by annotation of the lien in the company’s
stock ledger. Once perfected, the pledged shares may not be transferred without the
creditor’s consent. In creating a lien on shares, the lien beneficiary is well-advised to first
ensure that the company’s bylaws do not prohibit a shareholder from encumbering its
shares. Foreclosure is not a particularly agile process and requires a public auction
proceeding under the auspices of the Comisión Nacional de Valores, the local equivalent to
f. Formal requirements: must security documents be notarized? Translated?
Unless it is required to be registered or filed in court, the security agreement need not be
translated (though it may be advisable to ensure accuracy of the parties’ agreement). Any
document that must be registered to perfect the security interest must be prepared in
Spanish or translated by a certified public translator.
Notarization is generally advisable to avoid any subsequent challenge of the security
documents’ authenticity or the date certain of their creation.
Mortgages over real estate may only be created by means of a public deed executed before
a public notary. The mortgage deed must be filed with the public real estate registry of the
jurisdiction where the property is located.
a. How does your legal system establish the priority of the rights of a secured creditor
relative to other secured creditors?
Priority between secured creditors over the same asset is generally determined by the first-
in-time rule, i.e., which creditor first perfected its encumbrance over the asset. At the time
of a foreclosure proceeding over an asset, the proceeds from the foreclosure sale will be
applied first to the senior lienor and the balance, if any, paid to the junior lienor(s).
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b. If there is a registration system for liens, is it necessary to register the entire security
document or merely a notice of the lien? Are receivables, inventory and equipment
all covered by this system? How reliable is the filing system? Is the registry
available to be searched by prospective lenders? Does the date of registration
establish the date of priority relative to other secured claims? Are there costly
registration fees? If there is no filing system, how is priority determined?
When registration is mandatory the relevant registry charges an administrative fee usually
calculated over the amount of the secured obligation. Argentina does not have a
centralized registry. Each jurisdiction (province or the city of Buenos Aires) has its own
registry. The correct registry is determined by the type of asset and its location. Vehicle
liens are registered in the vehicle registry (registro automotor). Other tangible goods that do
not have an independent registry may be registered in the secured lien registry.
5. Guaranties. Are there any restrictions on the ability of a domestic company to guaranty a
loan made to its parent or affiliate?
An Argentine company may properly guarantee an obligation of its parent or affiliate as long as the
giving of a guarantee is expressly authorized by the company’s bylaws. Recent case law has
indicated a judicial trend to further require that, in addition to authorization under the bylaws, the
guarantor must receive a specific benefit in consideration for giving the guaranty. This benefit need
not equal the monetary value of the guaranteed obligations.
a. Please describe the procedure by which an asset-based lender would realize upon its
security. Is a court proceeding required or is a non-judicial proceeding available?
What is the typical timing for an enforcement proceeding?
A secured asset-based lender without possession of the secured asset has the right to seek
judicial foreclosure through an expedited (sumarísima) procedure. This proceeding, among
the most agile in the Argentine legal system, entitles the creditor to appear in court, produce
the papers documenting the lien and move for judicial foreclosure. The evidence and
affirmative defenses that may be offered by the debtor or third party in this type of
proceeding are limited to assure rapid resolution of the case.
A non-judicial foreclosure proceeding is also contemplated under the Argentine commercial
code. In this proceeding, the creditor is entitled to sell the asset through a public auction
but is obliged to render to the debtor an accounting of the proceeds after the sale takes
place. The creditor must convene the auction with no less than 10 days’ notice and is
allowed to sell the asset at any time after the maturity of the underlying debt.
An enforcement procedure of the kind described above typically lasts between one and two
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b. How reliable is the court system? Does this vary by state or region? Are foreign
lenders treated the same as a domestic lenders in court proceedings?
In general terms, foreign lenders in Argentina may expect to be treated as equals to a
domestic lender. The quality of the courts varies, with federal commercial courts usually
being of a relatively higher caliber.
c. Do insolvency proceedings contemplate reorganization, or merely liquidation? Is an
asset-based lender’s lien recognized in an insolvency proceeding? Is there a stay or
moratorium on the exercise by an asset-based lender of its remedies? Is the
borrower permitted to use the lender’s collateral during the insolvency proceeding,
and if so, is the lender compensated? How do companies finance themselves during
an insolvency proceeding? What are potential theories for the insolvency official or
other creditors to seek to void or invalidate the lien or claim of an asset-based
Argentine insolvency law contemplates both reorganization (concurso) and liquidation
(quiebra). Both of these proceedings will recognize an asset-based lender’s lien.
In a reorganization preceeding the debtor will continue to operate and is entitled to post-
petition financing. Argentine insolvency law does not afford special priorities to post-petition
lenders. As a result, most of this type of financing is based on rescheduling existing debt or
obtaining judicial consent to additional secured lending. No stay or moratorium applies to
an asset-based lender’s exercise of its remedies over a secured asset. The exercise of
remedies is only conditioned on the lender’s tender and allowance of its claim in the
insolvency proceeding. Collateral used by the debtor during a insolvency proceeding does
not give rise to any specific obligation to compensate the creditor.
Claims of asset-based lenders may be set aside if the trustee can show that the creditor
knew or should have known of the debtor’s insolvency at the time of creating the security
interest. A lien may be attacked if given to secure an antecedent debt any time during the
two years prior to the debtor’s filing for insolvency relief.
d. What claims of other creditors (e.g., costs of insolvency, fees and expenses of
insolvency administrators, taxes, employees, landlords, environmental claims,
suppliers, unsecured creditors) may have priority over the claims of an asset-based
lender in an insolvency proceeding? Does the law provide for a carve-out from the
lender’s collateral in favor of other creditors?
In the insolvency context, certain claims, including claims for administrative fees, taxes and
labor claims are entitled to a mandatory preference with respect to unsecured assets. This
however, does not affect secured lenders, including asset-based lenders.
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7. Recent developments. Are there any recent or pending developments in the legal or
business environment that affect asset-based lending?
In general terms, there are no recent or pending developments that affect asset-based lending.
Nonetheless, amendments to the rules applicable to certain financial trusts and mutual funds (e.g.
special purpose vehicles used to neutralize tax effects in the securitization of accounts receivables)
may practically affect asset-based lending. A recent amendment (decree 1207/08) disallows the
deduction of distributed profits, thereby eliminating the formerly transparent nature of those special
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The above has been provided as general information prepared by professionals with regard to the subject
matter. This document only refers to the applicable law of the jurisdiction referenced herein. While every
effort has been made to ensure accuracy, no responsibility can be accepted for errors or omissions. The
information contained in this document should not be relied on as legal, accounting or professional advice
Prepared by Negri & Teijeiro Abogados
Meritas Member Firm – Argentina
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