M&A Transactions in Argentina. Choosing between an Asset Deal and a Share Deal

M&A Transactions in Argentina. Choosing between an Asset Deal and a Share Deal

Dolores M. Gallo

1.- Introduction

Argentina’s evolving economic landscape is expected to drive an increase in M&A activity. After years of stagnation, the new administration has introduced pro-business reforms to stabilize inflation, attract foreign investment, and reduce regulatory barriers. Sectors such as energy, technology, and infrastructure are seeing renewed interest, fueling deal-making opportunities. In this context, it is crucial to understand the most common structures for investing in the country.

When structuring an M&A transaction, two main approaches exist: a share deal and an asset deal. Each carries distinct legal, tax, and operational implications. This article provides a brief overview of these transaction structures and their key differences.

2.- What is a Share Deal?

In a share deal, the buyer acquires shares in the target company, gaining control over the entity. The company maintains ownership of its assets and liabilities, which are indirectly acquired by the buyer.

3.- What is an Asset Deal?

In an asset deal, the buyer acquires some or all of a company’s assets. Transactions involving an operational business unit are governed by Law No. 11,687 as a ‘transfer of an ongoing concern’ (fondo de comercio), which establishes specific procedures1

1 Law on the Transfer of Commercial and Industrial Establishments (“Law No. 11,867”) –, published in the Official Gazette of the Argentine Republic on August 20, 1934, effective Aug. 21, 1934. . However, it is possible to structure the transfer outside this framework. A key distinction between these approaches lies in the level of protection against liabilities, which is higher when the prescribed procedure is followed.

4.- Key Differences

Key differences between these structures should be carefully evaluated when determining the most suitable approach for a given transaction.

a) Legal framework

In Argentina, share purchase agreements are not subject to a specific regulatory framework, allowing parties to freely negotiate their terms. Typically, the transaction involves a letter of intent, due diligence, and the execution of the acquisition agreement. Moreover, unless the target company is a limited liability company, no registration with the Public Registry is required.

In contrast, asset deals structured under the ongoing concern process require following a complex process involving multiple formalities, including publications and tax authority reporting. Creditors may object to the transfer until paid or secured. Completion can take months or over a year. Conversely, if the asset deal is structured outside the ongoing concern framework, a simple agreement based on general contract principles is sufficient, avoiding these formalities.

b) Liabilities

A key distinction between the two structures is liability exposure. In a share deal, since the underlying business remains owned by the target company, the buyer indirectly inherits all existing and potential liabilities, including hidden ones. Argentine courts generally uphold the principle that unless expressly agreed otherwise, the seller is not liable for undisclosed liabilities.2 To mitigate this risk, buyers typically conduct a thorough due diligence and seek a comprehensive set of warranties and indemnities to protect against both identified risks and any unknown liabilities. In some cases, a portion of the purchase price may be deferred as a safeguard against future claims.

By contrast, in an asset deal structured as ongoing concern transfer, the buyer is generally protected against the seller’s business-related liabilities, except for unpaid taxes, labor obligations, and social security liabilities. However, if the transaction does not follow the ongoing concern procedure, the buyer may be jointly and severally liable with the seller for any business-related obligations up to the purchase price.3 Consequently, the allocation of risk will depend on contractual terms.

Due to exposure to labor and tax liabilities, parties often opt to structure asset deals outside the ongoing concern framework, as these liabilities are among the most significant concerns when acquiring a business in Argentina. Additionally, the process is highly formalistic and time-consuming. If core assets can be transferred individually with effective contractual safeguards, structuring the deal outside the ongoing concern framework may be preferable.

c) Operational issues

From an operational perspective, aside from the challenges that may arise during negotiations, share deals tend to be relatively straightforward since ownership changes at the corporate level. There is no need to transfer individual assets or contracts, unless change-of-control clauses apply. Furthermore, no labor formalities or consents are required, as there is no change of employer.

On the other hand, asset deals tend to be more complex and time-consuming. Contracts are not automatically transferred, and counter-party consent may be required. Additionally, the transfer of permits and certificates may require regulatory approval. Separately, real estate must be transferred individually through a public deed and registered with the Land Registry Office. While employees’ written consent is not required, adverse changes in employment conditions may lead to contract termination claims.

d) Tax burden

Generally, share deals are more tax-efficient. Sales by resident individuals are taxed at 15% while foreign sellers are taxed at 13.5% on the gross selling price or 15% on the net gain. Local companies face a tax rate of 25%-35%, depending on their annual taxable profits.

By contrast, asset deals tend to be more expensive. Income tax rates can reach up to 35% of the agreed price, and asset transfers may be subject to multiple taxes, depending on asset type and jurisdiction.

5.- Key takeaways

Each transaction structure presents advantages, risks, and complexities. Generally, share deals are easier to execute but carry the risk of hidden liabilities. Transfers of an ongoing concern are complex and costly, but buyers gain protection against business liabilities if legal procedures are followed.

Choosing the optimal structure requires analyzing the target business and the goals of both parties. Cost considerations and transaction timelines also influence decision-making. Proper planning and expert legal guidance—particularly from

local counsel familiar with Argentina’s regulatory landscape—are essential to ensuring a successful transaction and protecting both parties’ interests.

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1 Law on the Transfer of Commercial and Industrial Establishments (“Law No. 11,867”) –, published in the Official Gazette of the Argentine Republic on August 20, 1934, effective Aug. 21, 1934.

2 CNCom., Chamber C, “Rocha, Ramón v. Puente, Osvaldo,” issued on 06/14/1988, published in Revista del Derecho Comercial y las Obligaciones, vol. 1989, p. 829. In this precedent, it was established that the seller of a share package only transfers shareholder rights and is not liable for hidden liabilities or other irregularities in the company’s assets, unless expressly agreed otherwise. The Argentine Supreme Court ruled reaffirmed in “Pocoví v. Brennan” issued on 05/24/2011 that the seller of a controlling stake is not automatically liable for the target company’s undisclosed liabilities unless contractually agreed otherwise. Ruling and Opinion of the Attorney General of the Nation available at https://sjconsulta.csjn.gov.ar/sjconsulta/documentos/verDocumentoByIdLinksJSP.html?idDocumento=51091&cache=1740414845321; https://www.mpf.gob.ar/dictamenes/2010/beiro/8-agosto/pocovi_osmar_miguel_p_438_l_xlv.pdf

3 Law 11,687, supra note 1, Section 11.