1- Overview of the Argentine rules that govern the matters dealing with the liability of directors and officers

Section 1109, Civ. Code: “Whoever does something, which for his/her fault or negligence provokes harm to someone else, is forced to repair the damage”.


People acting as directors can be sued for damages, mainly, from three sources:
a) Damages to the company that retains their services; b) c) Damages to the company’s shareholders; and Damages to third parties.


Section 59, CCA
“The administrators and representatives of the company must conduct themselves with loyalty and with the diligence of a good business man. Those who neglect their duties are jointly and severally responsible for the damages resulting from their act or omission.”

CCA, section 274 (1st. para)
“The directors are jointly and severally accountable towards the company, the shareholders and third parties, for poor performance of their role, pursuant to the criterion of section 59, as well as for violation of the law, by-laws or corporation rules and for any other damage caused by willful misconduct, abuse of attributions or gross negligence.”

Executive Order 677/01
• According to para. 27, the “corporate interest” (interés social) is to be the “guiding principle” of the administrators’ performance. Such corporate interest to be defined as the “common interest of all the shareholders”, which includes the notion of “creation of value for the shareholders”. Para. 27 also refers to the “duties of loyalty and diligence”.

Executive Order 677/01
• Section 8 lists several directives regarding the conduct of directors, referring among others to: loyalty and diligence, preeminence of the common interest of shareholders, adequate means for conducting business, internal controls, use of corporate assets, noncompetition, compensations, etc.

2 - Liability of directors and officers in other bodies of law
• Labor laws. • Environmental laws. e.g.: Section 31 of the National Environmental Policy Act (25,675) • Forex market regulations. Act 19359, section 2, f. • Tax laws. Act 11683, sections 5, 6 and 8. • Bankruptcy. Act 24522, section 173. • Customs Code, section 888.

3- Exemptions and extinctions • Individual allocation (CCA, section 274,
second para.). para.).

• Written objection (CCA, section 274, third • Approval or waive by the company
(CCA, section 275).

• Statutes of limitation.

Circumstances that do not exclude a board member’s liability
• Executive committee (CCA, section 269). • Appointment of managers (CCA, section 270). • Approval of financial statements (CCA, section 72). • Nominal holding of the position.

4- Actions by the company, its shareholders or third parties
• Corporate liability action (CCA, section 276). When the damage affects the common interest of the shareholders or the corporate assets. Removal of directors. • Individual liability action (CCA, section 279). When a shareholder considers to have suffered a damage to his/her own asets. • Third party.

5- Risk management
• • • • • • • • Appointment to specify functions. Registering the resignation / removal. Corporate and accounting books up to date. Restrictions and incompatibilities imposed by the CCA. Obtain information of other directors’ activities. Written objections. Attend board meetings. Indemnity letter or D&O insurance.


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