Succession Planning in Family Businesses in Argentina
Family businesses are a crucial part of society and the economy in Argentina and around the world. Despite the lack of specific legislation for family businesses in Argentina, the Civil and Commercial Code of the Nation provides various modifications to the current regime in terms of contracts, companies, family law, and inheritance. These modifications result in a legal framework that is very positive for the better functioning and continuity of the family business.
Family Protocol
Most companies are owned by a group of people united by conjugal ties and/or kinship. Some of them are also involved in their management and/or work under a relationship of dependence on their owner. Family businesses have numerous advantages, such as agility, flexibility, commitment, and internal empathy with their customers. However, they also face unique challenges related to the sensitivity of the links between the people who make them up. As well as the different vicissitudes that befall their members.
An adequate legal design for many of the issues of family businesses is vital for the maintenance of their value and their transmission. Although there is no specific legal regulation for family businesses in Argentina. There are scattered regulations in the Civil and Commercial Code of the Nation and its complementary norms, in labor legislation, etc.
Simplified Corporations
The legal problems of the family business include a multiplicity of issues, and it can be reflected in different legal instruments. The Argentine Civil and Commercial Code provides legal solutions that allow family businesses to avoid conflicts and achieve better patrimonial and succession programming, such as the future inheritance agreement, the reduction of the legitimate inheritance, the value of the family protocol as a contract, and the option for marriage with separation of assets, among other measures.
The family protocol is a document in which a family that owns a company puts in writing the rules that will govern the relationship between the company and the family in the present and the future. It serves as an agreement of moral and legal wills, thus resulting in a legal framework adapted to the needs of that company and its partners. It is an important tool that allows the company to be safeguarded for both current members and future generations.
Contracts
The simplified joint stock company (SAS) is the preferred corporate legal vehicle for the legal form of organization and management of the family business in Argentina. Due to its great flexibility and the possibility for the parties to design its structure and operation, the SAS can be set up simply, quickly, and saving on costs and procedures.
The Covenant on Future Inheritance is allowed when it comes to a family business. It is one of the most significant modifications that allow for the best scheduling of succession in the company’s ownership. Article 1010 of the New Code provides for the validity of the same, even in the case of being made between the future deceased and his or her spouse, provided that they do not affect the legitimacy of the children, the rights of the spouse, or third parties. Thus, avoiding agreements aimed at the commission of fraud or that seriously affect the assets of the succession.
In summary, the need to facilitate succession in the family business is met by these legal instruments, which allow for the best scheduling of succession in the company’s ownership and provide for the better functioning and continuity of the family business.