Shareholder and other third party liability in bankruptcy cases in Argentina 



In Argentina, bankruptcy proceedings are governed by Law No. 24,522, as amended (the Argentine Bankruptcy Law or ABL). Immediately after the adjudication of bankruptcy (proceedings that involve the dissolution and liquidation of the debtor's business), the court appoints a receiver (síndico), who takes possession on all the assets of the debtor and succeeds the debtor in the administration and disposition of the entire debtor’s assets and controls and manages the bankruptcy proceedings and the liquidation. 

Under exceptional circumstances a debtor’s bankruptcy adjudication may be extended to a debtor’s shareholders with limited liability and other third parties.

Pursuant to §161 of the ABL, the bankruptcy adjudication may be extended to the following. First, any person who caused the debtor to conduct activities for such person’s sole benefit and managed the debtor’s assets as if they were the property of such person in fraud of the debtor’s creditors, provided that such person: (i) had an active role in the debtor’s bankruptcy; (ii) showed willful misconduct; (iii) had conflicting interests; (iv) caused an actual diversion of the debtor’s assets for its own benefit; and (v) caused fraud against the debtor’s creditors. 

Second, any controlling shareholder of the debtor who unlawfully diverts the debtor’s corporate interest, and subjects the debtor to a common management with the purpose of pursuing such controlling, or such controlling entity corporate group’s, benefit. In order for the bankruptcy to be extended in this case, there must be evidence that the controlling shareholders, through a scheme of unified or single management, had forced the debtor to benefit them or their corporate group. Belonging to a corporate group alone is not sufficient to subject the group entities to bankruptcy extension. For these purposes, a shareholder is deemed to control the debtor when, directly or indirectly, individually or acting jointly with other shareholders, it holds interest in the debtor granting the necessary votes to control the debtor’s shareholders resolutions. Certain scholars hold that ‘control’ also includes any dominant influence which, through other means, determines the actions of the debtor. The doctrine of disregard of the corporate entity has only been used exceptionally and for the purpose of avoiding fraud to creditors and other parties.

Finally, any person whose assets and liabilities are commingled with those of the debtor in such a way that makes it impossible to identify the owner or holder thereof.

The bankruptcy adjudication extension may be requested by the receiver or any creditor. The petition must be filed within six months from the filing date of the receiver’s general report (which is filed within the 30 days following the elapsed term for filing proof of claims), provided that under certain circumstances this term may be extended. 

The effect of the bankruptcy adjudication extension is that the person is also adjudicated bankrupt and subject to the bankruptcy proceedings. To the extent that the assets and liabilities of the debtor and such person are commingled, the court will order that the estates of the debtor and such other persons will be treated as a single estate, thus allowing the creditors of each such person to collect pari pasu from the proceeds of such single estate. In all other cases, each of the debtor’s and such other person’s estate will be treated separately, thus allowing the creditors of each of the debtor and such person to collect first from the proceeds of the estate of the person who is its debtor pari pasu with all other creditors of the same debtor, and to collect any remaining balance pending after full liquidation of its debtor’s assets from the proceeds of the estates of the other persons, but only to the extent that the claims of such person’s original creditors have been satisfied first. 

In addition, pursuant to §173 of the ABL, the following third parties may be held liable for any damages arising from the debtor’s bankruptcy. First, the members of the board of directors and representatives that willfully provoked, facilitated, allowed or aggravated the debtor’s economic and financial situation or its insolvency. Certain scholars have concluded that any express decision or omission of the directors that permit the continuation of the insolvent debtor’s operations without adopting any measures directed to address this situation, may result in corporate liability under the Law No. 19,550, as amended (the Argentine Business Companies Law or BCL) general grounds for directors’ liability. Second, any third party (including the shareholders) who willfully participated in acts leading to the depletion of the debtor’s assets or to unduly increase the debtor’s liabilities (the so-called ‘exaggeration’ of the debtor’s liabilities), before or after the adjudication of bankruptcy.

Liability extends to all such acts carried out up to one year prior to the date determined by the bankruptcy court as the date on which the debtor was first unable to meet its payment obligations (payments cessation date), provided that the payments cessation date cannot extend beyond the two years immediately preceding the date of the adjudication of bankruptcy. Scholars and recent case law agree that liability requires willful misconduct. It is relevant to point out that the National Commercial Court of Appeals, Room E imposed a temporary restraining order (inhibición) on the directors of a bankrupt debtor based on the future and eventual actions that might be initiated against the debtor’s directors pursuant to the ABL.

Also in the case of bankruptcy (but not limited to a bankruptcy scenario), the debtor’s shareholders and other third parties may also be held liable based on general grounds for liability under the BCL. The shareholders are liable for the damages derived to the debtor from the shareholders’ willful misconduct (dolo) or negligence (culpa). The shareholders are jointly and severally liable for any damages derived from any act of the debtor that:(i) conceals the prosecution of interests different from the interests of the debtor; or(ii)constitutes a mere resort for breaching the law, violating principles of public policy or good faith, or frustrating third parties’ rights (‘piercing of the corporate veil doctrine’). The shareholders must refrain from voting any resolution in connection with which the shareholder has an interest conflicting with the interest of the debtor. The shareholders are liable for any damages derived from any such resolution adopted with such shareholder’s vote (where such vote is determinant to reach the required majority to adopt the shareholders resolution). 

Further, the members of the board of directors of the debtor, who are subject to the duties of loyalty and diligence, may also be held liable under the BCL. The duty of loyalty embraces the obligation to act with the correctness of an ‘honest person’ and in defence of the interests of the company. The duty of diligence requires, among other things, that the director possess certain minimum qualifications (i.e., technical knowledge and expertise). In this regard, pursuant to the Argentine Civil Code, the liability of a director is aggravated when, due to the director’s qualifications, the director is required to act with more care than an ordinary person. The directors may also be held liable for violations of the law, regulations or the company’s by-laws, and the damages resulting from fraud, abuse of powers and gross negligence.


Martín Campbell and Fernando Daniel Hernández are partners at Marval, O’Farrell & Mairal. Mr Campbell can be contacted on +54 11 4310 0100 ext. 2514 or by email: Mr Hernández can be contacted on +54 11 4310 0100 ext. 1670 or by email:

© Financier Worldwide


Martín Campbell and Fernando Daniel Hernández

Marval, O’Farrell & Mairal

©2001-2019 Financier Worldwide Ltd. All rights reserved.