New CNV Corporate Governance Code Released in Argentina

Today, RG N° 797/2019 was published in the Boletín Oficial, through which the new Corporate Governance Code by the Comisión Nacional de Valores (CNV, the Argentine capital market regulator), was approved.  It is the first update of the Code since 2012. RG N° 797/2019 will enter into force from the day after its publication in the Boletín Oficial and the provisions of the updated code will be applicable for the fiscal years that finish December 31st of 2019, accepting its previous adoption for companies whose fiscal year ends before.

The Code is divided into three chapters. The first chapter, ‘Introduction to Corporate Governance’, gives a definition of corporate governance and focuses on the role of the board of directors. The second chapter, ‘Corporate Governance Code’, is methodological and develops and explains the structure, scope, reporting, monitoring and history of the Code, and international best practices. Lastly, chapter three, ‘Principles, Practices and Guidance’, is where the corporate governance principles, practices and guidance are developed. The principles are general concepts that underlie all good corporate governance, which guide and inspire the recommended practices; the practices are concrete recommendations that are considered as “best practices”, and lastly the guidelines are an explanatory framework of the logic of the recommended practices.

Since 2017, Cefeidas Group has worked with the CNV Corporate Governance Team in developing the new version of the Code, when the process of updating it began. Cefeidas Group advised the CNV in the initial process of analysis, in the drafting of the Code and lastly in responding to comments that derived from the public consultation process, which started in December of 2018 with the approval of CNV General Resolution N°778/18 and culminated in January of 2019. The vast experience in corporate governance of the Cefeidas Corporate Governance Team was key for the success of this project.

The updated Code has been designed to reflect the most recent update of the OECD/G20 Principles of Corporate Governance (in 2015), which are used as international standards best practices.

The provisions of the Code are applicable to all entities authorized to publicly trade either their shares (listed companies) or their debt, notwithstanding the exceptions of CNV RG N° 606/125. However, the Code also seeks to encourage non-listed companies to introduce or improve their good governance practices, and serve as an inspiration that generates a progressive advance in their practices. The updated version of the Code adopts the ‘apply or not, explain’ system, in which the implementation of a practice or a good explanation are both considered as ‘comply’. Therefore, this gives more flexibility and proportionality, and thus freedom for companies to not adopt a certain practice, as long as they explain why they do not do so.

The reporting system has been modified with respect to the previous version of the Code, in which companies had to respond to whether they complied or not with the practices and give explanations via a questionnaire. In the updated version of the Code, companies shall prepare a report in which, through the ‘apply or not, explain’ system they should: i) inform if the recommended principles and practices are applied and explain how so, or; ii) if such practices are not applied, explain: a) how they comply with the principle through the application of another practice, or b) how they consider to incorporate in the future the recommended practice or another one which complies with the principle.

Santiago Chaher, Managing Director of Cefeidas Group, highlighted that “the new Code is a necessary step towards a modern and transparent capital market. Under the principles of flexibility and proportionality, companies are able to give the necessary information to investors and stakeholders about the key areas of corporate governance, which will not only serve to mitigate risks but also improve the decision making process.”

Sobre Cefeidas Group:

Cefeidas Group is an international advisory firm that focuses on research, assessments and implementation programs in both corporate governance and compliance. Based on our deep understanding of the political and regulatory environment, and corporate governance structures, we deliver objective, multi-disciplined, sophisticated, unbiased, and informed analyses to help our clients develop the best possible strategy to advance their goals. Our assessments and strategic advice help turn uncertainty into calculated risk that can be mitigated through effective strategies, policies and practices. We provide close attention to our clients, delivering concrete, high quality answers to their complex matters in a concise and timely manner. We offer efficient and effective advisory services to family owned companies, corporations, financial institutions, state owned enterprises and governments from our offices in Argentina to the Latin America & Caribbean region. For more information, please follow the link.