Public Registry of Commerce (IGJ): Nullity of resolutions affecting gated neighborhoods

On November 18, 2021, the National Court of Appeals on Commercial Matters, Room C, issued a ruling declaring the nullity of Public Registry of Commerce (“IGJ”) General Resolutions 25/2020 and 27/2020.

By virtue of the referred resolutions, the IGJ self-attributed the power to regulate the provisions of the Argentine Civil and Commercial Code with respect to real estate complexes.

Section 2075 of the Code in force establishes that said real estate premises must adhere to the horizontal property regime, under a special category this type of property.

In turn, the IGJ, through the aforementioned general resolutions, assumed the power to regulate the provisions of the Code, and established not only a term for compliance, but also penalties for country clubs that do not comply with the deadline imposed by the agency.

In its statement of appeal, the plaintiff based its claim on two strong points.

On the one hand, it emphasized that the power to regulate laws is vested in the Executive Branch, and therefore the IGJ lacks the power to do so.

Likewise, it objected that it was protected under Article 3 of the General Corporations Law (associations in the form of  corporation), by virtue of which it had an acquired right that the IGJ could not restrict by enforcing a retroactive application of the law, as it intended to do.

The Court finally decided that the resolutions appealed were null and void from a double point of view.

First, due to the lack of competence of the issuing body, as well as an evidenced excess of regulatory power.

That is to say, not only is the power to regulate laws -in order to guarantee their enforceability- vested in the President, but also the National Constitution is clear in establishing that the regulation of a law can in no way alter the spirit of what was dictated by the legislator.

In certain cases the Executive Branch may delegate its regulatory power, but it is well known that such delegation must be supported by a prior law for said purpose.

Otherwise, if any lower administrative body could regulate laws, we would be faced with a chaotic overlapping of powers in such a sensitive matter as the creation of general binding rules.

Finally, the chamber of appeals considered it pertinent to emphasize that the regulatory power seeks to execute the law, not to dictate the law.

In this sense, no regulation may introduce modifications or add legal obligations and burdens, which is what occurred in the instant case.

The IGJ established compliance deadlines where the legislator did not, and what is more, imposed penalties for potential “non-compliance”.

The law authorizes IGJ to apply fines in the event of proven violations, not as a deterrent that compels companies to act in accordance with obligations that do not emanate from the legislative power.

Finally, the Court rightly clarifies that the decision of IGJ not to register the corporate acts of affected companies would not even constitute a penalty, but rather a breach of the registration functions under the scope of its responsibility.

This ruling is very important for gated communities and country clubs registered in the Autonomous City of Buenos Aires.

Said premises were in a state of uncertainty as to whether to comply with an extremely onerous and difficult to implement regime, or to remain in a situation of permanent registration irregularity, as they were unable to register the corporate decisions under the provisions of the rules that were finally declared null and void.

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