The Argentine in the Twentieth Century

by Alberto B. Martínez; Maurice Lewandowski

constituted, the founders, administrators and representatives are, conjointly and severally and without limit, required to restore any sums they may have received for shares issued, and also to pay the debts of administration and the losses that may be incurred by third parties by the failure to fulfil obligations contracted in the name of the company.

Once a limited company is constituted, its administrators contract no common or personal responsibility for the engagements of the company, but they are responsible, personally and conjointly, to the company and to third parties, for the failure of execution or the improper employment of their mandate, and also for the violation of laws, regulations, and statutes.

All companies are obliged to appoint at least once a year a censor chosen by the general meeting, who directly represents the shareholders, and who supervises the proper conduct of the company, and the accomplishment of the legal formalities which concern it.

The Commercial Code contains many other enactments which tend to ensure the correct and legal constitution, as well as the proper conduct, of limited companies: but those we have cited will suffice to show that the law-maker has striven to use the utmost foresight, with the object of guaranteeing the interests and the capital confided to such companies.

Despite this prudence and foresight, we are forced to recognise that the institution of such companies, which constitutes a powerful economic lever when they are correctly administered and established with a view to commercial and industrial utility, is at present discredited on account of the abuses committed in its name at the time of the great crisis of 1890.

The institution of limited companies is so intimately connected with the financial disasters of that period that its history is to a certain extent the history of speculation, and it has suffered all the vicissitudes of speculation.

In 1882, when Buenos Ayres was federalised and became the permanent capital of the Republic; when public tranquillity was confirmed, with the conviction that it would be long before it was disturbed; when the public expenditure

was increased, thanks to the employment of credit and the issue of paper currency; when, in short, the prospect of universal prosperity had awakened energy and initiative; there began to pass through the country a light breeze of speculation, which was soon to become a tempest; and the limited company, which until that time had existed in a modest, inconspicuous degree, quickly assumed a greater importance, with a more definite, more concrete form.

The companies floated in 1882 and in the three following years were not very numerous, and their capital was insignificant as compared with the capital of those that followed: yet a very marked impulse towards progress was already perceptible, as much in numbers as in capital. Thus the sum of 10 million piastres, the amount of the nominal capital declared by the limited companies in 1882, rose to nearly 13 millions in 1885.

But as the fever of speculation and affairs grew higher and ever higher, thanks to the aid of the credit too liberally granted by the banks, whether mortgage or money-lending banks or otherwise, and as at the same time all the paper thrown upon the market was immediately absorbed, to the great profit of those who issued it, the limited company followed the upward march, although this movement did not always correspond with the idea of progress. Thus we see with surprise that from 13 millions of piastres (paper) in 1885, the capital of the companies rises to 34 millions in 1886, to 95 millions in 1887, to 196 millions in 1888, and in 1889 to 378 millions; and in these two latter years the fever has reached the period of greatest danger.