Resolution of the General Directorate of Legal Security and Public Faith of October 22, 2020.
In the Resolution of the DGSJFP (formerly DGRN) of October 22, 2020, that governing body has studied a case in which a limited company with an administrative body composed of two joint administrators, when one of them died, the surviving administrator proceeded to convene a meeting in whose agenda was included the modification of the form of the administrative body, going from two joint administrators to a single administrator, with the surviving joint administrator becoming the single administrator.
When the public deed formalizing these agreements was submitted for registration with the Mercantile Registry, it was rejected. The reasons for this decision were based on the literal wording of Article 171 of the Capital Companies Law, which states:
“Article 171. Call for meetings in special cases.
In the event of the death or removal of the sole administrator, all joint administrators, any of the joint administrators, or the majority of the members of the board of directors, without there being any substitutes, any partner may request the Judicial Secretary and the Commercial Registrar of the company's registered office to convene a general meeting for the appointment of the administrators.
Furthermore, any of the directors who remain in office may convene the general meeting for that sole purpose.”
Taking into account the literal meaning of the last paragraph of the aforementioned article, the Registrar considered that in the event of a meeting called by the surviving joint administrator, the agenda of the meeting called should be limited exclusively to appointing an administrator to replace the deceased, without the meeting being able to address any other issue, from which it follows that if the company intended to modify the structure of that administrative body, it should, subsequently, call a new meeting for that purpose.
Faced with this strict stance of the Registrar, the notary authorizing the unregistered deed argued, among other things, in defense of the legality of the agreements adopted, that the general meeting is the competent body to appoint and dismiss the administrators as well as to modify the form of organization of the company's administration and that in the case under study, the notice of the meeting contemplated, alternatively, both the replacement of the deceased joint administrator and the modification of the system by changing to a sole administrator, so that the right of information of the partners was preserved by including the agreement adopted in the agenda of the notice.
The DGSJFP resolution opted to uphold the appeal and revoke the Registry's resolution, accepting the registration of the agreements adopted.
In it, it states that “(…) the validity of the agreements that the general meeting may adopt within the scope of its powers is conditioned not only on them having been adopted by the legally or statutorily required majority, but, as a prior requirement, on the valid constitution of the meeting itself, which requires its prior convocation (cf. article 174 of the Capital Companies Law) including the agenda (…)” to later argue that “This requirement fulfills the dual purpose of providing the partners with full knowledge of the matters on which they are called to vote, allowing them to inform themselves and reflect on the meaning of their vote, as well as decide on the advisability of attending or not attending the meeting, and guaranteeing them, on the other hand, that no decision may be taken on matters about which it was not foreseen to deliberate or adopt any agreement (…)”.
Finally, and to support the decision adopted, it argues that “The fact that any of the directors who remain in office can convene the general meeting for the appointment of directors, even without it being on the agenda, for that sole purpose (in order to avoid paralyzing the company), so that once the vacancy of the deceased director is filled they can then convene a broader agenda in accordance with the general rules, should not prevent, by complying with the general requirements for convening and respecting the right to information through the setting of the agenda, the change in the structure of the administrative body in favor of the system of a single director, when what is intended is precisely not to fill the vacancy.”
The decision by the DGSJFP (Directorate General for Legal Security and Public Function) seems entirely reasonable, allowing a company to choose in a single meeting between replacing a deceased joint administrator or appointing a sole administrator (provided this is included on the meeting's agenda). This avoids the need for the company to convene two separate meetings: one to appoint a temporary joint administrator and another to change the organizational structure of the board of directors. The resolution appears to align with the growing trend toward simplifying corporate governance by eliminating superfluous procedures that serve no purpose and can only be justified through a strict interpretation of corporate law.
What seems doubtful is that in that meeting convened under the provisions of article 171 of the Capital Companies Law, issues other than the appointment of directors can be included.
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A graduate in Law from the University of Barcelona and with a Master's degree in Business Law from the same university, he worked at the law firm Alonso-Cuevillas Advocats and later joined the Civil and Commercial Litigation department of the law firm Bufete Bueno Bartrina. He then joined the team at the firm Casamitjana-Cuyas-Morales, and subsequently continued his career at Bufete Herrera Advocats, in the Commercial and Litigation department. In November 2015, he joined aÀmbitJurídic i Econòmic, SLP, as a professional partner, to head the Commercial and Insolvency practice.
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