Scope of the provisions of Article 160 f) of the Capital Companies Law
The Resolution (hereinafter, the Resolution) issued by the Directorate General of Registries and Notaries (hereinafter, DGRN) on November 29, 2017, deals with a case in which a commercial company that was in the liquidation phase, proceeded to sell a series of properties owned by it to a third party by means of a public deed in which the liquidator expressly stated that “even though the value of the property does exceed 25% of the equity value of the company's assets, it is true that it is transferred in compliance with the obligation to liquidate 100% of said company assets, which in the liquidation phase already lack, by definition, the condition of being essential for the continuity of the activity, so the authorization of the General Meeting is not necessary for the purposes provided for in article 160 of the LSC”.
When the aforementioned deed was presented for registration, the Property Registrar refused it on the grounds that, since it was an essential asset for the purposes of the provisions of article 160 f) of the Capital Companies Law (hereinafter LSC), the General Meeting of the company should have expressly authorized that transfer.
As a result of the situation raised, in the Resolution, the DGRN rules on the necessity or not of express authorization of the General Meeting to transfer essential assets when the transferring company is in the liquidation phase, but also on the scope of the provisions of article 160 f) of the LSC.
Regarding the first issue, the DGRN upholds the appeal filed by the company transferring the properties, since although the transferred properties constituted essential assets of the company (recognized by the company in the public deed of transfer), once the company is in liquidation, its sole purpose is reduced to the sale of its assets to satisfy its liabilities and, if any, distribute the remaining company assets among its partners, the sale of the company assets being an unavoidable obligation for the liquidators. In this regard, the Resolution states, “As previously explained, Article 160(f) subjects the disposal of essential assets to the competence of the general meeting because they may have effects similar to structural modifications or equivalent to the liquidation of the company, or because they are considered to exceed the ordinary administration of the company. Therefore, such caution lacks justification in the case of disposals that are merely acts of carrying out the new corporate purpose of liquidation. It is the legal provision that, with the commencement of liquidation, not only empowers but also requires the administrative body to dispose of the assets to pay creditors and distribute the company's assets among the shareholders (see Article 387 of the Capital Companies Law, without the provisions of Article 393 of the same law constituting any impediment to this conclusion).”
Regarding the second question, for a better understanding of the issue, it is relevant to reproduce the literal wording of article 160 f) of the LSC, which reads verbatim:
“It is within the competence of the general assembly to deliberate and agree on the following matters:
- f) The acquisition, disposal, or contribution to another company of essential assets. The essential nature of the asset is presumed when the amount of the transaction exceeds twenty-five percent of the value of the assets shown in the last approved balance sheet.”
Well, with respect to the same, the DGRN points out that the fact that the rule refers to an indeterminate legal concept such as "essential assets" entails problems of interpretation, although it already warns that this interpretation cannot go against the ratio legis of the rule (to avoid the execution of corporate operations with effects similar to structural and statutory modifications without the approval of the General Meeting) nor the necessary agility that must exist in legal transactions (requiring, for example, an express pronouncement of the general meeting in all cases, in view of the possibility that the transferred asset is an essential asset), since this, among other consequences, could entail an invasion, by the general meeting, of the powers that are proper to the administrative body.
As a way to eventually dispel this conceptual uncertainty, the DGRN (Directorate General of Registries and Notaries) considers that, when granting a public deed transferring an asset whose essential nature may be questioned, but which the company involved believes is not essential, it may be advisableto require "a certificate from the company's governing body or a statement from its representative confirming that the transaction amount does not trigger the legal presumption established by the regulations (by not exceeding 25% of the value of the assets shown in the last approved balance sheet) or, if it does exceed this amount, that such assets are not essential." However, this is merely a recommendation aimed at avoiding problems during registration. "There is no obligation to provide a certificate or for the administrator to make an express statement that the asset in question is not essential. Nevertheless, the statement in the deed regarding the non-essential nature of the asset strengthens the counterparty's position with respect to its duty of care and the assessment of gross negligence." However, the omission of this express statement is not in itself a defect that prevents registration. In any case, the registrar may assess the essential nature of the asset when it is manifestly so (for example, in the case of an asset related to the corporate purpose that is clearly indispensable for its development) or when it is evident from the information available to him when assessing it (in the case that the contravention of the rule is evident from the title itself or from the entries by application of the legal presumption).
In short, when transferring an asset that may raise doubts about its possible inclusion within the category of essential assets, it may be advisable to proceed in the manner indicated by the DGRN, that is, by providing certification from the administrative body or making a statement by the same, that the asset being transferred does not exceed 25% of the value of the company's assets or, if it does exceed it, that it does not constitute an essential asset for the purposes of article 160 f) of the LSC, although, as the DGRN itself points out, that declaration will not bind the Registrar.
Do you have any questions about this topic?
Our team of expert advisors will help you resolve any issues related to our services.
Contact us now
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.
Latest posts by Andreu Pujol i Camps
(see all)
Related
