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According to article 166 of the Capital Companies Act (Ley de Sociedades de Capital – “LSC”), the faculty for calling the general meeting is legally, and exclusively reserved for the company administrators, except for those companies in the liquidation phase of insolvency proceedings.
In this article, we shall deal with the following issue:
A joint-stock company published the announcement of a call of a general meeting in the Spanish Official State Gazette (Boletín Oficial del Estado – BOE). Said call was carried out by way of an agreement made by the board of directors. Subsequently, a minority shareholder with more than 5% of the share capital requests a supplement to the call of the general meeting regarding certain points of the meeting agenda, so in this case does the supplement to the call of the general meeting require the ratification of the board of directors?
The General Directorate of Registries and Notaries (Dirección General de los Registros y el Notariado – DGRN) deals with this question in its decision of 31st January 2018. The DGRN considers it necessary to analyse whether in the scope of a joint-stock company whose general meeting has already been called, the request for the supplement to the call as referred to in article 172 of the LSC requires the prior agreement of the Board. The points analysed are as follows:
The authority to call the general meeting legally corresponds exclusively to the administrators of the company, in accordance with article 166 of the LSC (or liquidators where the company is under insolvency proceedings).
– The authority to call the general shareholders meeting and the formulation of the agenda and the proposal of agreements cannot be delegated by the board.
– When the law recognises that said competence corresponds to the administrators it does so for all of the members of the administration body as a whole, and not “uti singuli” (individually) for each of the members. Therefore, if the company has opted for a board of directors structure, it is this collective body to which the decision to carry out the call for a general meeting corresponds.
– The validity of the agreements that may be adopted by the general meeting within the scope of its competences is conditioned not only to them having been adopted by a legal majority or the statutorily demandable majority, but also, as a precondition, to the valid constitution of the meeting itself, which requires the prior meeting call, including the meeting agenda.
– If the authority or duty to call the general meetings of the company corresponds to the board of directors, in cases where the board does not do so, the will to call the meeting cannot be substituted by the president or one of its members, only by a judicial summons. The lack of validity of the prior agreement of the board of directors regarding the summons of the meeting, or the lack thereof, is a cause to invalidate the summons already executed and the agreements adopted therein.
– This monopoly of the administration body extends to the premise in which a request for a supplement to the call of the meeting as referred to in article 172 of the LSC arises. The resolution of the same entity, the DGRN, of 1st October 2013, in a case with a certain similarity to the matter at hand, set the following doctrine: “the law grants the administrative body with the right to monopolise the execution of the competence of the meeting call, even in cases where such competence constitutes an obligation, rather than a faculty, to respond to a request formulated by shareholders representing more than 5% of share capital”. Thus, even in this case, the individual action of a member of said organ is not appropriate, instead a collective decision adopted in the form and with the majorities established statutorily is necessary.
In conclusion, if, as a consequence of the non-fulfilment of the legally established requirements for the call of the general meeting or the agreements adopted therein prove to be flawed, the registrar is obliged to reject the requested registration.
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23rd February 2018