The resolution of the Directorate General of Legal Security and Public Trust – GDLSPT (Dirección General de Seguridad Jurídica y Fe Pública-DGSJFP) of 24thNovember 2022 regarding the refusal of the Registrar of the Commercial Registry of Madrid to register a public deed of capital reduction of a limited liability company was published in the Official Gazette on 2nd December 2022.
In this case, the public deed pursuant to which the limited liability company proceeded to formalise the resolution on the capital reduction due to the redemption of own membership interests was filed at the Commercial Registry. A total of 7,644 membership interests previously acquired by the company were redeemed. In the certification of the corporate resolution notarised in the public deed of capital reduction, the identity of the partner who transferred the membership interests was stated “for the appropriate purposes”.
The registrar suspended the registration for the following reason: “There is no record of the constitution of the non-disposable reserve provided for in Articles 141 and 332 of the Spanish Companies Act (“Ley de Sociedades de Capital – LSC”) which must be established as a guarantee for the company’s creditors, since the joint and several liability of article 331 of the same law cannot apply”. Given that the redemption takes place two years following the acquisition of the membership interests by the company with the consequent capital reduction, “it cannot be claimed that the transferring partner now becomes jointly and severally liable (and without even being aware of it, as she was no longer a partner at the time of the agreement for which registration is now being sought) for the company debts contracted after she ceased to be a partner (see article 231 of the LSC); and when it was possible for such acquisition to be charged to profits or available reserves and for the reasons set forth in letter d) of article 140.1 of the LSC, when the membership interests may have been acquired in order to be disposed of and when it was necessary to establish the reserve set forth in 142.2. of the LSC .
An amendment was filed in response to the registrar’s decision by way of a statement made by the notary public who granted the public deed, consisting of the following:
1) The price of acquisition of the membership interests coincided with their nominal value; and
2) The vendor is aware that she is responsible for the company debts under the terms legally set forth for this case of capital reduction and that she is aware of and consents to this public deed of capital reduction.
Following this statement, the registrar ratifies his assessment placing emphasis on the fact that the vendor assuming responsibility is now totally unrelated to the company. “From the moment in which the transfer was made, the transferor became totally unconnected from the company (she did not retain any membership interests), and the subsequent fate of the membership interests (their resale or redemption) is likewise completely unrelated, and for that matter, it is difficult for the law, in the case of the subsequent redemption, to retroactively modify the legal rules applicable to the prior transfer, and to impose upon the transferor the consequences derived from subsequent facts beyond her control (articles 9 CE and 2, 1257 and 1258 of the Spanish Civil Code)”. “We consider that for the registration of the capital reduction now carried out, the constitution of a non-disposable reserve as per article 332 of the LSC is essential, which maintains the amount of retained equity; and that such guarantee cannot be substituted by the joint and several responsibility assumed by a third party at the time of said reduction, even if such third party at some point was a partner of the company, but was not so at the time of the reduction”.
An appeal was filed against the registrar’s decision.
The Directorate General upholds the appeal and revoked the registrar’s decision based upon the following grounds:
The Directorate General considers that each one of the articles cited in the registrar’s statement affects a different premise: the first, (article 141.1) affects the reduction of capital through the redemption of membership interests, the acquisition of which does not entail the return of contributions because they were acquired for profit, and the second (article 332) affects the reduction of capital that does entail the return of contributions. Two initial consequences can be drawn from the reading of both articles: that their respective provisions refer to different cases, and that the constitution of the reserve sought by the registrar will only be mandatory when the acquisition by the company of the redeemed shares has not entailed the return of the contribution to the transferor.
With regard to the explanation of the registrar that there is only a return of contributions when the acquisition of own membership interests occurs in execution of a prior capital reduction agreement, the Directorate General does not accept that the agreement adopted is of such a nature when the redeemed membership interests are already in the equity. It confirms that the decision of 22nd May 2018 proclaimed the contrary by clearly stating that “the redemption of membership interests previously acquired by the company for a consideration is equivalent to the case of a capital reduction through the return of contributions”.
In short, precisely because the acquisition of the membership interests that were later redeemed was for a valuable consideration, the reduction carried out must be subject to the regime of those produced by the return of contributions and, consequently, observe the system of protection of the company’s creditors established in articles 331 to 333 of the LSC.
Finally, the Directorate General adds that “it should be noted that the system of redemption of own membership interests, and particularly the three-year term granted by article 342 of the Spanish Companies Act, has been the object of criticism from “lege ferenda” positions, but such opinions do not affect their validity”.
Vilá Abogados
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3rd February 2023
