Article 217 of the Spanish Companies Act provides for, by default, the unpaid nature of the post of director, even though it also allows for the contrary provided that the company bylaws contain a provision that states the contrary.
And in the case of being remunerated, the bylaws must contain the remuneration system and the items of remuneration. Furthermore, the general meeting must establish the maximum annual remuneration of all of the directors as a whole.
However, doubt arises in cases where the post is not remunerated, (either because the bylaws do not state anything in this respect, or because it is expressly indicated therein). Additionally, in the bylaws themselves the possibility for remunerations for directors is also established as a consequence of services other than those which correspond to the office, as with the rendering of employment services, and particularly, those of top management services.
The Directorate General of Legal Security and Public Trust – DGLSPT (Dirección General de Seguridad Jurídica y Fe Pública-DGSJFP) passed a resolution on 10th May 2023 which clarifies whether a provision of the bylaws is lawful and is registrable with the Commercial Registry. The provision establishes, on one hand, that the post is of an unpaid nature and, on the other hand, the possibility that the director may perform services of an employment nature for the company. This is the factual situation of the case in question, in which the bylaws of a recently incorporated company provided for the unpaid nature of the post of director, but at the same time also allowed possible civil or employment relationships between the company and the director.
The Registrar of the Commercial Registry suspended the registration on the understanding that the accumulation of relationships and remunerations is conditioned to the director carrying out, as a consequence of contracts other than his relationship with the company as a director, an activity other than that which corresponds to him as such, since otherwise the employment relationship would be subsumed within the relationship of provision of services as a director, with the ensuing duality being incompatible. The Registrar held that the bylaws should have expressly excluded the top management employment services.
The DGLSPT rejected the interpretation of the Registrar. In the first place, it recalls that when there is no provision in the bylaws for the remuneration of the directors, any civil or employment contract that under the appearance of a civil or employment relationship masks a remuneration for the exercise of the post of director is unlawful, since both are incompatible scenarios and must be separated; that is, the remuneration as director and the remuneration for functions unrelated thereto. Nevertheless, this does not prevent the bylaws for providing, in addition to the unpaid nature of the post, that the director and the company may enter into civil or employment contracts which provide cover to the rendering of services which are different from the functions of the management and representation of the company, which correspond to the director. These contracts must be subject to the approval of the general meeting (article 220 of the Spanish Companies Act). This provision in the bylaws must not in principle be interpreted as an indication of “extra-statutory remuneration” of the director, but rather that it requires that its wording in the bylaws be undetermined or that it is possible to infer from it that remuneration for the exercise of the post of director exists.
Eduardo Vilá
Vilá Abogados
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9th June 2023
