Although the concept of a sole shareholder is apparently contradictory to the essence of a Company, the Spanish Capital Companies Act (“LSC”) specifically allows such a possibility in article 12 and subsequent.
The condition of sole shareholder may originate from the moment of incorporation of the company when the shares or participations of the company are held by a sole shareholder or partner; or it may be ensuing, that is to say the condition arises at a later point in the company’s life.
In both cases, as a protective measure for third parties who may contract with the company, the LSC requires that the Commercial Registry registers the identity of the sole shareholder, and that the condition of sole shareholder appears in all the documentation of the company (correspondence, invoices….).
When the condition of sole shareholder arises at a later date, the LSC requires that it is registered at the Commercial Registry within the deadline of 6 months as from the moment of occurrence. In the case of non-compliance, a liability regime is established so that the sole shareholder is obliged to respond personally and without limit to the debts that the company may have contracted as from the moment that it became a sole shareholder company.
As clarified by the Supreme Court in a recent judgement of 19th July 2016, the requisites and principles of liability for fraud or gross negligence are not applicable to said liability regime, whether contractual or non-contractual, as generally established in the Civil Code and the LSC, consequently there is no requirement for a causal relationship between the non-payment of a company debt and the non-fulfilment of the obligation to register the condition of sole shareholder with the Commercial Registry.
For this reason, it is of crucial importance to register the condition of sole shareholder, when arising at a later date, with the Commercial Registry, otherwise, and although the non-fulfilment could easily occur due to a lack of knowledge of the Law or a mere oversight, we may find ourselves obliged to respond jointly and severally to the debts contracted by the company as from the moment it became a sole shareholder company, without being able to allege a lack of causal link or the inexistence of fraud or gross negligence in our conduct.
As a mere example, in the aforementioned judgement, the sole shareholder was sentenced to respond jointly and severally to the company debts in spite of having declared being in bankruptcy proceedings, and had to face the payment of more than 2 million Euros of liabilities, which would not have happened had the condition of sole shareholder been registered at the Commercial Registry.
Ismael Marina Schneider
Vilá Abogados
For more information, please contact:
16th September 2016
