Article 176 of the Spanish Capital Companies Act (hereinafter “LSC”) establishes that “Between the call and the date set for holding the meeting there must be a term of at least one month in the case of joint stock companies and fifteen days in the case of limited liability companies.”

The aforementioned article, in regulating the advance notice required for calling a general meeting, sets a temporary margin aimed at allowing the shareholder to obtain the relevant information regarding the questions regarding which he is being called upon to vote and to carefully reflect on the contents of the vote to be issued.

The relevance of said term is that in accordance with the exception of the exception established in article 204.3 of LSC, the infraction regarding the advance notice of the call of the general meeting set forth in the cited article 176 of LSC may carry with it the challenge of the company resolutions made during the meeting in question and consequently their non-registration in the corresponding commercial registry.

Forms of call

This said, in accordance with article 173 of LSC, the general meeting may be called in various different forms, namely.

I. By means of announcement:

    • an announcement published on the website of the Company (if this exists, and is duly registered and published under the terms of article 11 bis of LSC)
    • or in the absence of a website duly registered and published, an announcement published in the Official Commercial Registry Gazette (Boletín Oficial del Registro Mercantil – BORME) and in one of the newspapers with a large circulation in the province corresponding to the corporate domicile of the Company.

II. Alternatively, via individual written communication instead of the announcement, where permitted by the company by laws:

    • individual and written communication which ensures the receipt of the announcement by all of the shareholders at the address designated for such purposes or the address which is reflected in the documentation of the company (furthermore, in the case of shareholders living abroad, the bylaws may set forth that they may only be individually called if they have designated an address on national territory for such notifications).

III. Finally, article 173.3º of LSC leaves the door open for the by-laws to establish additional advertising mechanisms to those set forth in the law and impose the digital administration of a warning system for shareholders regarding the announcement of meeting summons inserted on the company website.

The calculation of the term, in each case

I. Call by announcement. When the bylaws of the company are silent on this issue and the general meeting must be called by announcement, the term of notice of the call must be calculated as from the date of publication of the announcement, but not the day of holding the meeting, which must be excluded.

By way of an example, the resolutions made on 6th October by the general meeting of the company shall not be valid if the call had been published via an announcement inserted in a major newspaper on 21st September and an announcement published in the Official Commercial Registry Gazette (BORME) on 22nd September, given that in such case the advance notice shall be 14 days, the days counted from 22nd September – day of publication of the call in the Official Commercial Registry Gazette (BORME) – to the 5th October, inclusively.

II. Call by individual written communication. On the other hand, when the call of the general meeting is carried out by individual written communication to each shareholder, section 2 of article 176 of the LSC provides that “the term shall be calculated as from the date upon which the announcement had been sent to the last of them.”

By way of an example, if the call of the general meeting is sent by registered letter with acknowledgement of receipt addressed to each and every one of the shareholders on the 12th June and the meeting is held on 27th June, the call of the meeting shall be valid, as well as the resolutions passed in the meeting, regardless of the date of reception of said letters by their recipients.

III. Additional publicity mechanisms. idem.

Criterion reinforced by doctrine and case law

The criterion currently reinforced by doctrine and case law is that the calculation of the term should be carried out taking into account the first day as the day of the publications or sending of the call (not the date of reception by their recipients), excluding the day of the meeting.

This has been confirmed by the General Directorate of Registries and Notaries (Dirección General de los Registros y del Notariado – DGRN) by means of a resolution dated 5th July 2016, published in the Official State Gazette (Boletín Oficial del Estado – BOE) of 12th August, in the appeal filed against the rejection on the part of the registrar of the commercial registry and the registry of moveable assets VII of Madrid to register a certain public deed bringing into public the corporate resolutions of a company (BOE-A-2016-7820).

In said resolution, as in many earlier resolutions, the DGRN states that its initial doctrine in interpreting article 97 of the repealed Joint Stock Companies Act (of subsidiary application to limited liability companies), should not apply article 5 of the Civil Code, but a term of at least 15 days should exist between the moment of publication of the announcement and the meeting, so that neither of the dates (initial day and final day) should be included in the calculation. High Court judgements of 28th March 1968 and 5th March 1987 use the same interpretation.

However, subsequently, the posture of the High Court changed in two judgements of 29th March and 21st November 1994, which held that the calculation of the term should be carried out taking into account as the first day the day corresponding to the publication of the call (or sending of the individual call to each shareholder), excluding the day of the meeting.

This case law posture was subsequently adopted by the DGRN in its resolutions of 10th July and 6th November 1995, which rectify the interpretations which were officially sustained, likewise regarding the regulation of article 46.3 of the repealed Limited Liability Companies Act, precedent to article 176 of the LSC, and applicable to the cases of individual call to each shareholder.

Comment

In light of the above, it follows that by the express will of the legislators, when the administrative body of the company calls by way of an announcement published on the website of the company or in the BORME or in a major newspaper, the shareholders may know of the existence of the call as from the date of publication, and as from this day the term of advance notice as required by the Law may be calculated.

However, paradoxically, when the call is carried out by way of individual call to each shareholder, the shareholder shall not know of the existence of the call until the receipt of the communication, even if the calculation of the term of advance notice had already begun as from the date of sending of the call by the administrative body to the last of the shareholders. Therefore, in most cases, the shareholder to whom the announcement is communicated individually shall have less time to exercise his rights as granted by the Law, such as the right to information or the right to adopt and prepare his representation.

Given all of the above, the form of call which seems to provide the highest guarantee of the rights of the shareholder is currently the publication of the announcement on the website of the company, accompanied by a provision in the bylaws which imposes upon the company the digital administration of a warning system for the shareholders regarding announcements inserted on the website of the company.

 

Carla Villavicencio

Vilá Abogados

 

For more information, please contact:

va@vila.es

 

23rd September 2016