The resolution of the General Directorate of Registries and Notaries (Dirección General de los Registros y del Notariado – DGRN) dated 15th September 2016 looks into the question regarding whether it is possible to file the annual accounts of a company when a minority shareholder has exercised its right for the Commercial Registrar to designate an auditor to verify the annual accounts and the accounts are not accompanied by the auditor’s report drafted by said designated auditor, but instead they are accompanied by a different auditor’s report drafted by the auditor appointed by the company itself. In said resolution, the DGRN has also manifested its opinion regarding the conditions under which the right of minority shareholders to carry out accounting verification is undermined.
The facts of the matter contained in this resolution are as follows:
The annual accounts of the 2011 financial year filed by a company in Tenerife on 7th April 2016 were given a negative qualification by the Registrar for the following reasons:
1) The preceding qualification is reiterated, given that the defect expressed therein has not been amended. In order to perform the registration of the annual accounts for the financial year 2011, the registration of the annual accounts for the financial year 2010 must have previously taken place; and
2) The Auditor issuing the report does not coincide with the auditor appointed by the Commercial Registry, as called upon by the minority shareholders (the minority shareholder exercised its right to the verification of accounts regarding the annual accounts for 2010.)
The Tenerife company filed an appeal against the negative qualification issued by the Commercial Registry based upon the following allegations:
1) The annual accounts of the 2010 financial year are accompanied by an auditor’s report, drafted by an independent auditor;
2) Said auditor’s report was handed over to the shareholder who called for the appointment of the auditor, and furthermore, said report was filed together with the annual accounts of the financial year;
3) The High Court has been making the point that the right of the shareholder to request an audit as established in article 205.2 of the Joint Stock Companies Act (LSA) had been undermined by the voluntary assignment of an audit by the directors. It also pointed out that the purpose of said article is not for the audit to be carried out at the request of a certain shareholder, but that the audit is carried out correctly and the shareholder may have perfect knowledge of the company accounting.
4) The DGRN has indicated that if the resolution of voluntary designation passed by the company, was irrefutably dated with evidence prior to the filing of the request for appointment (of auditor) by the minority shareholders, the former would prevail over the latter.
In its resolution, the DGRN expresses the following opinion regarding the matter of restriction of the right of minority shareholders to carry out the verification of accounts:
“…so that the voluntary audit may undermine the right of minority shareholders to carry out the verification of accounts, two concurrent conditions must be fulfilled: (a) that it takes place before the filing at the Commercial Registry of the request of the minority shareholder for the appointment of an auditor by the registry, and (b) that the right of the shareholder to an auditor’s report is guaranteed, which may only be achieved by way of the registration of the appointment, via the handing over to the shareholder of the referred to report or via its incorporation into the file”.
The DGRN understands that the company alleges that both conditions are fulfilled since an auditor had been voluntary designated by the company on 26th June 2008 and tacitly extended for a term of three years, although this allegation may not be taken into account given that procedurally it is not the right moment to dispute said appointment and thus undermine the designation of the auditor by the Commercial Registry, instead, such controversy should be taken into account upon the occasion concerning the request made by the minority shareholder.
As a consequence, it resolves to refuse said appeal, and fully confirms the qualification of the registrar.
Mika Otomo
Vilá Abogados
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7th October 2016
