Pursuant to its decision of 18th January 2017, the Directorate General for Registers and Notaries of the Ministry of Justice (Dirección General de los Registros y del Notariado – “DGRN”) declared that when a company does not fulfil the obligation to register certain acts with the Commercial Registry when they are legally required to do so, it must bear the consequences that may be derived from said breach.

Regarding the case referred to in said decision, the registrar decided not to enter the public deed granting the change to the company administration system, and the removal and appointment of the sole administrator of a limited liability company on the registry’s records. The decision was based upon the fact that the deregistration of said company from the Index of Legal Entities (as established in the Corporate Tax Act and imposed, amongst other reasons, due to the non-payment of corporate tax during 3 consecutive tax periods) figured on the company records held by the registry. The DGRN points out that under such circumstances, it is not possible to enter any records on the registry, except under the order of the judicial authority or as a consequence of an administrative decision which orders the registration on said Index.

The representatives of the new administrators of the company filed an appeal against this qualification, with the following arguments

  • The closure of the registry record sheet ordered by the Tax Agency and the non-fulfilment of the tax obligations which caused the closure were subsequent to the removal of the sole administrator.
  • The refusal to register the removal of an administrator or representative gives rise to a situation of powerlessness on the part of the removed administrator.

The DGRN stated the following in response to the above allegations:

Above all, the DGRN confirmed that its doctrine in this respect was built upon the text of article 131.2 of the consolidated text of the Corporate Tax Act, which established that in the case of a provisional deregistration of a company from the Index of Legal Entities of the Spanish Tax Administration, a practically complete closure of the registry is imposed upon the company, the only exception being the certification of a new registration on said Index. This doctrine continues to be currently applicable, in spite of the change in the law.

In accordance with the doctrine, the conclusive question for the registrar is: while the marginal note of closure due to the provisional deregistration from the Index of Entities is in force, the company shall be unable to make any entries on the registry records.

With regard to the claims that the removal of the administrator took place upon a date prior to evidence of the deregistration from the Index of Entities in the Registry, the DGRN decided to dismiss such claims due to the following reasons:

  • At the time of filing the public deed at the registry for registration, the situation of deregistration from the Index of Entities already existed, a fact which must be observed by the registrar.
  • In accordance with article 215.2 of the Spanish Capital Companies Act, the appointment of an administrator must be filed for registration at the Commercial Registry within 10 days following the acceptance of the appointment. If this is not the case, the adverse consequences derived from said legal breach must be endured by those who are obliged to procure the registration.

In conclusion, the DGRN dismissed the appeal filed by the company for the reasons mentioned in the above paragraph.

In this context, we may understand that in practice, priority is given to the status of the registry records and not the chronological order of events, when the document has not been filed for registration within the deadline established by the Law. Thus the DGRN considers that the company must assume the responsibility for the outcome if the legal deadline for registration is breached.

 

 

Mika Otomo

Vilá Abogados

 

For more information, please contact:

va@vila.es

 

February 24th, 2017