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1. Introduction

In the Official Bulletin of 22nd October 2015, the resolution of 30th September 2015, on the General Counsel for Registers and Notaries, in the appeal lodged against the statement of impediments issued by the mercantile and personal property registrar of Ceuta, by which the entry of an appointment resolution of an advisor by co-optation is denied.

The appointment of the member of the board of directors, among the shareholders, by election of the Board of a limited company itself until the Annual Meeting confirms the new advisor. However, the registrar proved in the statement of impediments that the appointment by co-optation is not possible as the company has limited liability, because the Corporate Enterprises Act expressly restricts this option for the public limited companies. By virtue, he decided to reject the registration of the advisor’s appointment due to the unrectifiable faults for the board of directors of a company with limited liability not being a organ suitable for the appointment of new directors, as the co-optation system is specifically reserved for public limited companies.

2. Appeal lodged against the statement of impediments

Against the abovementioned statement of impediment, there was a lodging appeal that claimed the following:

(i) Article 244 of the Corporate Enterprises Act does not prohibit the selection system by co-optation of limited company boards: the Article is limited to adjust the public limited company procedures, without going beyond.

(ii) Article 245 of the Corporate Enterprises Act neither implies a prohibition of the election system by co-optation in limited companies.

(iii) Article 21 of corporate statutes registered in the Mercantile Registry, which ensues that “if additional vacancies occurred, the Board may appoint, amongst the shareholders, the persons to occupy these vacancies until the first Annual Meeting is held”, should fit in the framework of said precept.

The Registrar submitted the file to the Management Centre.

3. Resolution of the General Counsel

The General Counsel instructed in the resolution that the only issue discussed in this file consists on deciding whether, upon the resignation of a board member of company with limited liability, the board itself can decide the new advisor from among the shareholders through co-optation. Moreover, the articles of association or the norms regarding the company organization, provided that these have not been left without effect as a consequence of a subsequent legislative modification that, with an imperative nature, should prevail.

The Article 214, in force, of the Corporate Enterprises Act, Royal Legislative Decree 1/2010, of 2nd July states that, as a general rule, “the responsibility of appointing administrators belongs to the shareholders’ meeting, with no exceptions other than those laid down in the Law”, and the only exception, provided in the Law, is that of public limited companies, without considering any exception for limited companies. This was the result of the Article 244 of the Corporate Enterprises Act when it determines that “in a public limited company, if vacancies occurred during the period for which Administrators were appointed and there was no one to substitute, the Board may designate, within the shareholders, the persons to occupy it until the first Annual Meeting is called. In accordance with the above stated, current regulations are clear as regards to the impossibility of appointing an Advisor by co-optation in a Limited Company, and this option is only available in the case of public limited companies.

As a consequence, the General Counsel decided to dismiss the appeal.

4. Conclusion

Through this resolution, it is confirmed that the only solution in order to rectify the vacancy in the Board of Directors of limited companies is calling for an Extraordinary Annual Meeting. Nonetheless, there are cases amongst limited companies in which calling for an Annual Meeting is not easy as there are many shareholders; therefore, it is necessary to study preventive measures to avoid leaving a vacancy in the Board of Directors.

For more information, please contact:

Mika OTOMO

otomo@vila.es

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