The resolution issued by the General Directorate of Notaries and Registries (the GDNR) of 3rd April 2019 deals with whether it is possible for the company by-laws to modify the ordinary majority established by the Law.
In the case in question, the following modification to the company by-laws was adopted in the general partners meeting of a limited liability company.
“Ordinary majority. Company resolutions shall be adopted by a majority of the votes validly cast, provided that they represent at least eighty percent of the votes corresponding to the membership interests into which the company capital is divided. Blank votes shall not be counted as votes cast”.
The public deed in which the aforementioned company resolution was executed and filed for registration at the Commercial Registry, however, the registrar refused registration for the following reason:
Upon the modification of the ordinary majority and establishing it at “at least 80% of the votes corresponding to the membership interests into which the company capital is divided”, if this clause is not more specific, the agreements for which the Law calls for an ordinary majority, shall be expressly included, and the majority may not be modified.
An appeal was filed against the registrar’s refusal:
The General Directorate of Notaries and Registries commented that this matter concerns the imperative character of determined aspects of the regulation of limited liability companies, albeit with a wide leeway for free will and the following opinion was expressed:
In one of the general claims of limited liability companies, reference is made to their hybrid nature, so that in the legal form of this type of company, human and capitalist elements must coexist in harmony. Likewise, the legal stipulations for the flexibility of the legal system exist for the purpose of respecting the free will of the partners. For this reason, a wide set of regulations supplementary to independent will are added to the indispensable minimum imperative, which the partners may repeal by means of the appropriate stipulations of the by-laws.
The capitalist nature of the limited liability company is shown in the legal setting of the principle of the majority for the passing of resolutions by the general meeting. Furthermore, ordinary and enhanced majorities are imperative, pursuant to articles 198 and 199 of the Spanish Capital Companies Act. The flexibility of the legal system is demonstrated by the possibility of modifying these minimum legal requirements either by adding the requirement of strong majorities, or by increasing the quorum of voting required by law.
By way of example, where a winding-up agreement exists by concurrence of a legal cause, the Law requires the ordinary regime of majorities, a regime that cannot be modified because it affects the individual rights of the partners. This is the DGRN’s understanding, and therefore there is no freedom for the by-laws to enhance the legally established majority.
In conclusion, the argument that the clause should overcome any legal stipulation of reinforced majority is not acceptable. Certainly, the law sometimes requires that certain agreements require enhanced majorities, such as the modification of by-laws. In this case, the clause in question does not respect the maximum voting quorum imposed by law in the cases indicated, a measure that protects the individual rights of the partner. In view of the above, the appeal was dismissed.
Mika Tsuyuki
Vilá Abogados
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17th May 2019
