There are two opposing doctrinal positions regarding the retribution of directors with executive powers and its regulation in the company’s bylaws.
On the one hand, advocates of the bylaw regulation of the retribution of the directors with executive powers indicate that the managing directors are also directors themselves, and in their capacity as such, article 217 of the Spanish Capital Companies Act (“LSC”) would apply together with article 249 of the same Act (amended by Law 31/2014, of December 3rd, which amended the Spanish Capital Companies Act to improve corporate governance). Article 217 LSC expresses the need for regulating the directors’ retribution in the company’s bylaws and also the approval of the shareholders meeting of the total amount of remuneration to be paid to the directors and article 249 LSC makes special reference to the directors with executive powers. This doctrinal position defends that managing directors cannot receive a retribution arbitrarily without the approval of the shareholders meeting and it not be regulated in the company’s bylaws.
On the other hand, there is another doctrinal position that upholds that the regulation by the legislator of a specific article (art. 249.3 LSC) for directors with executive powers, makes the general system of directors’ retribution established in article 217 LSC not applicable to managing directors. In this sense, the shareholders’ meeting should not approve the retribution of the directors with executive powers and said retribution should not be regulated in the company’s bylaws either.
Following the resolutions of February 24th 2015 and July 21st 2016 by the General Directorate of Registries and Notaries (“DGRN”) in favour of the second doctrinal position mentioned above, section fifteenth of the Provincial Court of Barcelona, in its judgment 295/2017 of June 30th 2017, revoked judgment 241/2015 of November 27th 2015 ruled by the Commercial Court number 9 of Barcelona, establishing jurisprudence in the same vein as the DGRN.
It seems clear that the specificity of article 249 LSC regulating the retribution of directors with executive powers, makes them different from the directors which do not have such executive powers and for which the general retribution rule of article 217 LSC is applicable.
Regarding article 249 LSC, the directors with executive powers will have to sign an agreement with the company with the following characteristics:
“3. When a member of the board of directors is appointed as managing director or empowered with executive powers pursuant to another title, it shall be mandatory to draw up an agreement between said director and the company, which shall be approved previously by the board of directors with two thirds of votes in favour. The director appointed shall not attend the deliberation and not participate in the voting. The approved agreement should be annexed to the minutes of the board of directors meeting.
4. The agreement shall detail all the retribution concepts related with the exercise of the executive functions, including the compensation payable for early termination of such functions and the quantities to be paid by the company as insurance premiums or as contributions to saving schemes. The managing director shall not be allowed to receive any quantity for exercising executive functions that are not foreseen in the agreement.
The agreement must be consistent with the retribution policy approved, where applicable, in the shareholders meeting.
As regards to establishing the retribution of directors with executive powers, even when it is not mandatory for the shareholders meeting to regulate a specific retribution policy and the general regulation of article 217 LSC under the aforementioned jurisprudential doctrine is not applicable, the shareholders could legitimately request to see the contract, given that it is an agreement between the company and the directors, which contains relevant information.
Marc Martínez
Vilá Abogados
For more information, please contact:
28th of July 2017
