I.- INTRODUCTION.

On 10th January 2011 Section 1 of the Civil Chamber of the High Court passed judgement 889/2010in favour of the Companies Registry of Santander, which had disqualified one of the articles of the by-laws of a Joint Stock Company. Said article established in favour of the shareholder and the recurrent Joint Stock Company a redemption right on the shares held by legal entities in cases where the latter suffer modifications to its shareholders through inter vivos transfers, in such a way that certain persons, or their derivatives, would lose the possibility to exercise the majority of at least two thirds of voting rights.

Nevertheless, the above-mentioned sentence was passed with the dissenting vote of one of the Court judges, who understood that said by-law is contemplated in Spanish law.

II.- THE HIGH COURT JUDGEMENT.

In its judgement, the High Court concluded that the disqualification by the Companies Registrar was in line with the law because the establishment of an absolute redemption right, without being subject to deadlines or destined to guarantee the control of the shares of certain persons, or their family relations, means that “personal background ends up imposing itself upon the by-laws to such an extent that the capitalist, open and anonymous character of the recurrent company is practically eliminated.”

The above, upheld by the High Court, amounts to an infringement of article 10 of the former Joint Stock Companies Act (equivalent to article 28 of the current Capital Companies Act), which stipulated that the company by-laws may include all pacts and conditions deemed appropriate by the shareholders, provided that they do not oppose laws or contradict the structuring principles of the chosen legal form of the company.

III.- THE DISSENTING VOTE ON THE HIGH COURT SENTENCE.

The dissenting vote formulated by the dissident judge disagrees with the sentence considering that it introduces an unnecessary rigidity in company legal forms, substitutes the principle of free by-laws with that of free typological option  and unnecessarily restricts the general principal of free will.

In his opinion, the appeal filed by the recurrent Joint Stock company should be allowed, deeming to be lawful the statutory regulations which impose positive restrictions directed at demanding, as an accessory feature for remaining in the company, that the conditions which allowed the shareholder to enter the company should be maintained. All of which is regardless of whether or not the chosen legal form adjusts to the ideal structure of a strictly capitalist joint stock company or not, which is open and governed by “intuitus pecuniae” and which does not infringe upon the imperative provisions of the former Joint Stock companies Act or the current Capital Companies Act.

IV.- CONCLUSION.

Although the opinion of the majority of the judges opposed the acceptation of this kind of stipulations in the by-laws of a Joint Stock company, the dissenting vote suggests the possible evolution, which the legal form of companies shall undergo in Spain. It is very possible that, as envisaged in the preliminary recitals of the Capital Companies act, in the future “being more than a rigid comparison arising from the chosen legal form, the essential distinction shall lie in whether or not the company is quoted on the Stock Exchange.”

For more information, please contact:

Ramon MANYÀ: rmt@vila.es/en