The resolution dated 8th February 2017 from the Directorate General of Registers and Public Notaries (Dirección General de los Registros y del Notariado – “DGRN”), expressed the criterion for deciding whether or not to allow the appointment of a member of the board of directors of a company by way of cooptation.

In said resolution, the DGRN mentioned that the problem lies in whether the appointment, by way of cooptation, of a director of a listed joint stock company should be registered when two general shareholders’ meetings have already been held following the date upon which the position became vacant. The resolution mentioned the following opinions of the DGRN:

  • The faculty for the appointment of directors is legally attributed to the board of directors, given that the cooptation system is based upon the necessity to guarantee the stability and the perfect functioning of the board, when a vacant positions arises. Said faculty has a certain exceptional nature regarding the general regulations crediting the general meeting with the capacity to choose directors.
  • The duration of said faculty only lasts until the first general shareholders meeting.
  • The appointment of the directors of a joint stock company via the cooptation system cannot be registered when the number of members of the board of directors with a valid mandate who adopt the agreement is less than the majority of the appointed members. In such cases, the board may not be validly constituted.
  • When a vacancy arises, there is no legal obligation on the part of the general meeting to immediately appoint a director to cover the vacant position. Instead, the obligation regarding the appointment of directors by cooptation is established in the first general meeting once the appointment by cooptation has occurred.
  • Article 171 of the Spanish Capital Companies Act (Ley de Sociedades de Capital – LSC) should be interpreted, which, only in the case of the death or the departure of the majority of the members of the board of directors, allows any shareholder to call for the judicial summons of the meeting, which confirms that the board cannot be validly constituted.
  • In the absence of statutory prohibition, the appointment of directors through cooptation should be allowed in order to fill unexpected vacant positions when the general meeting has already convened following the position becoming vacant, and regardless of the appointment of directors appearing as an item on the meeting’s agenda, the vacant position has not been voluntarily filled. On the other hand, appointment by cooptation should be rejected if the general meeting has not had the opportunity to deal with the question regarding the appointment of directors, and this item has not yet appeared on the agenda of the meeting.

As indicated above, the faculty for appointing members via the cooptation system allowed in the board of directors should be a consideration on certain occasions and recognised in exceptional cases; such as when there is a great necessity or urgency or when the general meeting does not exercise said faculty voluntarily, given that the law grants the faculty for the appointment of members of the board of directors by cooptation.

 

Mika Otomo

Vilá Abogados

For more information, please contact:

va@vila.es

31st March 2017