The question raised is whether the renewal of the posts of company directors for a term shorter than that set forth in the company bylaws is in accordance with the law.
The Directorate General of Legal Security and Public Trust – GDLSPT (Dirección General de Seguridad Jurídica y Fe Pública-DGSJFP) issued a resolution resolving said matter on 23rd December 2021.
The case can be summarised as follows: the general shareholders meeting of a joint-stock company unanimously agreed to renew the posts of the members of the board of directors for a term of 6 months when the company bylaws provide for a duration of 6 years.
The registrar refused the registration of the decision taken by the meeting arguing that the appointment of the board member must be carried out for the term determined by the bylaws.
The challenging notary public maintained that article 221 of the Spanish Companies Act (Ley de Sociedades de Capital – LSC) distinguishes between the duration of the initial post and the renewal; that is to say, it allows for renewals for terms of an equal maximum duration (6 years) even though it does not prohibit renewal for a shorter term.
The GDLSPT resolution:
With the support of resolutions 9/XII/1996, 29 IX de 1999 and 9/II/2013 it considers that the general meeting cannot appoint a director for a term shorter than that provided for in the bylaws. It is true to say that the former article 126 of the Joint-Stock Companies Act allowed for the appointment of directors for different terms for each one of them, which was the object of modification in 2005 in order to obligate companies to appoint all directors for the same term.
Likewise, it deems that the need to be appointed or re-elected for the statutory term
(neither shorter nor longer) is based on the forcefulness of the legal terms of article 221.2 of the LSC, on the circumstance of being a necessary mention in the bylaws and on the limited ease of removal by the general meeting.
However, it does not seem that the resolution resolves the doubt raised by the last sentence of article 221.2 of the LSC: “the directors may be re-elected for the post, once or several times for periods of equal maximum duration“. This wording allows for, in the absence of precision, the interpretation that the term of re-election may be less than the term provided for in the bylaws inasmuch as it will be below the maximum period established in the bylaws in joint-stock companies; this interpretation is also supported by article 221.1 of the LSC, which refers to limited companies, and points out that the re-election must be for an “equal duration” as the term determined for the first mandate (which leaves us in no doubt), while article 221.2 (section 2) adds the word “maximum” (maximum duration) which allows for the interpretation that the re-election may be for a term which is less than that established in the bylaws, in this way distinguishing the system for limited companies from that of joint-stock companies.
Eduardo Vilá
Vilá Abogados
For more information, please contact:
14th January 2022
