The principle of legitimacy requires that deeds to be registered at the Companies Registry are subject to previous examination, verification and qualification in order to prevent the official register publication from supporting deeds that are not perfect and valid.
Such precaution guarantees the content of the deeds and justifies the attribution of the so called positive effects of the official register publication, which are presumed to be accurate and valid.
Meanwhile, what happens when a defective deed accesses the companies registry?
Modifications or cancellations of entries already recorded require the agreement of the parties or a court decision established as such.
What happens if the registration of a defective deed leads to further entries carrying said defect?
Such further entries will likewise be void and, thus, cancelled. A classic example would be the registration in the Companies Registry of the appointment of a company director which, for whatever the cause, suffers some imperfection. Such event may render invalid the decisions taken by said director and which have been recorded in the Registry, such as, among others, the granting of general powers of attorney in favour of third parties. Nonetheless, the assumption of accuracy and veracity of the registered deeds will not be diminished until a judgement concluding their invalidity is also registered.
Article 208.2 of the Spanish Capital Companies Act (hereinafter, “LSC”) provides that the final judgment declaring the invalidity of an agreement registered at the Companies Registry shall rule invalid any subsequent entries that contradict the judgement in question, in addition to ruling its cancellation.
Now, who is responsible for determining which entries are specifically contrary to the judgement issued?
In this regard, the recent resolution of 1st December 2015, of the General Directorate of Registers and Notaries (hereinafter, “DGRN”) provides that “deciding what range of impact the issued judgement has, is not the responsibility of the registrar”, when referring to determining which entries are contradictory to the judgement; on the contrary, “such formality is the exclusive responsibility of the judge”. Even though previous decisions issued by the DGRN pointed out that the Registrar “shall not fall into unjustified formal rigorousness if it can be concluded from the document (the judgement), with no doubt, which are the entries that warrant cancellation”, the Companies Registrar shall not proceed to cancel entries when the judgement does not indicate, not even generically, those which are contradictory to the judgement and, for that matter, have to be cancelled.
Needless to say, a private petition from the concerned party, indicating the entries that should be cancelled under his or her own interpretation and opinion of the judgement, cannot replace the jurisdiction of the judge to decide what should be the precise scope of his judgement.
Therefore, in case of legally calling for the invalidity of a deed registered with the Companies Registry, it is important to request that the judgement clearly specifies which further entries should likewise be cancelled, under the Article 208.2 of the LSC, and that the mere indication in the judgement that further entries contradictory to the ruling should be cancelled is not sufficient, since, as explained, determining the scope of the court judgment is not the responsibility of the Companies Registry.
Vilá Abogados
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22nd January 2016
