The resolution of the Directorate General of Legal Security and Public Trust – GDLSPT (Dirección General de Seguridad Jurídica y Fe Pública-DGSJFP) of 16th November 2021 regarding the refusal of the Registrar of the Commercial Registry of A Coruña to register a public deed in relation to the remuneration of directors was published in the Official Gazette on 3rdDecember 2021.
In this case, the extraordinary meeting of a limited company adopted the decision to modify an article of the bylaws in order to organise the management of the company and the remuneration of the directors. The complete text of the article is as follows:
«The Company management and its representation in and out of court shall consist of either a Sole Director, several Directors, acting jointly or severally, or a Board of Directors, at the discretion of the General Meeting. In the case of several joint directors, the power of representation shall be exercised jointly by two of them.
The post of Director is free of charge, regarding the execution of the powers inherent to said post that cannot be delegated, according to the laws on companies. However, said gratuity, is understood to be, without prejudice to any other remuneration, which, for services other than those which cannot be delegated as Director, the person holding said post may receive. In this case, the maximum amount of the annual remuneration of the Directors as a whole must be approved by the General Meeting and shall remain in force until any modification thereto is approved.
Unless otherwise determined by the General Meeting, the distribution of the remuneration among the different Directors shall be established by agreement of the Directors and, in the case of a Board of Directors, by decision thereof, which shall take into consideration the duties and responsibilities attributed to each director. The Company may take out civil liability insurance for its Directors.»
The registrar suspended the registration of the public deed for the following reasons:
1) In the case of administration by joint or several directors, either the number of directors, or the minimum and maximum number of directors must be indicated;
2) Notwithstanding the above, the text of the article does not indicate whether or not the post of Director is remunerated or not, neither is the form of remuneration, if any, indicated (Article 217 of the Spanish Companies Act – LSC, AND 185 of the Commercial Registry Regulations – RRM).
An appeal was filed against this decision. In this article we shall only analyse the second defect.
In this regard the Directorate General decided that it is a matter related to the remuneration system of the directors, and commented that the specific remuneration system of the directors must be clearly established in the bylaws, with the legally established limits.
Taking as a reference the judgment of the Supreme Court of 26th February 2018, the Directorate General explained its reiterated case law regarding the remuneration of directors. For this reason, “it has admitted that even though the different remuneration items of executive directors must be indispensably be included in the bylaws, the latter may refer to the contract entered into between the executive director and the company to specify whether the director will be remunerated for all or only for some of the remuneration items established in the bylaws”. “In this way the due protection of the partners is made compatible, as the possible remuneration items are fixed in the bylaws and the maximum amount of the annual remuneration of all directors is passed by the general meeting,” the Directorate General adds.
As for this particular case, the Directorate states that “the situation generated by the clause of the bylaws under discussion is somewhat paradoxical”, and it recognised that “the refusal must be confirmed without any doubt, as the clause does not fulfil the minimum requirements regarding the possible remuneration items”. However, the Directorate General states that “the question is really a different one”, and maintains that the clause in question does not seek to establish a statutory framework for the remuneration of the executive directors, but rather a framework of complete gratuity for any director, regardless of the structure of the management body, that is to say, whether or not he/she is a director.
Although the Directorate General admitted that the wording of the clause in question “could have been more clear”, the clause as a whole is also interpreted to mean that the post of director is free of charge for all directors, without prejudice to any remuneration that may correspond to them «for services other than those that cannot be delegated as a Director». For this reason, it can only be understood that these are services or labour relations that are unrelated to the powers inherent to the post of director. “Ultimately this extra-management remuneration is subject to the control of the general meeting as regards the setting of its maximum limit, or it is to be distributed at the discretion of the directors themselves”. The Directorate concluded that “it should not be seen as an indication of hidden remuneration to be managed, but as a peculiarity to which the directors who are willing to provide these other services must subject themselves”.
Finally, the Directorate General upheld the appeal and revoked the contested decision.
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24th December 2021
