Article 109 of the Spanish Capital Companies Act (SCC), contains various provisions regarding the compulsory transmission of membership interests:
(1) Firstly, the obligation on the part of the Company, upon notification by the courts or administrative authority decreeing the seizure, to note the seizure in the members registry book and to immediately send the notification received to those partners free of seizure.
(2) Secondly, once the auction has been held or just before the award in the event of a legally established compulsory transfer, it is stipulated that the competent authority must suspend the approval of the auction and the adjudication, and that the courts or the relevant administrative authority must inform the company the status of the compulsory transmission of the shares or membership interests, who, in turn, must inform the members (shareholders) within 5 days.
(3) Finally, the auction or the preceding award, only become final after a period of one month as from the date upon which the company received the previous notification, without any of the members (shareholders) or the company itself having exercised their preferential right of acquisition, if this is set forth in the company by laws.
Thus, the company LORCLIMA, S.L. filed for the registration at the Commercial Registry of Madrid of the modification of the company by laws, which created a system of forced transfer of membership interests deviating from the contents of article 109 of the SCC in that it initially articulated the right of the company and subsequently the members (shareholders), through the preferential acquisition right, to acquire said membership interests, before the suspension of the procedure explained in point (2) above.
The registrar decided to refuse the registration of the aforementioned modification of the by laws arguing that article 109 of the SCC is of mandatory compliance and that “to grant a preferential acquisition right at the start of a procedure would mean an alteration to the rules of judicial or administrative procedure”, both procedures being a matter of public order.
Following the appeal against the aforementioned refusal of registry, finally, the resolution issued by the General Directorate of Notaries and Registries (the GDNR) on 23rd May 2019 has decided to allow the registration of the controversial provision, indicating that the legal system provided for in article 109 of the SCC may be the object of modification by an alternative system, such as that which is mentioned, all of which is based upon the principle of free will referred to in article 28 of the SCC.
Pedro Blanco
Vilá Abogados
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14th June 2019
