A great deal has been written about the determination of the essential nature or otherwise of assets transferred by companies with a share capital, an issue that will not be addressed in this brief review. What is of interest here is the validity or legality of transfers made before a notary without an express declaration in the deed as to the essential nature of the assets transferred and, furthermore, access to the public register of these instruments.
It is well known that by virtue of article 160 f) of the Spanish Companies’ Act (Ley de Sociedades de Capital), the general meeting of shareholders has the power to authorise the transfer of an essential asset of the company, a power vested pursuant to Act 31/2014 of 3 December, with the aim of protecting shareholders or partners against abusive acts of disposition carried out by the management body. The provision is oriented towards those acts of transfer that go beyond the scope of ordinary business management, insofar as the essential nature of the asset lies not in a specific value but in its indispensable nature for the continuity or operation of the company, in such a way that an asset may have a relatively low value and still be essential for the continuity of its business activities. Conversely, an asset may have a high value and yet not be essential.
On the other hand, we must start from the premise, and bear in mind for what will be said below, that third parties dealing in good faith and without gross negligence who contract with the company are protected in the event of acts carried out by the directors exceeding the corporate purpose of the company duly registered in the Commercial Registry (art. 234 of the Spanish Companies’ Act). The act of transferring an essential asset must be included within the scope of extraordinary acts that either fall outside the scope of the company’s corporate purpose or, even if they do not, entail the disposal of a fundamental element of the assets, that endangers the continuity of the company, leads it directly to the cessation of its activities, or entails a substantial alteration of the registered corporate purpose.
As regards the intervention of the notary or registrar in the formalisation of the transfer, and leaving aside the obvious cases and those in which the presumption of ‘essentiality’ provided for in the aforementioned article 160 f) (final) applies, this does not consist of supervising, but rather of reasonably ensuring the legality of the transaction. Generally speaking, the essential or non-essential nature of the asset subject to transfer is beyond the notary’s reasonable control and is very difficult for them to determine, not least because the concept of ‘essential’ is indeterminate. On the other hand, it seems excessive to place on the shoulders of a third party (registrar or notary) the work of investigating or verifying the value or the essential nature of the asset; think, for example, of the transfer of know-how, industrial or intellectual property rights, the essentiality of which can only really be judged by the board of directors.
As has been amply established, the director’s declaration of the non-essentiality of the asset must be sufficient for the purposes of the notary and registrar, for the execution of the deed and its subsequent registration, respectively, all without prejudice to the shareholders’ rights to challenge the transfer. As an exception, only in notorious or obvious cases could the notary intervene to require a resolution passed by the general meeting of shareholders to declare the asset to be non-essential or, if it is, the corresponding authorisation to transfer it. It would be completely inappropriate and abusive to require a priori such a declaration by the general meeting if the circumstances surrounding the transaction, or the notary’s or registrar’s own knowledge do not give rise to any reasonable doubts as to the truthfulness of the director’s statement. To do otherwise would not only be a considerable hindrance to the natural flow of business, but would also indirectly attribute to the general meeting of shareholders a power that it does not have.
Having said this, we will focus on those cases where, after the notary has assessed the sufficiency and capacity of the parties, none of them (especially the transferor) makes an express declaration as to whether or not the asset being transferred is essential. The lack of such a declaration of essentiality should not invalidate the legal act, provided that the essential elements of the contract are present, since there is no legal imperative to make such a declaration, as is the case in other duly regulated cases. As it is not compulsory to make such a declaration, whether or not the asset is essential and whether or not there is a decision by the general meeting, the act will be valid and effective against third parties in good faith who are not guilty of gross negligence (234.2 of the Capital Companies Act).
It is therefore concluded that, as a general rule, there is no need or obligation to provide the certificate of the general meeting, and that the director’s express declaration of the non-essentiality of the asset at the time the public deed of transfer is executed is not even necessary. Nor is such absence a defect or cause preventing the registration of the deed in the corresponding register, unless in the eyes of the registrar the essential nature of the asset is evident, for example when they are aware or have a reasonable suspicion that it is “an asset assigned to the corporate purpose that is evidently essential for the development thereof”, or if the essential nature can be deduced from a value judgement based on the documents that he is preparing to classify.
In the latter sense, the Directorate General for Legal Security and Public Faith (Dirección General de Seguridad Jurídica y Fe Pública – DFSJFP) has expressed itself clearly in a decision of 29 July 2024 published in the Official State Gazette (Boletín Oficial del Estado) on 10 October, when dealing with a case of a public deed where neither of the parties declared the essential nature or otherwise of the asset and the notary simply issued their judgement on the sufficiency of the powers of the buyer and seller, “taking into account the elements of fact and law concurrent in the business formalised in the deed and in particular that stipulated in article 160. f) of the Spanish Companies’ Act”. Despite the fact that the land registrar suspended the registration due to the absence of these declarations, the DFSJFP overturned the decision, understanding, firstly, that these declarations are not obligatory, and secondly, because, with the declaration made by the notary mentioned above, the obligation to check the legality of the legal transaction had already been fulfilled (article 17(b) of the Spanish Notaries Act (Ley del Notariado). Therefore, in the absence of reasonable doubt or certainty as to the essential nature of the property, the notary cannot require the parties to provide the certificate of the decision of the general meeting authorising the transfer or declaring it to be non-essential, as the decision of the DFSJFP of 21 November 2022 has already established, nor can they require the directors representing the companies involved to make an express declaration to that effect, in order to execute the deed of transfer.
Eduardo Vilá
Vilá Abogados
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18th of October 2024
