Article 265.2 of the Spanish Capital Companies Act (Ley de Sociedades de Capital – “LSC”) establishes that, in companies with no obligation to submit their annual accounts to verification by an auditor, the shareholders who represent at least five per cent of the share capital may request the registrar of the Commercial Registry to appoint an accounts auditor to carry out the revision of the annual accounts of a certain financial year. This may be requested provided that no more than three months have elapsed as from the close of the financial year in question.
In resolution dated 20th February 2018, the Directorate General for Registers and Notaries (Dirección General de los Registros y Notariado – “DGRN”) pronounced regarding a case in which the minority shareholder of a company requested the appointment of an auditor when an auditor had already been appointed by the company.
In the case dealt with by the DGRN in its resolution, a company which is not obliged to submit its annual accounts to verification by an auditor, had, however, voluntarily designated an auditor to audit the 2014 annual accounts. Said appointment was registered with the Commercial Registry. Nevertheless, the appointed auditor retired in 2015, before completing the task with which he/she was assigned.
On the other hand, the minority shareholder filed a request for the designation of an auditor for the verification of the accounts of the same financial year, namely 2014. The application was rejected as an auditor appointed by the company already existed, given that the company had not notified the commercial registry of the retirement of the auditor.
On 6th November 2017 the company attempted to appoint a new auditor for the verification of the annual accounts, which was rejected by the registrar. The reason for the rejection was that the right of the minority shareholder had been infringed upon because the appointment of the new auditor did not comply with one of the two conditions required by the DGRN to protect the interests of the minority shareholder, that is to say:
(i) that the intended appointment is prior to the filing on the part of the minority shareholder of the request for the registration of the appointment of the auditor, and
(ii) that the right of the shareholder to the auditor’s report is guaranteed. This may only be achieved by way of the registration of the appointment, via the handing over of the referred to report to the shareholder or its incorporation into the registry records.
The company contested this qualification and, in consequence, the case was transferred to the DGRN.
The opinion of the DGRN regarding the right of the minority shareholder to request the designation of an auditor is:
- The law attributes an individual right to minority shareholders to request that the annual accounts of a certain financial year are object of verification by an auditor designated by the commercial registry. However, this right is not absolute, thus it arises from the very provision that temporary and legitimation limits exist in the exercise of said rights.
- The scenario contemplated in article 265.2 of the LSC wanes when there is no protectable interest of the shareholder.
- The purpose of article 265.2 of the LSC is to reinforce the position of minority shareholders within the company structure, for which said article recognises and regulates the right to the verification of the corporate accounting by an independent professional appointed by the Commercial Registry. As an independent professional, the auditor, duly registered with the Official Registry of Auditors, must carry out its activity in accordance with the legal, regulatory and technical standards, which regulate auditing activity. For this reason, the origin of the appointment, whether it be judicial, of registry or voluntary, must not infringe upon the right of the minority shareholder.
The company designated a voluntary auditor for the verification of the 2014 financial year company accounts and registered the appointment on the company registry records. As from this moment, the protectable interest of minority shareholders is safeguarded inasmuch as the deposit of the accounts corresponding to said financial year could not be carried out if not accompanied by a verification report. If, as a consequence of the retirement of the designated auditor, registered at that time, the administrative body of a company pursues the termination and the registration of a new auditor, the foregoing conclusion remains unaltered.
Mika Otomo
Vilá Abogados
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6th of April 2018
