Article 180 of the Spanish Companies Act (Ley de Sociedades de Capital – LSC) provides that: “the directors must attend the general meetings” of partners or shareholders.
The obligation is not disputable, and it appears to require the attendance of all of the directors, in such a way that the provision is deemed unfulfilled if not all of them attend as well as if only one of them attends. Likewise, it must be taken into account that said article does not refer to the “management body”, but to the “directors”, assuming that this refers to the attendance of all of the joint and several or joint directors, whereas when the management body is constituted by a board of directors, it will be sufficient that at least the number of attendees provided for in the by-laws are present.
In any case, and with the former clarification in mind, the law does not directly establish the penalty or consequence of the fact of not fulfilling totally or partially this obligation, thus the doubt arises as to whether the meetings (or the resolutions passed therein) held without the attendance of the directors may be declared null.
For the first time, the General Directorate for Legal Security and Certification (Dirección General de Seguridad Jurídica y Fe Pública – DGSFP) has issued a decision by means of two consecutive resolutions in identical cases, dated 15th and 27th November 2023.
The substance of the matter in both cases consisted of holding a partners’ meeting, called by two of the three joint directors, due to the passing away of the third director. The object of the meeting was none other than the appointment of a substitute for the deceased director. The meeting was held with said sole item on the agenda and 80% of the share capital attended the meeting, wherein the new joint director was appointed.
The head Registrar (of the Commercial Registry) refused the registration of the resolution for violating article 180 of the LSC and declared the defect to be “irremediable”. Following the corresponding request for a replacement assessment by the notary who authorised the public deed of the company resolutions, the Registrar authorised for this purpose confirmed the assessment of the substituted Registrar as to the fact that the directors cannot be substituted by other persons, since this is a very personal function, although the Registrar did consider the meeting to be valid.
Finally, the DGSFP revoked the Registrar’s negative assessment and declared the meeting and the appointment of the new director to be valid.
The duty of attendance corresponding to the directors is necessary and obligatory insofar as essential functions for the operation of the company are developed in the general meeting. Nevertheless, the lack of attendance does not necessarily have to lead to the nullity of the meeting or of the resolutions passed therein, to the extent that the concurrence of the directors is not a sine qua non condition for the constitution of the meeting.
It appears that the lack of attendance of all the directors constitutes an infringement of Article 180 of the LSC and, therefore, the existence of a validity defect, although it is not clear that this must always be punishable with the nullity (of the meeting).
Regarding this matter, a judgement of the Supreme Court[1] has declared that in the event of the non-attendance of the directors, the circumstances of the specific case must be taken into account in order to verify to what extent this can justify the suspension or even the nullity of the held general meeting, which must be understood to be an exception. If the presence of the directors is to ensure that information reaches the partners or shareholders for the purposes of exercising their right to vote with knowledge of the facts, it must be concluded that when a lack of attendance does not affect or impair the decision-making capacity of the partners, this must not be considered a defect with disastrous consequences for the validity of the meeting, but as a venial defect that does not fall within the grounds for objection set forth in article 204 of the LSC. However, this is without prejudice to the personal responsibilities of the directors who did not attend the meeting, even if it was possible for them to do so.
Said judgement of the Supreme Court establishes that, as a general rule, the absence of the directors cannot be considered a cause for nullity. It reasons that if the nullity were to depend on such circumstance, the valid holding of general meetings would remain in the hands of the directors. Nevertheless, this general rule is subject to exceptions, which shall be deliberated in light of the facts surrounding the case. In this way, if the decisions object of debate and vote require reports or data to be provided by the directors, the formal defect of their non-assistance would become substantial, and consequently, the basis for an action for the nullity of the general meeting or its resolutions, insofar as the partners or shareholders were deprived of the information necessary to adopt a position and exercise their vote with regard to the items on the meeting agenda. This criterion, based upon the principle of “relevance” has been brought to light in a relatively recent judgement passed by the Provincial Court of Lérida, on 23rd December 2020, emphasising the fact that the nullity penalty should be reserved for “scenarios wherein the infringement committed is not limited to purely formal or procedural aspects, but has a direct and relevant effect on the legal interests or assets affected”.
What is more, even in the event of the absence of the directors when this means a lack of access to certain information, this would not be a cause for the nullity of the meeting, as indicated in a judgement from the Provincial Court of the Balearic Islands of 30th June 2016. We refer to cases where the reply to the questions of the partners may be given after holding the meeting. Consequently, it is possible to infringe article 180 of the LSC and nonetheless this does not imply a violation of the right to information of the partners.
The possibility that the absence of the directors gives rise to the nullity of the meeting, or the resolutions passed therein, is, according to the Supreme Court, exceptional and subject to carrying out an “exercise of deliberation”. In the case of the exercise of a reinforced right to information, the absence of all of the directors may compromise the validity of the meeting or of the resolutions adopted therein, whenever it is inherent to the nature of an agenda that must be complemented by a reinforced right to information and that the fact that not all the directors are present completely curtails this right of information. Conversely, it must be understood that neither the meeting nor the agreements are challengeable in accordance with article 204.3 of the LSC. As conveyed in the resolution of the DGSP, said article prevents the challenge of resolutions which incur in the “incorrectness or insufficiency of the information provided by the company in response to the exercise of the right to information prior to the meeting”. It follows that the lack of attendance of all of the directors may constitute the basis for the nullity of the meeting or its resolutions when this is in breach of the director’s enhanced duty to provide information, in cases where the rights and interests of the partners or shareholders must be materially and directly affected by this circumstance.
In summary, the pondering judgement required by the Supreme Court would be structured as follows:
a) The main consequence of the infringement of article 180 of the LSC must be the potential liability of the directors, under the framework of article 236 of the LSC.
b) As a general rule, the infringement of article 180 of the LSC does not give rise to the nullity of the meeting or of the resolutions passed therein.
c) The possible exception to the general rule must be analysed in light of the following:
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- The exception is of a restrictive nature.
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- The subject submitted to the deliberation must inexcusably require that certain documentation relative to the proposed resolution is made available to the partners.
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- Whether or not any type of objection was expressed in the meeting by any partner or shareholder for the purpose of a potential challenge to the resolutions, inasmuch as their right to information was not fulfilled.
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- The incorrectness or insufficiency of the facilitated information by the company in response to the exercise of the right of information prior to the meeting is no longer a valid motive for challenging a corporate resolution, unless the information is incorrect or it was not provided, when it would have been essential for the reasonable exercise of the right to vote or for any other right of participation (article 204.3 (b) LSC).
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- Attention to the principle of relevance of the absence of the directors in relation to the breach of the rights of the shareholders or partners and the violation of their rights.
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- Weighing of the causes of the absence. In determined cases, it may even be justified when it proves to be in the interest of peace and corporate interest.
Eduardo Vilá
Vilá Abogados
For more information please contact.
12th January 2024
[1] Supreme Court Judgement of 19th April 2016.
