In accordance with paragraph 1 of article 43 of the Spanish Act 3/2009 of April 3rd, on structural modification to companies, when there is a merger between entities, it is required that the participating companies make the approval of said resolution of the general meeting public in the Official Gazette of the Commercial Registry as well as in a newspaper with major circulation in the provinces where each of the affected companies have their addresses. However, according to the second paragraph of said article 43, there is no need to publish if the agreement is communicated individually in writing to all partners and creditors.
However, what would happen if an error is found regarding the date upon which the merger was approved? Would it be considered a simple misquote or a serious mistake from the perspective of the protection of rights of the partners and creditors? Precisely this problem emerged in the Commercial Registry of Vizcaya, leading to the ruling of June 19th, 2017 of the General Directorate of Registries and Notaries (“DGRN”).
In this case, the merger was conducted between two companies of the same group. The absorbing company owned 100% of the shares of the absorbed company. The approval of this merger occurred at the general meeting of the absorbing company which took place on July 23rd, 2016. This merger was entered in the Commercial registry on May 30th, 2016. However, the announcements in both the Official Gazette of the Commercial Registry and the newspaper “El Mundo” stated that the resolution for the merger of the companies had been passed in the general meeting of February 8, 2016. In fact, there was a discrepancy in the dates, as this merger was not approved at the general meeting on February 8th, 2016, but on July 23rd, 2016, and the merger project had not been published until May 30th, 2016, and consequently the Commercial registry did not allow the registration of the notarial deed of this merger.
The absorbing company argued that the differences between the dates was a simple error and that this would not have limited or impeded the exercise of the rights of both partners and creditors. Consequently, the company filed an appeal against the previous negative qualification based upon this argument.
Faced with the question of whether or not the erroneous indication of date is a mere oversight, the resolution of the DGRN of June 19th, 2017 emphasized the need to ensure the protection of the rights of creditors, as well as the rights to opposition, established in paragraph 2 of article 44 of the Spanish Act on structural modification to companies and the rights to access to information. According to this resolution, it is fundamental that the aforementioned publication or individual communication are carried out rigorously to protect the right of the creditors.
On the other hand, it should be mentioned that article 43 of the same act does not require the publication nor the individual communication to state the entire agreement of the merger. Therefore, the recent decision states that there is no obstacle to the registration of this public deed, even if the publication had not mentioned the date of the general meeting in which the said transaction was agreed.
Nonetheless, in reality, both the dates of publication (Feb 8th, 2016) and the approval date of the merger at the general meeting (Jul 23rd, 2016) were incorrect. This could have confused creditors in their decision making processes when making use of their right to opposition, since such rights belonged to those holding credits before the date upon which the merger was registered, May 30th,2016. Therefore, those creditors who held credit after February 8th and before May 30th, 2016 might have had doubts about whether it was possible or not to exercise his/her right to oppose the merger.
At any rate, it cannot be denied that the publication of the erroneous date would have prevented the creditors to use their rights to object. And the commercial registry took this stance stating that such an error in the indication of the date is not a simple misquote without consequence.
Therefore, in this case, the merger operation was registered at the Companies Registry on May 30th, 2016, meaning that those who held credit before this date could execute their right to object to the merger, even though the credits arose after the date which was erroneously published (February 8th, 2016).
In brief, it can be concluded that stating the date of the general meeting in which the resolution for the merger of companies is passed is not necessarily a requirement for the publication. However, it needs to be taken into account, especially if there is a possibility that the date of said meeting could be changed.
Mika Otomo
Vilá Abogados
For more information, please contact:
4th of August 2017
