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The representation at the general shareholders meeting of Spanish Limited Companies: The execution of a POA to manage all assets in Spain

Article 183 of the Spanish Corporate Enterprises Act (“Texto Refundido de la Ley de Sociedades de Capital”, hereinafter “LSC”) sets out the voluntary representation at the General Shareholder’s Meeting of the Limited Liability Company.

The article begins by listing who can represent the shareholder at the General Meeting. Specifically, the shareholders can be represented by another shareholder, the ascendant or descendant and by another member or person holding power of attorney granted in a public deed with powers to manage all the assets of the grantor/shareholder in Spain.

Said wording of the LSC anticipates as usual that Spanish Limited Companies are composed by a few shareholders, who in addition have family or friendship ties. Consequently, shareholders are not willing to let any person who is not part of their inner circle attend the General Shareholder’s Meeting.

In our opinion, this rule makes more difficult today’s common business practice for shareholders of Spanish Limited Companies, who are companies, to be represented by a third person employed in their internal corporate structure (v.gr. project manager, finance director, legal in house, etc.) or even by external lawyers. The reason why we think this legal provision is obsolete and should be removed is that the power of attorney to be granted to this representative natural person must be so wide as to allow the legal agent to manage all assets of the grantor in Spain. Even a general power of attorney for representation at Shareholder’s Meetings would not suffice for a valid representation of the Grantor.

Unfortunately, not only international trade is affected, but also domestic trade. In the event that a shareholder cannot attend a Shareholder’s Meeting and wants a third party to attend in on his behalf, and the requirements of article 183 LSC are not fulfilled, the agreements adopted may be null.

The discussion has supporters and detractors.

On the one hand, the General Directorate of Registries and Notaries (Dirección General de Registros y del Notariado, hereinafter, “DGRN”), has relaxed the abovementioned requirements, understanding that a power with broad faculties could be enough to attend and vote at Shareholder’s Meetings (RDGRN de 20 de octubre de 1992 [RJ 1992, 8575] y RDGRN de 10 de mayo de 1994 [RJ 1994, 4085]).

On the other hand, the case law has been inflexible and has defended the strict requirement of formality described (Judgement of the District Court (hereinafter, “SAP”) of La Coruña, Sec. 4ª, 26th october 2011; SAP Alicante, Sec. 8ª, 13th July 2005; SAP Barcelona, Sec. 15ª, 11th January 2008; SAP Madrid, Sec. 10ª, 17th October 2005).

Due to the split of views and interpretations, the Supreme Court has passed the Sentence of 15th April 2014, supporting the interpretation of the case law.

The truth is that this formal requirement is excessive and hampers business without reasonable cause, especially in a globalized and constantly changing world.