Partial amendment of the Spanish Law on Capital Companies

On 3 May 2021, Law 5/2021 of 12 April, which partially amends the Spanish Law on Capital Companies (LSC), came into force. With it, Spain transposes the Second Shareholder Rights Directive (SRD II), passed by the European Union on 17 May 2017, with the aim of strengthening investor rights and improving communication between the company and its investors.

Law 5/2021 introduces reforms that primarily affect publicly listed companies; however, it also contains certain important amendments applicable to non-listed companies, which we examine in this note.

Remote attendance at general meetings

The amendment of Article 182 LSC now allows shareholders of limited liability companies (sociedades limitadas, SL) to attend general meetings by electronic means when so provided for in the articles of association. Until now, this option was reserved for Spanish PLCs (sociedades anónimas, SA), although the Directorate General for Registries and Notaries had already recognised the possibility of remote voting by shareholders in SLs, but not remote attendance as such. The provision lays down special rules on the exercise of the right to information by shareholders attending the meeting in this way.

If the articles of association provide for the possibility of attendance at the meeting by electronic means, the notice of call must describe the deadlines, forms and methods of exercising the shareholders’ rights to enable the meeting to be properly conducted.

In particular, the directors may decide that the statements and resolution proposals intended to be made by those attending the meeting by electronic means are to be sent to the company prior to the convening of the meeting.

Shareholders who attend the meeting remotely and exercise their right to information at the same must receive the answers during the meeting or in writing within seven days of the end thereof.

General meetings held exclusively by electronic means

The new Article 182 bis LSC, introduced by Law 5/2021, allows SLs and SAs to hold their general meetings entirely by electronic means, as long as this is provided for in their articles of association. The rule refers to the remote attendance of only shareholders or their representatives, but in our opinion, there is nothing to prevent directors from also participating in this way. In existing companies, a prior amendment of the articles of association will be necessary in order to include this possibility, which must be agreed by shareholders representing at least two thirds of the capital present or represented. We consider that, in addition to this majority, in a SL the votes in favour must represent at least half of the total votes, including those of shareholders who do not attend the meeting.

It should be remembered that, exceptionally for the year 2021, Royal Decree-Law 34/2020 provides for the possibility for companies to hold their meetings fully electronically, even if this is not permitted by their articles of association.

Pursuant to the new Article 182 bis LSC, the holding of an exclusively electronic meeting is subject to the identity and entitlement verification of the shareholders or their representatives being guaranteed, as well as to all attendees being able to participate effectively in the meeting by appropriate means of remote communication (either video or merely sound), supplemented, where appropriate, by written messages during the course of the meeting (e.g. a chatroom). The aim is for all of them to be able to exercise their rights to speech, information, proposal and vote in real time, and to follow the interventions of the other attendees by the same means of communication. To this end, the directors must take the necessary measures in accordance with the state of the art and the circumstances of the company (in particular the number of shareholders).

The notice of call of the meeting should provide information on the formalities and procedures to be followed for the registration of shareholders, the drawing up of the attendance list and the minutes of the meeting, and the exercise by shareholders of their rights. The specific procedure will depend on the platform chosen for the meeting, which may consist of access by means of a link or password, which must be stated in the notice of call or may be sent to the shareholders electronically when provided for in the articles of association. The minutes, which must in any case be in writing, may be limited to the text of the resolutions passed and a recording of the meeting may be attached to them.

Article 182 bis LSC refers only to the call of the meeting, but it must also be understood to apply to a universal meeting, i.e. one at which all shareholders are electronically present or represented by proxy and unanimously agree to hold the meeting and the agenda of the same.

Participation in the electronic meeting may be made dependent on the shareholder registering in advance, but the required advance notice may not exceed one hour.

When the meeting is held exclusively by remote means, it shall be deemed to be held at the registered office, irrespective of where the chairman of the same is located.

Persons related to the directors

Law 5/2021 amends Article 231 LSC to clarify that the following are deemed to be persons related to directors who are natural persons: companies or entities in which the director holds a shareholding that gives them significant influence (which is presumed to be at least 10% of the capital or voting rights) or when they hold the position of director or senior manager in them or in their parent company, as well as the shareholders whom the director represents on the management body (which should be understood as referring to cases where the director has been appointed by proportional representation in a SA or by a group of syndicated shareholders).

Intra-group transactions

In order to protect and balance the interests of the group and minority shareholders, the new Article 231 bis LSC establishes in which cases an intra-group transaction requires the approval of the general meeting or the administrative body.

The approval of transactions entered into by a company with its parent company or with another company of the same group (transactions which, as a general rule, will involve a conflict of interest), is the responsibility of the general meeting when it is a matter for which it is legally competent (e.g. transactions involving so called essential assets) or when their value (that of the transaction or the total value of all the transactions provided for in a framework contract) exceeds 10% of the company’s assets. In other cases, the competence to approve the intra-group transaction lies with the management body (which may delegate it under certain conditions), but if in such a case the vote of the directors linked to the parent company is decisive and the resolution is challenged, the burden of proof is reversed, so that it is up to the company and the directors affected by the conflict of interest to prove that the resolution is in the company’s interest (entire fairness test), or that they exercised due diligence and loyalty in the event that they are held liable.

Autor: Axel Roth
Autor: Carlos Fernández