Proportional Representation Valid Option for Spanish S.L.

14 January 2010

On March 6, 2009, the Supreme Court handed down ruling 138/2009 which, in addition to serving as a setback for shareholder agreements, also included a call in favour of recording proportional systems of representation for limited companies (Sociedades Limitadas or S.L.s) with the Commercial Registry.

The Limited Liability Company Act, unlike the Corporation Act, does not expressly foresee this possibility in its articles nor does it exclude it. The Commercial Registry regulations on the other hand do veto the recording of these types of clauses with the Registry.

This ruling therefore goes against Article 191 of the Commercial Registry regulations which establishes that the appointment cannot be made by co-option or a proportional representation system.

We understand that the legal decision is logical since the regulation goes beyond that strictly required by law. It would be best if, hereon after, the new case law doctrine is applied and the proportional representation clauses included in the articles of association for limited liability companies can be recorded with the commercial registry without encountering any obstacles.

For further information please contact Eric Jordi: