Spain – Royal Decree-Law 8/2020 of 17 March: Videoconferences and Resolutions in Writing Without Meetings for Shareholders’ Meetings Also?

23 March 2020 - Christian Krause

The answer should be “yes,” without a doubt. The reasons for which it should be understood that sections 1 and 2 of Article 40 of the Royal Decree-Law 8/2020 of 17 March on urgent, extraordinary measures to deal with the economic and social impact of COVID-19 (“RDL”) are also applicable to shareholders’ meetings in mercantile companies are as follows:

1. The RDL results from the entry into force of Royal Decree 463/2020, of 14 March, which declares the state of alarm for the management of the health crisis caused by COVID-19 (“RD”). By virtue of this RD, the Spanish government establishes limitations on the circulation of people and the carrying out of activities. There is a specific exception in Article 7, which allows travel to one’s workplace to carry out one’s “labour, professional or business service.”

In spite of this exception, formulated in a generic manner, and where it may be understood that the performance of the position of member of the management body (órgano de administración) of a company is included in the aforementioned exception, the RDL facilitates the adoption of resolutions in said body, but does not seem to say anything with respect to the general shareholders’ meetings.

Nevertheless, it should be understood that the shareholders of a mercantile company have the same facility to adopt those resolutions that the company needs during the state of alarm. And if this is not the case, at this exceptional time, one must ask oneself: what body is authorised to structure the administration of a company (in accordance with its most urgent needs) and to appoint its members? What body authorises certain “necessary” business deals in accordance with Article 160 of the Law on Capital Companies (Ley de Sociedades de Capital or “LSC”)? Finally, what would happen if the sole director passes away as a consequence of the coronavirus and the company requires the subsidies promised by the government?

It would not make sense to grant such facility to the directors and not to the highest decision-making body of a company.

2. The use of the term “órganos de gobierno” (governing bodies) in the RDL might seem confusing. It may seem as if it were only a synonym for a management body (órgano de administración), alluding to legal persons in private law other than mercantile entities. I cannot agree with that.

The general shareholders’ meeting, among the faculties which the law grants to it, governs a company just as the management body does. Both are corporate bodies, governing bodies and decision-making bodies; however, each decides and governs the company within the legally stipulated scope.

Furthermore, the title of Article 41 of the RDL refers to the “órganos de gobierno” of listed companies. If we analyse the text of said article, it must be concluded that said definition includes both the management body and the shareholders’ meeting. See section b of Article 41.1.

If we refer to the preamble of Law 31/2014, which modifies the LSC to improve corporate governance, said preamble declares that “a fundamental aspect for companies to function correctly and for the appropriate balance among its governing bodies is the regulation …” Subsequently, in the articles of the law, issues are regulated for both the general shareholders’ meeting and for the management body. As such, it should be concluded that the term “órganos de gobierno” refers to both the shareholders’ meeting and the management body.

3. Regarding shareholders’ meetings by videoconference: the LSC foresees attendance by electronic/telematic means for Spanish companies (sociedades anónimas) but leaves out any mention of regulation with respect to Spanish limited liability companies (sociedades limitadas). The General Directorate for Registries and Notarial Offices (DGRN) (Decision dated 19 December 2012) understands that this does not prevent, if there is a statutory prevision, that limited liability companies may also hold meetings this way. It follows the same criteria to resolve issues relative to the remote casting of votes ahead of time for general shareholders’ meetings or the delegation of the vote by electronic/telematic means, in cases of limited liability companies, as well as the casting of a vote by electronic/telematic means without a notarised signature and without an electronic signature.

Legal doctrine has also understood that by applying Article 28 of the LSC, and provided that the laws or the “principles configuring the chosen corporate form” (los principios configuradores del tipo social elegido) are not infringed, the members (socios) may regulate in the bylaws the holding of the general members’ meetings for limited liability companies by electronic/telematic means.

On the adoption of resolutions in writing and without meetings for the General Shareholders’ Meeting: this institutionalised practice, which some authors have called “hidden,” could be considered as accepted. In this respect, Article 100 of the Mercantile Registry Regulations for both forms of companies and corporate bodies, Article 189 of the LSC for Spanish companies (sociedades anónimas) and the Resolution of the DGRN of 8 January 2018 on limited liability companies should be mentioned.

These criteria, rulings and regulations arise from the need to render more flexible the day-to-day dealings of a company in an ever-more globalised, complex world. The situations the company faces require agility and regulation appropriate to its needs at any given time, based on the will of the shareholders when establishing pacts and conditions in the bylaws in the absence of an express prevision/prohibition under law.

More information: Christian Krause