Insolvency Proceedings and Company Types: A Comparative Analysis, Apuntes de Derecho Mercantil

¡Descarga Insolvency Proceedings and Company Types: A Comparative Analysis y más Apuntes en PDF de Derecho Mercantil solo en Docsity! UNIT 1: Introduction to commercial law -Commercial law regulates the acts of commerce -Commercial law: as a general idea it is private, but some aspects are public -CEO=Consejero Delegado 08/09/2021 Units 1-3 -Why do we have commercial law? What is it meant to regulate? -It is meant to regulate trade and acts of commerce -Originally, commercial law was meant to regulate the relationships of merchants. The first regulations had a very wide perspective but then countries began to develop their own national rules with their own national perspectives. -In the 1970s we have the EEC and then the EU. The aim of the EU is to create a single market. In order to create it we need rules to regulate the market that apply to everyone the same way. EU Directives are very relevant in commercial law -Trading and traders. Who is the business person and what is a business? -Business person: anyone who, in his own name, offers goods or services in the market as a professional activity -Business (≠company): it is the combination of capital and work that is used to develop a commercial activity -Is it possible to sell a functioning business as a whole? If yes, what exactly would you be selling/buying? -Yes, the business can be sold and transmitted as a block (Sánchez Calero, 2020). What would be sold are the set of elements, both material and immaterial (rights, obligations, know how), which make up the business and which are essential its maintenance/way of being and exploitation (Sánchez Calero, 2020). In other words, the necessary instruments to develop the comercial activity of the business i.e. the goods and rights which ensure the continuity of the business. Two basic theories: -Atomistic: each thing as to be sold individually -Courts have accepted: we can sell a business as a whole but we need to pay attention to some tricky elements e.g. labour relationships (innovation contract), debtor-creditor relationships (contract would change/innovation of credit, creditor’s express consent needed when there is a new debtor; when there is a new creditor the debtor must be expressly informed of who he must pay the debt to). These relationships may be included in a single contract but they must be individualized when we execute the transfer. 
 -Characteristics of this contract: a business may have a higher value than all the assets sold individually. -Obligation: the previous owner may not compete with the buyer of the business until they are established (determined by the uses or customs of the place). -Selling a company (≠ selling a business): not the same as selling a business i.e. selling shares. There is no innovation of relationships, the entrepreneur is the same, creditors are still owed by the same company and debtors still have to pay the debt to the same company. There is no change in the entrepreneur. Selling a company may include a business but as stated before there is no innovation in relationships. -Entrepreneur: natural person or legal person that develops, in his own name and behalf, a commercial activity -The liability regime is the same for the natural person and the legal person i.e. universal liability of the debtor applies here (art.1911 CC): present and future patrimony is used to pay debts. Entrepreneurs are also liable for tort law and damages against consumers. -Individual entrepreneur: there is no distinction between his professional (business related) and personal patrimony in the sense of liability. Everything is business patrimony and everything is affected. -How can individual entrepreneurs limit their liability? 1.Create a single share company, then they can distinguish personal patrimony from the company patrimony. What is the risk? There might be confusion between the company’s patrimony and the shareholder’s patrimony. There needs to be distribution of profits. The shareholder may be using the assets of the company for his own purposes and taking them out i.e. -However, there are specialties within the insolvency proceeding when it comes to entrepreneurs -Companies have their own legal personality so they function with their own patrimony -Two types of companies: -Personal companies (sociedades personalistas): the personality of the partners is very important. They can contribute to the company with their own personal work. If the patrimony of the company is not enough to cover a debt then there’s some subsidiary liability of the partners. -Capital companies (sociedades de capital): the partners have to give something to create the company’s capital (money, goods or rights that have an economic value). They receive shares of the company in return. These companies have the full legal personality i.e. they act in the market in complete separation from the shareholders. The shareholders can’t contribute with their own personal work. -Labour, Tax, Administrative and Criminal law are related to Commercial law -What are the economic principles of the Constitution? -Right to private property. Limit: subordinated to the general interest when it is necessary. -Free market -Competition regulation: rules that are meant to protect the market and consumers. You cannot damage the market. We have national and European administrative authorities which control this. -Sources: commercial law, uses and customs, common law (meaning civil law) -Specialized commercial courts: insolvency proceedings, industrial property law….. 09/09/2021 What kind of entrepreneurs are there? -Legal person -Individual person -Distinctions in sizes: PYMES and big companies -Private entrepreneurs and public entrepreneurs—the Government may engage in business through private companies. 13/09/2021 Can an entrepreneur have collaborators? What kind of collaborators? -Collaborators: people needed by the entrepreneur in order to develop their business i.e. those who directly or indirectly assist in the exploitation of the commercial activity -Independent collaborators: they are considered entrepreneurs themselves. For example: agency contracts, franchise contracts. There are commercial contracts between both entrepreneurs i.e. they have a commercial contractual relationship with the main entrepreneur. -Dependent collaborators: those that depend on the entrepreneur, there is a relationship of subordination. For example: employees (there is a labour relationship). -Individual proxy (proxy=power of representation): appointing someone to represent you for a specific action -General proxy (poder general): you’re going to be my representative for everything related to the business e.g. manager (usually the general proxy of the business). This proxy is usually named “factor general” or “factor de comercio.” It is defined in the Commercial Code: the individual authorised to develop the business in name and on behalf of the entrepreneur. Senior management: special regulation (different from the common regulation for workers) -Factor notorio: someone who appears to act on the name and behalf of the entrepreneur but has not been appointed as such or signed a contract. He will still be considered a factor and is under the same regulation as a factor. He will suffer all the consequences of being a general proxy. -What is the basic obligation of the general proxy? To follow the basic instructions of the entrepreneur. They have a general prohibition to compete with the entrepreneur. Consequences if they compete with the entrepreneur: all the profits are going to the entrepreneur and all the losses will be suffered by the general proxy. -Capacity of the entrepreneur? -Must be 18 years old and have full legal capacity -Minors cannot engage in a new business -Emancipated minors still don’t have full capacity for certain acts of commerce (they can’t mortgage, they cannot borrow money) -Must not have been incapacitated -Must not have been sentenced in certain cases e.g. insolvency proceeding and condemned not to trade anymore for X years and cannot be appointed as general proxy -Minors and those who have been incapacitated may become entrepreneurs only when they are continuing the business of their parents or testator (causante) with the help of a tutor/guardian, who will be under the safeguard of the judicial authority Unit 4 -Why does the Business Registry exist? -Transparency before interested parties and public authors -Publicity 1) Legal publicity is the main reason for its existence. -The main function of the Business Registry is to be an instrument for the publicity of certain legal situations of entrepreneurs, both natural and legal persons. For example: situations such as their existence, to their subsequent modifications, which includes the moment of the end of their entrepreneur condition -Legal publicity is the main function of the Business registry but it has other functions: the registration of the entrepreneur (individual or legal) in the Registry. The existence is the first thing that we are going to disclose and all the acts that have to be known by interested parties in order to accomplish legal publicity. -Other functions: 2) Deposit of the annual accounts: every year the annual accounts have to be entered in the Registry 3) Appointing independent experts and auditors -Auditors check the accounts of certain businesses -Independent experts: people that have to be appointed under some circumstances in order to solve problems e.g. in order to create a capital company the owners have to give something in exchange for the shares. That something can be money but it also can be goods or rights that have an economic value. When we have to determine the value of those rights or goods we need an independent expert. 4) Legalise the corporate books: companies have to give some books e.g. those which contain the decisions that have been taken by the company. allegations from both sides and decide, via resolution, on the denial problem. If the entrepreneur disagrees with the resolution they can go to the Commercial Court. 7. “Tracto sucesivo” principle: in order to register acts or contracts related to a subject who can be registered, the subject’s previous registration will be required. In order to register acts or contracts which modify prior acts or contracts, the latter must have been previously registered. In order to register acts or contracts granted by proxies or managers, their prior registration will be required. -Does the register have declarative or constitutive effect? -Declarative efficacy: declares that something exists -Constitutive efficacy: needs the registration to really begin to existe (event/relationship, etc). -General rule: declarative effect. The validity of the inscription doesn’t create an event/ relationship. The purpose of the transparency/publicity/legal security and legal efficacy in front of third parties is to protect the market. -Some events have to be registered in order to exists (constitutive efficacy): capital companies need to be registered in order to be created/exist (why? Due to the limited liability of the partners) -Each province has a business registry and there is also a central business registry (centralizes all the information of the business registries of the provinces). -E.g. I’m a company, I go to my province’s registry and a personal sheet is opened and everything is introduced in a chronological order. The basic data is going to be sent to the central business registry. After it is received, it is published in the BORME (bulletin with the basic data of what has been registered in the provincial register) -For specific data you have to apply to get the information in the registry of the province of the entrepreneur i.e. where they have registered -If I don’t know where the company/entrepreneur is located you can ask for a “nota simple”—it is an informative note— or a certification of content to the central register. Two ways of obtaining information: -Certification of content: -They have legal power to prove data, the certification is given by the provincial registry. Has probatory efficacy. -Exception to the issuing of certification: the central business registry is capable of issuing the negative denomination certification i.e. for company names. How do I know if the company is named like the one I want to create? This business registry know every single company that has been created in Spain. You create a list, in order, of possible names. They let you know if one is available and that denomination is kept for the entrepreneur for six months. -Informative note or “nota simple”: it contains basic data of the registration, given by both the central and provincial registries. The nota simple has no certification power i.e. no legal power of stating that the facts are true. 16/09/2021 Unit 5 -Why should competition be protected? -Competition encourages competitors to improve their services/products -In order to protect the market economy -What is the basic regime in Spain? The regulatory framework in Spain? How is it structured? How is it different from the EU regulation? -In Spain: -Competition act (15/2007: Defensa de la competencia: it declares the existence of effective competition between businesses). It has a public spirit because it is meant to protect the market. It comes form the TFEU and it is applied by the public authorities: EU Commission and the National Commission of Competition -Consequences o infringement of the competition act: the previously mentioned authorities may review the events that have been threatening the market and in case there is something that can be sanctioned they will impose sanctions -If the events may have an effect at a European level, the EU Commission will act. National level: National Commission -Unfair competition act (3/1991): meant to prevent unfair competition between competitors and protect consumers. It has a private perspective. The direct damage caused to other competitors and/or consumers and, in the end, it could also damage the market. Commercial courts solve these cases. They will not act ex officio, competitors and consumers have to sue. 3.Competition law/act, three main issues (antitrust law)? (always included in the exam: study everything on the campus i.e. judgements too) -Competition law/antitrust law applies to entrepreneurs and everyone that trades and acts in the market 1.Prohibited conducts: they threaten the market -Three different conducts: 1.Collusive conducts (art. 101 TFEU and 1.1 LDC) -Definition: agreements, decisions, collective recommendations, concerted or consciously parallel, which produce or may produce the effect of preventing, restricting or distorting competition in all or part of the national market (art. 1.1 LDC) -Cartels: independent entrepreneurs which join together/agree to carry out conducts which may or actually distort the market e.g. by fixing prices, limiting production, etc. In other words, instead of competing against each other, they rely on one another’s agreed course of action (take a look at the Road Cartel case). Cartel: basic example of all the collusive conduct -Typical example of a collusive conducts (check the article, but there can be more): fixing prices, limitation or control of distribution of the product, limitation or control of production, applying dissimilar conditions to similar relationships (i.e. vertical relationships), positioning a competitor in a significant disadvantage, subordination of the conclusion of contracts to the acceptance of conditions which are not related to the contract, limitation or control of technological/technical development and investments. -Everything is going to be considered null e.g. contracts which are a result of the collusive conducts. Under some circumstances collusive conducts are allowed (art. 103 TFEU) participes realicen individualmente en España un volumen de negocios superior a 60 millones de euros. -Procedure: 1. First stage: we communicate our intention before we merge and the Commission decides whether it authorizes the merger or it needs more information to make a decision 2. Second stage: the commission gets more information and determines whether the market will be affected or not. -Fees must be paid to get through this procedure -The companies must comply with the conditions that the Commission sets -Different limits depending on whether the merger has a national or a community scope -“Europe does pay traitors": explain the EU leniency policy. -Actors whom provide sufficient information about a cartel in which they have participated may receive full or partial immunity from fines that are going to be imposed on the participants of the cartel -Also applies in Spain 23/09/2021 -Minimis are conducts which fall under the category of collusive conducts but, due to their low importance, are not capable of significantly affecting competition or the market. -Limit: less than 10% of the market affected between competitors, less than 15% of the market affected when it comes to non-competitors (vertical agreements) -Even though it is a collusive conduct it has no capacity to affect the market. This regulation seeks to protect the market, so there is no need to sanction. -Art. 101.3 TFEU (art. 1.3 of the Spanish Competition regulation): when the result of the collusive conduct improves the market and/or benefits the consumers. -Art. 101.3 TFEU (take a look at the regulation on motor vehicles on the campus): -The provisions of paragraph 1 may, however, be declared inapplicable in the case of: - any agreement or category of agreements between undertakings, - any decision or category of decisions by associations of undertakings, - any concerted practice or category of concerted practices, -which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. -Art. 1.3 LDC: La prohibición del apartado 1 no se aplicará a los acuerdos, decisiones, recomendaciones y prácticas que contribuyan a mejorar la producción o la comercialización y distribución de bienes y servicios o a promover el progreso técnico o económico, sin que sea necesaria decisión previa alguna a tal efecto, siempre que: a) Permitan a los consumidores o usuarios participar de forma equitativa de sus ventajas. b) No impongan a las empresas interesadas restricciones que no sean indispensables para la consecución de aquellos objetivos, y c) No consientan a las empresas partícipes la posibilidad de eliminar la competencia respecto de una parte sustancial de los productos o servicios contemplados. -Relevant market: -Two criteria to establish what a relevant market is: 1.Product/service market: comprises all those products and/or services which are regarded as interchangeable or sustituible by the consumer, by reason of the products’ characteristics, their prices and their intended use 2.Geographical market: comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas Unit 6. Unfair competition: study on our own (know up to art. 31 of the LCD) 29/09/2021 Unit 7: Inventions and other industrial creations -Industrial creations (not intellectual creations, not ideas) -Why do you think there is a regime for the protection of inventions or industrial creations? -To encourage technological investigation and economic progress as new and useful products favour the economy and in order to gratify the effort of inventors -Give them free access to the market and recognize them the right to be the only ones to exploit this invention for some time. However, they also have the obligation to exploit this creation. -Patents: the monopoly right which protects inventions -A patent is the a title which incorporates the right to exploit the patented invention. It necessarily refers to an invention, although it is essential that it is a new invention that involves an inventive/novelty step and is capable of industrial application (art. 4.1 Patent Law) -20 years for the exclusive right. You get the right when you have registered the invention. -What can be patented? -Objective requirements -Positive requirements: -The right to prevent others form exploiting it (not from recreating the invention for personal use) -Who owns the patent? -Utility model: giving a new shape or consistency to an existing product which gives it a substantial advantage. -Trademarks are shapes, sounds, smells, mp4s, combination of words, not just names… anything which can be reproduced 06/10/2021 -Patent right: 20 years, non-renewable -Patent as a traded object -Contractual licences: -They can decide on the geographical area of exploitation, exclusivity, and the term of licensing this right -Unless it is expressly provided in the contract, sublicensing is not permitted -Ex officio licenses (de pleno derecho): -Public announcement through the trademarks and patents office -Anyone can get a license but they must pay a fee to the patent owner -Non-exclusive right to those who want to use and pay for it -The owner decides the price, but the office states whether it is reasonable or not and it has to be reasonable -When I offer it I won’t lose my patent right if I don’t exploit it -Compulsory/mandatory licenses: -Lack of exploitation to satisfy the needs of the market by the patent owner -Public interest (the only situation in which it is an exclusive right) -Satisfying the pharmaceutical needs of third world countries -Due to anticompetition behaviour -(The financial terms: I will get paid at a reasonable price but I won’t decide the price) -Selling the patent -The patent may be charged with other rights: pledges, real guarantee rights, usufruct, mortgages -To go against those who are abusing my patent right: -Examples of actions: -Compensation/damages: indemnización -Cessation action: stop others from what their are doing -Cease all the products that have been made against their patent right -Options: -Destruction -Give them for humanitarian purposes -Prevent them from doing it again -Publication of the resolution in the news or wherever the Court thinks its convenient so everyone know that the patient has been infringed -Utility models -No worldwide novelty needed, only in Spain -Inventive step: lower requirements -Changes in structure or configuration which give the product an advantage -10 years (term), non renewable -Can only be granted for products, not procedures -Art. 137 LP definition: utility models are new configurations, structures or compositions of an object or product which entail an inventive step, which result in a practical advantage for its use of manufacture -Industrial design: -5 years, renewable up to 25 years -New designs that give speciality to the product -Refers to the appearance of all or part of the product which derives form its formal characteristics: shape, lines, edges, color, texture, materials, ornaments -An industrial design can be registered if it has novelty and it is unique (singularidad) -Novelty: no identical design has been disclosed to the public before the request for its registration has been presented -Unique: refers to the impression generated by the design on an informed user. This impression must differ from the impression that any other design accessible to the public may cause on that same user prior to the submission of the registration application Unit 8. Protection of the distinctive signs of the business -Trademark: -Purpose: to identify products or services in the market -Anything that has distinctiveness (from other products or services) or has distinctive power and can registered in any type of file susceptible of being registered (e.g. mp4, mp3, etc): words, slogan, forms and figures, the shape of the product, holograms, sounds, signs, number sequences, colors with a purpose i.e. combinations/patterns, position. -Company name not necessarily a trademark (company name is registered in the Business Registry). The company might register as a trademark. -Commercial name: refers to the identification of the company in commercial traffic (we must not confuse it with the company name that refers to the legal person subject to relationships, rights and obligations, which is registered in the Business Registry). Both the trademark and the commercial name are registered in the Spanish Patent and Trademark Office (OEPM). -Prohibitions: -Anything that doesn’t have distinctive character: for example, flags or public elements, other trademarks or commercial names -Is it possible to register a personal name as a trademark? -You can only register your own personal name as a trademark (own real name) or a made up name if there is no risk of confusion -Vulgarization of a trademark: risk of losing the trademark when everyone uses the name to refer to the product e.g. Kleenex, Tupperware. They must fight anyone who is using the trademark for other products. -To determine whether a trademark has been vulgarized there are two requirements: 1.Objective requirement: that the trademark is currently the usual designation of the product or service for which it was registered 2. Subjective: that the loss of distinctiveness is due to the activity or inactivity of the owner -I can name it whatever I want as long as I’m not going against public order and always respecting trademark law (I’m not using a registered trademark) and I’m not infringing any of the dispositions of the unfair competition act 11/10/2021 Unit 9: General Theory of Company Law -Company: a contractual relationship in which partners put things together and to try to achieve a common goal -Historical perspective, when did they show up? -Middle Ages: development of commercial activities during the colonial ages. They were financed by the different Kingdoms of Europe. They were the first companies of what we know of as capital companies: the investors contributed the money and somebody else developed the activity -Industrial revolution: biggest growth of companies due to the creation of the industrial system. They needed to get together in order to join capital (money) and labour. -Elements of a company: -It is an agreement between different people. Exception: there is a possibility of having a single share company i.e. it could be a single declaration of will. -Agreement that may be multilateral or an agreement of a single partner or shareholder -Elements of the contract: -Perfection: the agreement of the parties involved -A company is created through a public deed and then registration in the Business Registry -Object of the contract: the obligation to contribute to this common goal -Cause of the contract: economic and social goal of this company -Purpose to achieve a common goal even if it is not profitable -In strict terms, this common goal has to be profitable -Personal companies: need a profitable purpose in order to make it a commercial company (otherwise it will be a civil company) -Capital company: it is always going to be a commercial company, regardless of its purpose -We are taking about an agreement between different parties and this common goal has to be obtained through the contribution of the members. Depending on the type of company the contribution will be different (personal companies: money, assets or personal work; capital companies: money, assets, rights) -Structural organization -Depending on the type of company they will be more flexible or less flexible -Aim to distribute the profits Questions -How does a partnership (personal based companies) differ from a limited liability company? -Perfection of the contract: agreement or single act, given through a public deed and then we have the obligation to register this company in the Business Registry -Partnerships: registration of partnerships is merely declarative, it is compulsory, but registration won’t determine that it exists (sociedad colectiva/personalista) -Capital companies: registration is constitutive, we don’t get full legal personality until we register -Types of companies -2 groups -Partnerships (sociedades personalistas) -General partnerships (sociedades colectivas) -Simple limited partnership (sociedad comanditaria simple) -Capital companies (sociedades de capital or sociedades capitalistas): they all have limited liability for the partners -Joint stock company (sociedad anónima) -Limited liability company (sociedad limitada or sociedad de responsabilidad limitada) -Limited partnership by shares (sociedad comanditaria por acciones) -All of these are commercial companies -Partnerships are regulated in the Code of Commerce while capital companies are regulated in the Ley de Sociedades de Capital -Partnership: the personal elements of the partners matter, they don’t change. -Differences between partnerships and capital companies: -Partnerships: they are based on the characteristics of the partners, the personal elements of the partners are really relevant -Structural organizational structure: -Partnerships: less complex, the importance of the partners is really relevant because as a general rule there is no possibility of transferring the status of partner. There is no separation between property and management. Partners develop the management of the company. -Capital companies: complex corporate structure this means that the personal circumstances of the partners are not relevant in this type of companies. The partner status is transferrable. They can sell their participation to someone else e.g. listed companies. Each day, shareholders are changing. We have the general meeting and a managing body (that may or may not be constituted by the partners: the directors do not have to be partners or shareholders of the company). There is a distinction between property and management. -Patrimonial communication: -Partnerships: the patrimony of the company is not completely separated from the patrimony of its partners. They will be liable for the debts of the company -Capital company: they have unlimited liability of the company and limited liability of the partners. When the company is created, a separate patrimony is created with the partner’s contributions. They will not be personally liable for the debts of the company -Contributions to patrimony of the company -Partnerships: money, assets, rights and the partners’ personal work -Capital companies: money, assets and rights, NO partners’ personal work Legal personality -Date of beginning of the activities: usually the same day as the day of the incorporation the company -Term: duration of the company: it shall define the possibilities of liquidation in the company. If there is no term, at any of the moment, any of the partners can ask for the termination of this company -Capital each partners is contributing: money, goods, rights that have an economic value, personal work of the partner. -Identification of the partners to whom the management and representation of the company is entrusted: as a general rule, all the partners are entitled with the management (we will study more on this) -Any other terms or conditions which the partners may find necessary to include: functioning of the company, representation powers, participation in the profits, decision of continuing with the existence of the company in case a partner dies, internal relationships…. -Who can be a partner? -Natural person: anyone that can develop and entrepreneurial activity (legal age, full disposition of assets, not have been incapacitated, not have been sentenced in certain cases) -Legal person may be partners -A capital company may be a partner of the general partnership. It will be subsidiarily liable for the general partnership -Internal relationships between the partners: -Status and obligations -These are determined by the partners in the public deed in their private agreement -The law will be subsidiarily applied -Management and representation of the company: -General idea: all partners are meant to manage and represent the company as it is a personal based company -How do we manage the internal relationship between those partners? -The law establishes that all partners are meant to manage the company all together, but only the one entrusted with the management of the company….Three possible management situations: 1.In the absence of agreement, all the partners are meant to carry out the management together and are equally entrusted to take part in this management: all the partners have to make decisions unanimously. Each partner has a veto vote. 2.It is given to some partners but not to all of them and they decide how they make decisions (act together or through a collegial/majority system). What happens with the non-managing power? They keep their right to supervise and to be informed of what is happening in the company. They shall not interfere on the managing that the managing partners are developing. 3.Statutory management (administrador estatutario): when in the deed it is stated which partner will be entrusted with the management forever. This partner shall not be removed. -If the manager is not following/accomplishing his duties: -Co-manager can be appointed by the rest of the partners -The rest of the partners may sue the management partner (liability actions) -Any of the partners can ask for the dissolution of the company -Competition rules -General rule: there is a prohibition for partners to compete with the company: partners shall not develop any economic activity outside the partnership that they are engaged in which may compete with the company. 1. Industrial partners, unless the company expressly allows it, cannot exercise commercial activities of any kind on their own account, regardless of whether the public deed defines the corporate purpose (art. 138 Cco). This partner contributes only work to the company and what is wanted, in principle, is that all of his or her activity is carried out in favour of the company 2.The rest of the partners: -If the public deed does not define the corporate purpose: the partners cannot develop any commercial activity. They need the the company’s authorization and it can only be denied if the activity poses an effective and manifest damage to the company -If the corporate purpose is defined in the deed: the prohibition is limited to the corporate purpose. Then the partner can develop any other commercial activity i.e. an activity which is different from the company’s -However, the partners can even compete with the company if it has been expressly agreed by all of the partners (art. 137 CCo) -Profits and losses: -Distributed as determined in the public deed. Otherwise: -Profits: proportional to the contribution of capital and the profit of the industrial partner will be equal to the minimum asset contributed -Losses: the capital contributors will participate in losses in proportion to their contributions, the industrial partner will not participate in the losses (OJO: only within the internal relationship of the partners, the company’s creditors can still go against the industrial partner) -Obligation to develop the accounts and deposit those accounts every year. Those accounts will show whether we have profits or losses (entrepreneur obligation) -Representation of the company: right to act and sign in the name and behalf of the company) (READ ABOUT THIS ON MANUAL) -If nothing is stated in the public deed -If we have a third party entrusted with the representation, any kind of limitations imposed on the industrial partner, don’t apply to third parties -What happens if there is an abuse of the representation power by the industrial partner? -The constitution was a privilege given by the Monarchs -There was a large difference between the partners rights -Second milestone: -Industrial revolution and the French Revolution in the 18th century -There was a huge privatization of companies, there were no longer given by monarch concession. -They needed administrative authorization to create this companies -Companies began to have general meetings that worked as a…and a managing body that worked as the government -Had bylaws which worked as the law within the company -Regulation of companies started -Third milestone -After WWI: appearance of socialism and public intervention. In terms if companies we have more public participation and worker participation inside their companies. -Fourth milestone: -Beginning of the 21st century: EU: single market and the freedom of movement of capital and people. -The EEC aimed to create common market -Harmonization through directives in company law, so that companies are regulated more or less the same so the market works in a common way. Limited liability company: -Appeared in the 19th century and it is a hybrid between the joint-stock company and a partnership. It still has some elements which are personal based. -Why was it created? To create companies with a reduced number of partners, usually related, with limited liability but based on the personal relationships of the partners. -First one was created in the UK (private company) -In 2010 it was regulated together with join stock company in the same law. -Basic characteristics of capital companies: -Capital Companies Act (Ley de Sociedades de Capital): art. 1: essential elements 1.The capital: divided into stakes (“participaciones”, OJO: for limited liability companies they are called partners, not stakeholders) or shares (acciones: piece of the capital in joint stock companies, accionistas=shareholders) -JSC/SA (sociedad anónima)= shares (acciones)= shareholders (accionistas) -LLC/SL ( soc iedad de responsab i l i dad l im i tada )=s takes (participaciones)= partners (socios) -(Limited partnership by shares: it is a joint-stock company with at least one general partner) -The capital is created through the contributions of the partners: economic contributions, goods/assets and rights with economic value, NEVER work. We don’t have service/industrial partners in these companies 2.Limited liability of the partners involved in company -Exceptions: the general partner in the limited partnership by shares 3.Mercantile character: capital companies are always commercial companies, regardless of their purpose. Any company that has been created as a capital company is a mercantile company, even if it has a civil purpose. 4.Legal personality: have full legal personality that is acquired upon registration, it is compulsory and constitutive -Before registration, it has a different regime for a year i.e. the company under formation regime -After one year, the law establishes that there is no intention to really register that company: you’ll be a general partnership or civil company depending on your purpose, which means the company is irregular and there will be unlimited liability for the partners 5.Denomination of the company (social denomination): we can have the name of some partner (has to be real and new), but you cannot include the name of someone who is not a partner of the company. You can also include an objetive denomination i.e. what do we do, you can create a fantasy denomination. -Check with the Central Business Registry: negative certification -Need to include the type of company 6.Nationality and registered office: a company shall be Spanish if it has its registry office in Spain -Forum shopping: which forum fits best according to your needs in terms of tax and company regulation. EU court establishes that you can do it as long as you’re operating in that country or establishing a branch there -Registered office: the social domicile where the company has to be established and the meetings have to be carried out there, unless something else has been established 7.Capital companies have a complex structure and are always organized around to different bodies: the general meeting (meeting of the partners/ shareholders/the owners of the company) and the management body (directors) -The most important decisions have to be made by the general meeting -the other body is the managing body (the directors): the are in charge of the representation of the company before third parties and they have the power to manage the day to day decisions. -The directors may or may not be partners. 21/10/2021 -The capital -Amount of money, assets and rights that have been given an economic value which are stated in the articles of incorporation (escritura de constitución)—the contract where we decide to create a company which also includes rules called bylaws—bylaws (estatutos)—basic rules of functioning of the company— -This capital is a fixed amount that is established in the bylaws that defines the proportion of property of each partner -Nominal value of each share= Capital/number of shares -What is the capital for? Three functions 1.Organizational function gives us the percentage of ownership of rights and shares. In principle, one share = one vote. 2.Guarantee function: -In this sense, capital is a guarantee instrument for creditors, insofar as the company assumes the obligation to preserve a patrimony equal to, at least, the amount of capital. -Since the partners/shareholders are not liable, the company needs to have something in order to respond before third parties i.e the capital -Willingness of the partners company to create the company and the concrete type of company that they want to create (e.g. limited liability company, joint- stock company, etc) -Contributions that each partner is giving and the specific number of stakes or shares that the partner is receiving for to their contribution (the concrete stakes/ shares): money goods or rights the have an economic value -Money: certified (bank certificate) that I have deposited the money in the company’s name -Non-cash: I need someone to state the real value of these goods or rights. Who is going to decide how many stakes or shares I receive for the assets? An independent expert is compulsory for joint stock companies, but not compulsory for limited liability companies (more flexible—the partners state the value and joint liability is established for the real value of the non-monetary assets for the partners) -The appointment of the independent expert is going to be made by the Business Registry. Negligent valuation: liability for the independent expert. -If we have an independent expert, the partners avoid the liability for the real value of the non-monetary asset. -This is different form the loss of value of assets over time -Company bylaws (estatutos de la sociedad) -Depending on the type of company: -JSC: prevail in the articles of incorporation the approximate expenses for the constitution of the JSC. What is the amount that we think we will be paying for the constitution of the JSC -LLC: we have to establish the exact way to organize the managing body in case we have prevailed more than one possibility -Articles of incorporation: the contract in the public deed where all of the above is included (by- laws are included in the articles) 2.What are by-laws and what are they for? -Art. 23 LSC: regulates by-laws: the basic rules for the functioning of the company from beginning to the end of the life of the company. They cannot be changed unless we carry out the legal procedure to do so. This is based on the idea that we need to protect the partners; hence, we also need reinforced majorities to change the bylaws. -Basic content of the bylaws (minimum and compulsory content) 1.Company name 2.Corporate purpose: what are we going to do, what is our activity 3.Term of duration of the company: the most common thing is that the term is undefined 4.The registered office: domicile 5.The amount of capital -The number of stakes and shares that it is divided in, their numeration and the nominal value -We have to include whether we have different classes or series of stakes or shares -Stakes or shares may be ordinary or privileged -Date of the beginning of the operations (usually the same day as the articles of incorporation are signed -The way or ways to structure the managing body meaning directors. -In limited liability companies we can establish more than one of the four options. The general meeting will have the power to decide which way will be used. Art. 210 LSC: it still says that this is an option just for limited liability companies. -In JSC I have to choose one of the ways and state it in the bylaws and at least the minimum or maximum number of members that the body will have (in case that it is more than one) -No names in the by-laws e.g. I may say there is a sole director in the company. But the position of director must be appointed in the deed i.e. X is the director. -The ways in which the different bodies conduct their decisions inside the company: how the general meeting operates and how the directors operate. -For the amendment of the bylaws you need: absolute majority (half, plus one, this majority can be increased in the by-laws) -Reinforced majority: for very important decisions such as mergers (the law establishes at least 2/3 majority, this majority can be increased in the by-laws) -There is an option which consists of pactos parasociales (shareholders agreements): contracts between some partners where they state some decisions that are going to be ruling their relationship, they are only binding for the partners that sign them. The most common shareholder agreement is the family protocol (protocolos familiares): they regulate family relationships Example of a shareholders agreement: the major shareholders cannot work inside the company as employees but they can be directors -Things which may be included in the shareholder agreement: union vote i.e. sense of the vote. In the agreement there should be sanctions for infringements. However, you cannot use infringement to go against the general meetings decisions. If all partners are in the shareholder agreement it would depend (oponibilidad de los pactos omnilaterales) -Simultaneous foundation process: what we have been studying, the most usual way to create a company. The act were we get together and sign the contract and articles of foundation. -Successive foundation process: four step procedure that has never been used (only foreseen for joint stock companies -Process of formation (study for ourselves) -Successive foundation limited company (look at this) 28/10/2021 -Sociedades en formación: they may have this regime for one year, after that they become irregular companies. The interpretation of the legislator is that there is no intention of the company to register. They do not obtain full legal personality and depending on the corporate purpose, the regime that would be applicable to the company will be civil or commercial -Nullity of the capital company (art. 56 LSC): -When they have an illicit purpose -When there is absence of essential information in the deed or the bylaws -Absence of intention of creating a company -This nullity needs a judicial resolution -The consequence of the declaration of the nullity of the company=dissolution cause. The is procedure of liquidation shall be started and it will have no retroactive effects: after the declaration, the company becomes extinct, but all of its previous activities are valid in order to protect third parties Financing of companies: -How does a company finance itself? -We know that the capital is created by the shareholders through cash contributions or non-cash contributions -They are different form a contribution -They have to be established in the by-laws -They are obligations of the partners, different from the contributions, establishing whether they are cost free or remunerated -Possibilities giving (e.g. money, not part of the capital), doing (working for the company), not doing (e.g. not competing with the company) -They are more common in small companies where there is a personal relationship between the partners. More common with LLC than JSC. -If a stake is charged with an ancillary committed and it is transmitted, it is transferred with the ancillary commitment. This transfer needs to be authorized: -By the general meeting (LLC) -By the board of directors (JSC) -If I fail to comply with the ancillary commitment LLC: if the partner voluntarily fails to comply, it is a cause of exclusion i.e. I can be kicked out of the company (art. 350 LLC) JSC: voluntary or not, the exclusion consequence is only possible if we have prevailed it in the by-laws -Reserves -In order to maintain the equivalence of capital and patrimony, there is an obligation established by the law to keep reserves -Art. 274 LSC: all companies have to maintain an amount which is equal to 20% of the capital as a reserve. -At the end of the financial year, if we have profits, we have to take at least 10% of them to go into the reserve, until we reach the amount of 20% (legal reserve) -But in our by-laws we could increase that amount e.g. 30% instead of 20%. It is law for the company. -The reserves are unavailable, they are meant to be guarantees. -Voluntary reserves: the general meeting decides to keep part of the profits for a particular purpose e.g. investing -Could we begin the company with the reserve? -Yes, it has to be included in the articles in incorporation through premiums -Foreign financing (will not be asked in exam) 03/11/2021 Unit 13. Capital Companies (III):  Stakes and Shares. Rights of the partners. Proof of ownerships and transfer -Shares and stakes are aliquot parts of the capital i.e they are proportional to the shareholders’/partners’ ownership of the company -Being a partner or shareholder means something in terms of rights: -Two different groups: 1.Political rights: -Information right: the most important right inside a company because the partners/shareholders have the right to be informed of what is going on in the company. It is instrumental because it is used to exercise the rest of the rights. -Attendance to the general meeting right: the right to go to the general meeting -Joint stock-companies: possibility of limiting this right i.e. only to shareholders who own a determined number of shares -Voting right: right to vote in the general meeting. Decisions have to be made through the majority system -Can be limited or excluded in certain situations -Right to challenge decisions made by the general meeting or directors: i.e. go to court and ask for the decisions to be declared null. This right is recognized to let the owners of the company to protect the company’s interest -Art. 204 LSC -It is a minority shareholder right: rights that are recognized when one or more shareholder owns at least 1% of the capital -Why do we have minority shareholder rights? -Abuse of the majority i.e. sometimes the majority doesn’t make the decisions in the company’s best interest but rather in their own personal interests -When we sell under price or giving things for free where someone is getting a profit we can challenge decisions because they damage the corporate interest, remember that the company is its own legal entity and its purpose is not always the same as the shareholders’ interests -Contractual theory: the corporate interests mainly consists of the shareholders’ interests -Institutional conception of the company (theory): many people depend on the development of the company e.g. employees, the community, etc. The corporate interest includes other interests different from the shareholders’ interests -Insolvency law establishes that under an insolvency procedure there is a duty shifting in the company: the creditors’ interest and their protection will be the corporate interest -Proximity of insolvency (proximidad de insolvencia): the corporate interest becomes to do whatever it takes to prevent insolvency (-Related party transaction: regulated by the law) 2.Economic rights: -Right to participate on the profits of the company which has two faces: -The right to receive a dividend from the profits (non-abstract right) -We get this right when it is decided that the profits will be distributed. If it is decided, then all shareholders get their dividend. -The other economic right is participation in the liquidation quote i.e. when the company is extinguished and if anything is left it is distributed among the partners -Preferent acquisition/assumption right (it is kind of a mixed right): right that is recognized to maintain the percentage of ownership in the case of increase in capital. This right allows the shareholders to acquire the number of new shares which will result in the same percentage that they had before the increase in capital. It is not an obligation. -Mixed because if I have more shares then I will have more political rights -Series: they all have the same rights, but they have a different nominal value -Directors: in charge of the day to day decisions -Shareholders/partners: in charge of making some other decisions (art. 160) -In the general meeting 9. How can you find out who is a partner in a company? Why is it important to know and who is in charge of keeping such control? -The first one interested in knowing who the partners are is the company -Celebration of meetings: we need to know who they are so they can attend the meeting, use their voting rights, know whether there has been a transfer -The company is obligated to keep books of the ownership and transfer of shares (specific obligation of the managing body) -One of the functions of the Business Registry is to legalize these books -Limited liability companies: -The ownership of shares is kept in a book of partners -We have the original ownership i.e. the book is started with the constitution of the company (in the by-laws) and then all the transfers are registered (since the creation of the company) -All the rights and charges imposed over the stakes have to be written down in this book -It is kept and filled chronologically by the managing body -Partners have the right to consult all of this information -Transfer regime in LLC: -Inter vivos transfer: completely free between partners, ascendents, descendants, spouses and companies of the same group (if we pertain to a group of companies). Only in these cases the transfer is free. If it is not free does it mean that I can’t sell the stakes to anyone else? I can sell them but I need the company’s authorization (i.e. given by the general meeting). They can only deny the request if they are giving the option to buy the stakes under the same conditions -The by-laws could alter this subsidiary regime: they could make it a little easier to transfer stakes but it can’t be entirely free or make they could make it more difficult e.g. all transfers need authorization. If you prohibit the transfer of stakes, even to the company itself, then you have to prevail in the by-laws the possibility of exiting the company -Transfers have to be carried out though a public document -Mortis causa transfer: in general, it would be admitted but the by-laws could prevail a preemptive right for the partners to buy those stakes -Mandatory transfer: happens when there is a public auction or a judicial process where there has been a seizure of these stakes. To avoid a stranger from becoming a partner, partners have a preemptive right -The by-laws will be adapted to the real needs, the only thing that cannot be done is the complete freedom of transfer. -Important for the rest of the partners to know who the other partners are -Representation of shares (JSC) -Shares are considered as securities and they are by definition transferable and we have two options of representation: 1. Certificates or titles: nominatives (nominativos) or to the bearer (al portador) -To the bearer: whoever holds the title is presumed to be the owner and is going to the recognized as the owner -Nominative: titles given with the name of the owner. If the owner changes, then the company issues a new title with the name of the new owner -Not really issued today but registered in the book of nominative certificates -If they are not fully paid we need to represent the shares in nominative certificates -Also if we have ancillary commitments -Also if there are limitations to the transfer 2.Book of entries (anotaciones en cuentas) -Accountancy register that is kept by other companies e.g. banks, that keep the accountancy of the shares -All the shareholders are completely identified -Compulsory for listed companies -The most common way for JSC=nominative certificates -Transfer regime in a joint-stock company (JSC) -As a general rule, we have a free regime of transfer of shares -Limitations can be included in the by-laws -Cannot include limitations that make it virtually impossible to transfer shares -In case authorization is needed for the transfer of shares, it will be given by the directors of the company -The most common clause is a preemptive right recognized to the other shareholders to acquire the shares that are being sold by the other shareholder in the proportion of the company that they own -Another example: total prohibition to sell the shares in the two years after the constitution of the company -Can a partner’s stakes/shares be seized? (embargo) -As a general rule in the case of seizure it is the owner who holds the rights -Usufruct: the beneficiary of the usufruct has the… -Is it possible that the company owns shares? Is it possible for the company to be a shareholder when it is created? Can it become a shareholder later? -Original acquisition of shares/stakes: no, the company doesn’t exist yet. In the constitution of the company we need contributions and a company which doesn’t exist can’t contribute any capital -LLC: completely null -JSC: the acquisition is not permitted -Consequence: the subsidiary liability of the shareholders and directors. They have to pay the shares that have been given to the company within a year and they have the obligation to transfer them because they need to have an owner -Approval of the accounts, decision on the results and censoring the managing performance: compulsory content of the ordinary GM (decided every year in every company) -Approval of the liquidation balance sheet and results 3. Appointment and dismissal of directors, liquidators and auditors and decisions on any liability actions against them -All the competencies in art. 160 LSC can be distributed among these three groups -In the bylaws we can alter these within the confinements of the law -Change of social domicile: unless otherwise provided in the bylaws, it is a decision that is the competence of the directors when it is inside national territory Intervention of the GM on managing decisions i.e. giving directions to the directors (art. 161 LSC) -Limitations: we can never empty the competences of the managing body -The GM could establish that they should be asked for some decisions but not all of them -Sometimes the law allows directors to take up functions of the GM if it is established in the bylaws -E.g. as a general rule, if there are limitations of share transfer in a JSC we have to ask for permission to the directions in order to sell them -In LLC: the authorization is given by the GM but this could be altered in the by-laws -If they don’t give me answer within two months then I can assume it is a yes -If I’m given a no: they have to offer an alternative 11/11/2021 -Types of GM (art. 163-165 LSC) 1.Ordinary GM -This meeting has two basic characteristics 1) Term in which the GM should take place: it shall be convened within the six first months of the financial year to discuss/decide about at least about three items 2) Three items at least discussed: 1. approval of the accounts, 2. application of the result, 3. censoring directors’ performance (report on director’s performance, for the last year) -These three items are compulsory i.e. minimum content -Anything else can be included -Financial year: the by-laws must establish which is going to be the financial year -Jurisprudence: even though the ordinary GM has been celebrated after those 6 months, it is going to be valid. -This is the compulsory GM -The moment were the directors tell the owners of the company what is happening with the company -Directors make a proposal on the application of the result e.g. we have profits and the director’s proposal is to distribute the profits among the shareholders after taking 10% for the reserve 2.Extraordinary GM -Any other meeting which is not the ordinary GM -To discuss anything that we consider necessary -Term: anytime -At least we have to celebrate one ordinary GM because the law establishes it but the by-laws could establish an obligation to celebrate more e.g. an extraordinary meeting before the accounts close in order to give the partners information 3.Universal GM (OJO: it can be ordinary or extraordinary) -Only case in which the GM has not been convened, it is an exception to the general rule -It refers to a meeting that takes place because being present all the shareholders/partners, they unanimously decide that they want to give that meeting the character of a GM (i.e. celebrate the meeting) and they unanimously decide on the content of the GM, which means we could be celebrating an ordinary or extraordinary general meeting -In practice they are usually not celebrated, they just write the minutes to make it seem like it was celebrated (don’t write this in an exam) -Convening -Every GM has to be convened by directors or liquidators i.e. they have to call the meeting, in order words, announce that a GM will be celebrated -When? -Whenever it is compulsory e.g. ordinary GM -Whenever we have an additional compulsory GM in our by-laws -Across the Company’s Act we will have other circumstances: -If the company is under a case of dissolution e.g. if our patrimony is below half of our capital amount -Whenever directors consider it necessary -Whenever it is requested by shareholders/partners that own at least 5% of the capital or less if established in the by-laws i.e. make it easier to the minority shareholders to ask for the GM by lowering the percentage (percentage can’t be increased) -Minority shareholder right -One or more shareholders that together own 5% could request it -If directors don’t fulfill their obligation: “court/judicial convening” -Not actually convened by the judge but rather convened by the LAJ (secretary of the court) or the business registrar -Publication -The convening of the GM has to be published in the website if the company has one (legalized official website: duly registered and it is included the by- laws) -If not, it should be published through an announcement in the BORME and in one of the most widely circulated newspapers in the province of the company’s domicile -Notwithstanding, the by-laws may establish any alternative individually addressed notice, forwarded in a manner which guarantees reception -The proper convening is one of the things which guarantees the validity of the GM. If not convened properly=decisions are null -Celebration of the GM: -Is a minimum number of partners/shareholders needed in order to constitute the GM i.e. a quorum of attendance? It depends on the company -LLC: no quorum of constitution -We are going to celebrate it even if we have no minimum number of partners, the problem would be that there is no quorum for the constitution but maybe we do not fulfill the quorum for the adoption of decisions -JSC: there is a quorum of constitution because they have stronger rules of functioning. In order to celebrate them we need a minimum amount of capital percentage. -First call and second call: -LLC: convened for the celebration of the GM and they just have one opportunity -In JSC: we need a certain amount of capital to be there in order to celebrate the meeting. In the is first call for ordinary decisions it is 25% of the capital, in the second call we need any amount of capital to be present. We require less capital in the second call in order to facilitate the celebration of the GM i.e. we need to give them a second chance to discuss the same agenda -It is possible to include in the convening both calls -If the first call is celebrated then there is no second call -The by-laws could establish a higher quorum in order to celebrate those GMs, taking into account that the second call quorum must be lower -Unanimity is not a possibility i.e. we cannot ask for unanimous attendance -We cannot reduce the quorums in the by-laws, only increase them -Ordinary decisions: -Extraordinary decisions are: the modifications of the bylaws and the structural modifications (increase or reduction of capital and any other modification of the bylaws, the issuance of bonds, the suppression or the limitation of the preferent acquisition right of new shares, as well as the transformation, merger, split-off or global transfer of assets and liabilities and moving the social domicile to a foreign country) -In the by-laws the functioning of the corporate bodies is established: e.g. it could be established that the most ancient shareholder will be the president of the GM and the secretary will be the youngest shareholder or the director i.e. the bylaws establish who will be the president and who will be the secretary -At the beginning of the GM the list of attendance has to be taken, we need to know who is there and the amount of capital that they own 17/11/2021 -In the bylaws it will be determined who will be the president and the secretary of the GM (not the exact person) -If nothing has been prevailed in the bylaws, the shareholders decide at the beginning of the GM who will be the president and who will be the secretary -President: oversees the functioning of the GM -Secretary: in charge of the procedure of the GM -Attendance list: who is there and the amount of capital that they own and if they are being represented by someone -After the GM, the secretary must close the minute and elevate it into public (with a notary and certify it). Then a note is sent to the central business register -Could be liable if he/she is not fulfilling these obligations -The right to be informed of the shareholders/partners -During the celebration of the GM, shareholders/partners have the right to ask for more information (related to the agenda) -The president has the obligation of giving the word to the shareholders -The president could deny the word to partners or stop them from asking a question if the partner/shareholder’s intention is to alter the functioning of the GM -Vote -Each item needs to be voted independently from the others -LLC: we don’t have a quorum of constitution, whatever the % of capital that is there the GM will be celebrated -Adoption of decisions: -Ordinary decisions: an ordinary majority is needed i.e. more yeses than nos whenever it represents at least 1/3 of the voting rights of the company -Extraordinary decision: more than half of the voting rights of the company are needed -Structural changes: 2/3 of the voting rights of the company -The bylaws could increase the majorities but never require unanimous decisions -JSC: we do have quorums of constitution -First call quorum: -For ordinary decisions: 25% of the capital -For extraordinary decisions: 50% -Second call quorum: -For ordinary decisions: any % of the capital -For extraordinary decisions: 25% of the capital Adoption of decisions: -Ordinary decisions: simple majority i.e more yeses than nos -Whatever the quorum is, we only need a simple majority -Extraordinary decisions (in this case, structural changes are included here) -If the attendance is over 50% the requirement is absolute majority (half plus one of the present capital voting yes) -If the attendance is in between 25%-50%: 2/3 of the present capital voting yes -Minutes have to be kept in the minutes book and there is one for each collegial body -Exceptions: matters which are not included in the agenda but which can be discussed during the celebration of the GM by proposal of any shareholder or partner could ask for two things: -In LLC: in the bylaws we can include various managing body structures, then the GM decides which concrete option they will use, so they don’t need to change te bylaws when they want to change the structure -In JSC: only one managing body structure can be included in the bylaws, any change requires an amendment 18/11/2021 -Executive director (CEO): -When there is a possibility for the board of directors delegate some functions to someone i.e. the CEO -He needs to be careful as his decisions require duty of care and loyalty -Are there limitations to the voting right of a shareholder/partner whom is also a director? -Whenever the transaction is below 10% of the assets of the company it could be authorized by the managing body -For other types of decisions the managing body is incompetent and needs the authorization of the GM: in these cases there is a conflict of interest if the shareholder is a director -Shareholders/partners, in general, will not be allowed to vote in the cases established in art. 190 LSC: -Authorizing the of transfer of his or her own stakes or shares when they are subject to a legal or bylaw restriction -Exclusion of the company: when I have not accomplished an obligation as a shareholder/partner sometimes I have to exist the company -Freeing shareholders/partners from obligations or conceding them a right -Facilitation of any type of financial assistance to a shareholder/partner: the affected partner will not be participating in the decision -Freeing them form the duties of loyalty as established in art.230 LSC (duties of loyalty of directors) -Can a shareholder vote for himself to be a director e.g. in the case he owns for than half of the capital? -Yes, there is no conflict of interest -If I acquire more capital it means that I gave more to the company and hence I have more interest in the company doing well -This is how we align the interest -Whatever is related to the shareholder as a director, except when it comes to duties, the shareholder/partner director can vote -Corporate liability actions: when the director damages the company the GM can sue the director. The shareholder/director can’t vote to sue him/ herself -The shareholder/partner director may vote on his own remuneration -Other partners/shareholders can challenge the decision (only 1% of capital needed) -Art. 204 LSC: decisions made by any type of collegiate body in the company which can be challenged -Agreements which are contrary to the law or the bylaws or which damage the corporate interest for the benefit of one or various partners/ shareholders or third parties -The damage to the corporate interest also occurs, even when it doesn’t cause damage to the company’s patrimony, when it is imposed in an abusive manner by the majority. It is understood that it is imposed in an abusive manner when , without being reasonable, the decision is adopted by the majority for their own interest and to the unjustified detriment of the rest of the partners/shareholders. -When a director is performing his function or representation he owes the company the duty of care (diligencia) (art. 225-226 LSC) and duty of loyalty (art. 227-229) (DUTIES OF THE DIRECTOR) -Due to the duty of loyalty directors will have an obligation to avoid conflicts of interest. He must pursue corporate purpose in good faith -Business is risk and we cannot punish directors for their bad success or the unsuccessful business decisions unless they act in bad faith, in their own personal interests, without a due care process or without enough information -Must act with the standard of behavior of the good business person/orderly business person (duty of care). This means that for every decision: 1.Enough information 2.Due care process 3.Without personal interest in that decision 4.In good faith -If they act according to the previous requirements they won’t be liable for bad decisions -Standard of loyalty: pursue only the corporate purpose acting only in good faith -You have to avoid any type of conflict of interest -You cannot take advantage of a corporate opportunity -You cannot use the name of the company for your own purposes -You cannot use big corporate assets for your own interests -Cannot do what is called related party transactions: directors have to avoid engaging themselves directly, or their related parties, in business with the company because there is a risk that in this transaction they commit tunneling (taking out assets from the company) -Situations in which we can authorize the company to make those types of transactions: maybe the director knows about a business opportunity and he/she offers it to the GM. If they don’t want it, the director can ask for authorization to pursue that opportunity as a natural person, on his/ her own. -I.e. they release the director from the conflict of interest -Related party transactions: sometimes they are actually good and not about tunneling, it is about engaging in a business with better market conditions -Art. 231 LSC gives us a list of related parties (mostly spouses and family members) -Partners or shareholders that are represented in the managing body -Cannot receive remunerations form third parties -Minority partner shareholders/partners can leave the company if dividends have not been distributed for over 5 years. The company must buy their shares/stakes at a fair price (right granted in art. 348 bis. Derecho de separación en caso de falta de distribución de dividendos) -An independent expert will determine the fair price (appointed by the business registry) -This right is recognized 24/11/2021 Liability actions against directors: 3 types 1.Corporate action (acción social de responsabilidad): used when the performance of the directors causes damage directly to the company’s patrimony and there is an indirect damage to the partners Units 17, 18 and 19 Amendment of the bylaws: changing the bylaws -Amendment: whenever we are drafting a new clause or changing an old one in the bylaws i.e. when we are eliminating something or adding something new -This is a competence of the GM -The information right is strongly protected for this matter as we need to be aware of the changes that we want to do prior to the vote -Publicity: whatever we are changing in the bylaws, we need to register it in the Registry where our bylaws are registered (public deed needed) -Requirements for the process: -Convening of the GM with full information about the amendment proposed, including a report made by the partners/shareholders or director who are making the proposal about the convenience and effects of the bylaws and how to change them -Reinforced quorums and majorities in order to discuss and vote the amendment (look at chart uploaded in the campus) 25/11/2021 There are some cases in which the law provides some special protection due to the character/ nature of the amendment -We can divide the cases in 5 groups: 1.Creating or imposing new obligations on the shareholders or partners i.e. an additional ancillary commitment: doing or giving something to the company: a part from the increased majority, we will need the express consent of the affected shareholder or partner i.e. he or her must’ve have voted “yes” on the decision 2.The amendment of the transfer regime of stakes or shares -Limiting the transfer of stakes or shares: the requirements depend on the type of company: -LLC: a separation right is recognized the partners that voted against this amendment, which means that they can leave the company with the fair value of their shares. The company acquires those stakes, it is compulsory. -The separation right is considered as the partial dissolution of the company -JSC: shareholders that vote against this new regime would have three months of no application of this limitation (vacatio of three months). During the three months they may transfer the shares according to the previous transfer regime 3.Changing the corporate purpose -If the change consists of changing the corporate purpose then the shareholders are also recognized with a separation right 4.Modifying the class of stakes or shares: changing the rights for stakes or shares. If we want to do this, there is a difference according to the type of company -LLC: individual express consent of all the affected partners -JSC: besides the increased majority of all the shareholders, the majority of the affected shareholders is needed 5.Change of the registered office/social domicile: -Unless otherwise provided in the bylaws, the competence to change the social domicile belongs to the directors when it is inside the national territory -Exception to the general rule that all changes in the bylaws are decided by the GM -Separation right: -Art. 348 bis of the Companies’ Act: -The separation right is recognized when dividends are not being distributed, unless otherwise provided by the bylaws -It is an abstract right -We have a company that in each GM, every year, is deciding not to distribute profits -The law trying to avoid the abuse of the minority shareholders -A majority shareholder, who is also the sole director of the company, is being paid and doesn’t need the distribution of the dividends -Requirements: -Five consecutive years must have elapsed since the registration of the company in the Business Registry. Therefore, any partner who wants to exercise it must wait until the sixth ordinary meeting (Art. 348 bis 1 of the LSC) -The company must have had at least three previous consecutive profitable years in order for the partners to exercise this -Legal causes of separation (art. 346 LSC): 1. The partners/shareholders who have not voted in favour of the corresponding resolution, including non-voting partners, will have the right to separate from the capital company in the following cases: a) Substitution or substantial modification of the corporate purpose b) Extension of the term of duration of the company c) Reactivation of the company d) Creation, modification or early termination of the obligation to carry out ancillary commitments, unless otherwise provided in the bylaws 2. In limited liability companies, the partners who have not voted in favour of the agreement to modify the system for the transfer of shares will also have the right to separate from the company. 3. In cases of transformation of the company and transfer of domicile abroad, the partners/shareholders will have the right of separation under the terms established in Law 3/2009, of April 3, on structural modifications of commercial companies. -Legal causes for exclusion of partners (art. 350 LSC): -The right that the company has to exclude some partners for some legal causes: only in LLCs because it is related to the personality of the partners. -When the partner voluntarily doesn’t fulfill ancillary commitments -The partner who is also a director who infringes the competition prohibition or has been condemned by a definitive judicial resolution to compensate the company for the damages caused for acts contrary to the law or the bylaws or carried out without due diligence -Causes of exclusion established in the bylaws (art. 351 LSC): -For both types of companies -In capital companies, with the consent of all the partners/shareholders -In capital companies, with the consent of all the partners/shareholders, specific causes of exclusion may be included in the bylaws or causes of exclusion which were previously included may be modified or removed. -In both cases the partner leaves with their fair value of participation -In the case of exclusion: fair value minus the expenses of the procedure of exclusion -Separation right (art. 346 LSC) -The law establishes a few situations in which the partner has this right 1.When we change the corporate purpose 2.When the company was set to last during a certain period of time but then it is decided to expand that period 3.Reactivation of the company 4. Creation, modification or early termination of the obligation to carry out ancillary commitments, unless otherwise provided in the bylaws 5.In case of transformation of a company when we change the social domicile of the company -Art. 347 LSC: possibility to establish additional separation causes in the bylaws -Is it possible to add an adnutum separation right? i.e. without a cause -Doctrine debate, prof thinks no -Art. 348 bis LSC: when the GM decides not distribute profits…. -Exclusion of partners (art. 250 LSC) -Just prevailed for LLCs (legal causes) -Voluntary non accomplishment of the ancillary of the company -Partner who is a director who infringes the non competition obligation or when there is a court resolution to compensate the company (corporate liability actions) -We could include additional causes for exclusion in BOTH LLC and JSC (art. 251 LSC) Unit 19-20 Dissolution and liquidation of the company and structural changes -Point of no return: distribution of the liquidation quote to the partners -Liquidation process: to collect what is owed to the company and pay what the company owes… -LOOK AT SUMMARY -Even though the company is in liquidation it still exists and it can still make decisions 02/12/2021 (solo va a preguntar lo que esté en el summary) Structural changes: changes in the company that are very relevant which go beyond just amending the bylaws -They are regulated in the Structural Changes Act -Transformation: the procedure by which the company changes the corporate status while maintaining the legal personality -Is it possible that a personal based company becomes a capital company? It is possible that a capital company becomes a personal based company? They are both possible -Non-commercial companies can become commercial, the same goes for the other way round -Art. 4: different possibilities of transformation -Transformation agreement: decision made by the GM with reinforced majorities -LLC: 2/3 of the voting rights in favour of the change -JSC: increased majority based on the quorum that we actually have -Information needed in order to make this type of agreement -Dissenting partners will be recongnised with the separation right -We have to prepare the procedure for the transformation of the company, meaning that the partners proposing the transformation must have the full information on the transformation, the new bylaws, etc -Mergers: when two or more companies unite in order to create a single company. The single company could be a new one (merger by creation of a new company) or a preexisting one (merger by absorption) -Preexisting one (merger by absorption) A+B= A -Patrimony: A+B -Increase in capital of the preexisting company -Shareholders of the company that disappears have to be given shares from the preexisting company -Universal succession: all the relationships of the company that disappears are transferred to the preexisting company, without having to consult creditors -New company: A+B=C -Patrimony: A+B -Universal succession of the relationships -A and B disappear -In every merger we will need a lot of preparation and information -They are decided by all the general meetings of all the companies involved in the mergers -Common project of merger: the result of the negotiation i.e. it must include the resulting company after the merger: bylaws, etc -Directors of both companies are the ones carrying out the negotiation. When negotiations conclude, they present the common project of the merger to the respective GMs so they can approve it. The GM can approve or deny it but it can’t change anything in it because it will be presented to all general meetings. -Directors try to protect their shareholders: they fight for the purpose of their shareholders obtaining the shares that they consider fair -Aside from the common project, the directors of each company must give a directors’ report on the agreement i.e. only to their own company (it includes the advantages and disadvantages of the merger for their own company) -In the common project we need to state who we are (the directors) and whether he have a particular interest in the future company -NO positions are guaranteed for directors in the new company. In order to ensure that the shareholders’ interests are maintained -In these cases there is no separation right for dissenting shareholders -Opposition right to protect creditors is recognised -Simplified procedures in fully /90% owned companies -In mergers, shareholders can be compensated economically if they don’t have enough shares to own a share from the new company/preexisiting company -Split-offs (escisiones) -Three options: A. Total: we have company A that is giving its patrimony to different companies (two or more e.g. B and C) and in this process A will disappear and the shareholders will become shareholders of the different companies -B and C have to increase capital to integrate new shareholders -Or B and C could be new companies B. Partial: same procedure but A survives -Shareholders are kept in A, B and C -A=reduction of capital