Roles of Directors in Spanish Joint Stock and Limited Liability Companies, Ejercicios de Derecho Mercantil

¡Descarga Roles of Directors in Spanish Joint Stock and Limited Liability Companies y más Ejercicios en PDF de Derecho Mercantil solo en Docsity! BODIES: THE GENERAL MEETING AND DIRECTORS 1. Why does a company need bodies? -In partnerships there are no company bodies to cover with individuals because the functions which would correspond to these bodies, structurally (with the constitution of the company) correspond to the partners themselves -In capital companies, the company bodies originate with the constitution of the company itself -The bodies have as many functions as are convenient for reaching the corporate purpose -The essential functions of the bodies so that the company can act are the formation of the will of the organisation by its members and the management of the organisation. -Companies are organised by dividing the powers between a management and representation body of the company - the management body - and a body that articulates the participation of the partners in the governance of the company, which is the partners’ General Meeting -Both bodies are necessary, meaning that the legislator does not allow capital companies to exist without them -Girón: the need for a management body comes ... from a public order reason: the assurance of compliance with the general provisions of the legal system Eliminating liability/responsibility for the partners requires the existence of liable/ responsible individuals 2. Why is the general meeting said to be the sovereign body? -Sovereign body of the company: it is sovereign over the directors in the distribution of power 3. Who are the members of the general meeting? -The shareholders in joint stock companies (SA) -The partners in limited liability companies (SL) -Non-voting shareholders/partners are also members of the general meeting 4. On what matters can and/or should the general meeting decide? -Art. 160 LSC: matters that are given by law to the GM but remember that the bylaws could reserve other matters to GM. Any matters not expressly given to the GM are attributed to the directors -Decisions: three main groups: 1.Decisions attending the structure of the organization of the company: -Structural changes: mergers, spin-offs, transformations) (art. 160.g) LSC) -Dealings with essential assets: acquisition, disposal or contribution of essential assets of the company -Any transaction that exceeds 25% of the assets in the last balance sheet i.e 25% of the patrimony -Creating a right over an essential asset i.e. getting a mortgage for a building -Increases and decreases of capital -Amendments of the bylaws: e.g. changing the structure of the managing body, creating an ancillary commitment, creating or eliminating series of stakes or shares -Limit or eliminate the preferent acquisition right for a determined increase in capital -Dissolution/extinction of the company 2.Inspection powers of the GM -Inspection powers over the directors -Two different duties: -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 competences in art. 160 LSC can be distributed among these three groups -In the by-laws we can alter these within the confinements of the law 5. Can the general meeting give orders to the directors? -JSC: it is at least one month (minimum) 10. Are there any circumstances in which a meeting may be held that has not been convened? -Yes, in the case of universal general meetings (they 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. 11. Who can and who must attend the meeting? -Attendance is recognized to all partners/shareholders i.e. all of them have the right to attend -Exception: in JSC this right can be limited, mostly for listed companies 1.This right is subject to a minimum number of shares (we cannot ask shareholders to have more than 1/1000), has to be established in the by- laws. 2.Advance proof of ownership: the by-laws could require that you have to be shareholder of the company at least 5 days before the celebration of the GM and prove it. 3.Remote attendance: just for JSC: for listed companies which have foreseen it in their by-laws. However, due to COVID-19 there was an amendment which allowed companies to celebrate remote meetings even though they have not foreseen them in their by-laws -This is a right, there is no obligation for shareholders to attend -Directors have the obligation to be in every GM -Others: -The by-laws could accept it or the president of the GM could allow other people to attend the GM -The presence of advisors needs to be authorized by the president 12. Why is the shareholder's right of information so important? It is a political right and it is the most important right inside a company. It is instrumental because partners’/shareholders’ need to use this right i.e. be informed of what is going on in the company in order to exercise the rest of the partners’/shareholders’ rights. 13. Who may vote at meetings? -Each item needs to be voted independently from the others -Limited liability company: we don’t have a quorum, whatever the % of capital that is present the GM will be celebrated -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 decisions: 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 (look a chart in the “campus virtual”) -Ordinary decisions: simple majority: 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 capital 14. What is the agenda (orden del día) and who decides the agenda? -The convening must have a minimum content: it must state the name of the company, the date, time and place of the meeting, the agenda that will include the issues to be discussed and the position of the person who convenes the general meeting. -The agenda defines the matters on which the general meeting can deliberate and reach agreements on. -The legal requirement to include it in the convening serves an informative purpose: -It allows the shareholders/partners, by knowing in advance the matters that are going to be discussed, to be able to make the decision about their attendance at the meeting -Exercise of their right to information -Decide which way they are going to vote -The agenda will vary depending on the type of general meeting that is convened -Ordinary general meeting: the convening must mention in the agenda, at least, each one of the matters that it is competent to decide on: approval of the accounts, application of the results, censorship of the performance of the directors. In other words, those which are determined by law -In addition to the general meetings that must be convened according to what is established by law and in the bylaws, directors will convene a general meeting whenever they consider it necessary or convenient for the interests of the company -Also, when requested by one or more partners representing at least five percent of the company's capital, directors must convene a general meeting. In this case, the partners must state in the request the matters to be discussed at the meeting. -The general meeting must be convened to be held within the two months following the date on which the directors were required to convene it, and the matters that had been requested must be included in the agenda. 15. What is the role of the chairperson (president) and the secretary of the meeting? -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 -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 -If the bylaws don’t foresee the possibility of the attendance of other people, besides the partners/shareholders to the GM, the president of the GM could allow other people to attend the GM. -The presence of advisors needs to be authorized by the president -In order to avoid for these limitations to cause confusion, even when they appear in the bylaws, their access to the Business Registry is prohibited -The company will be liable before third parties that have acted in good faith, even it is established in the bylaws registered in the Business Registry that the determined act is not part of the corporate purpose -Without prejudice to the fact that directors’ actions may cause, where appropriate, liability before the company 20. Can a company have more than one director, and what are the alternatives? Is it the same in an SA as in an SL? -Structure of the managing body -Four options: 1.Sole director: when there is only one director -LLC (SL): possible -JSC (SA): possible -Representation power allocation: the one, he/she is the only one who has representation power 2.Two or more which are acting jointly (mancomunados) -LLC: possible -JSC: the maximum number allowed of joint directors is just two. If there are more that act jointly, then the structure of the managing body has to be a board of directors -Representation power allocation: all of them, we need all of them signing. If we have two joint directors we need them to sign together. 3. Two or more individually (solidarios) -LLC: possible -JSC: possible -Representation: is allocated in each of them, not in both of them together. Each of them has full powers of representation individually. 4.Board of directors (consejo de administración) -Collegiate body which functions with majorities -It needs at least three members (consejeros) -LLC: possible (at least three members but no more than 12 directors) -JSC: possible (at least three, there is no other limit) -JSC listed companies: they are forced to have a board of directors -Representation: they meet, celebrate a meeting and decide through the majority system because it is a collegiate body and decisions are executed by the board of directors -In every structure it is possible to have delegate directors and the board acts as a supervisory board of the day to day decisions. But there are some functions which can’t be delegated (art. 241 LSC) -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 the bylaws when they want to change the structure of the managing body -In JSC: only one managing body structure can be included in the bylaws, any change requires an amendment of the bylaws 21. What is a managing/executive director (CEO) and what is he/she used for? -Executive director (CEO): when there is a possibility for the board of directors delegate some functions to someone i.e. the CEO -The Executive director is a member of the board of directors of a joint-stock company or a limited liability company. The board of directors delegate certain management and / or representation powers to the CEO. -When the bylaws of the company don’t foresee the opposite, the board of directors may appoint appoint one or more CEOs from among its members 22. Who appoints the directors and are there any exceptions? -JSC: the appointment of directors corresponds, in principle, to the general meeting. Exception: when the company is constituted, since the first directors must appear in the public deed. -LLC: directors must be appointed by the general meeting, with the exception of the director’s named in the company's public deed of incorporation. Besides the latter case, the competence of the general meeting for the appointment of directors is exclusive. 23. How long can someone be a director, and can they be removed early? -In a JSC there is a maximum term of 6 years, which can be renewed an undetermined amount of times, unless otherwise stated in the bylaws -In an LLM there is no maximum term for the appointment of directors, unless otherwise stated in the bylaws -Yes, they can be removed early -The causes of removal of directors are the following: 1.End of the term for which they were appointed if they are not re-elected -In LLCs this cause is only works when the bylaws have established a specific term for directors 2. General meeting resolution of removal of te director -The removal of the directors by the GM consists of an agreement that can be adopted at any time and which does not require the existence of just cause -This resolution can be adopted by the general meeting even when it has not been included on the agenda -In LLCs, the bylaws may require a majority of more than 2/3 of the votes (which correspond to the stakes in which the capital is divided in) in favour of the removal agreement 3.When the GM agrees to exercise a corporate action against the directors (the agreement determines their removal) 4.Due to the company’s dissolution, once the liquidation period begins, since from that moment the liquidators assume the directors’ functions 5.Director’s resignation, which is a unilateral legal act, which must be notified to the company 6.Death of the director if he/she is a natural person, or its dissolution if the director is a legal person 7.When the judge so agrees, before the start of the liquidation phase in accordance with the procedure provided in the Bankruptcy Law -The removal of directors must be registered in the Business Registry 24. Are directors paid for their position? If so, how? -Yes, the creditor can exercise an individual action or the action for debts (look at question 29) 29. Are you clear about the differences between a corporate action, an individual action and an action for debts? A. Corporate action: -Exercised when damage has been caused to the company -Generally, its purpose is the protection of the company’s interests -It may be exercised: 1. Directly by the company itself -It requires a previous general meeting agreement, it may be adopted by request of any of the partners or shareholders, even if it is not in the agenda -The agreement to exercise the corporate action determines the removal of the affected directors -In the case of JSC, the law prohibits the bylaws from requiring a special majority for the adoption of the director’s removal agreement. Therefore, it is understood that an ordinary majority is enough. -The general meeting may decide not to exercise the action, as long as long as partners that represent at least 5% of the capital do not oppose 2. Subsidiarily by partners or shareholders that represent at least 5% of the capital -They have the right to exercise the corporate action in the following scenarios: A.When the requested GM with the purpose of deciding on the exercise of the corporate action has not been convened by the directors B.When the company doesn’t effectively exercise the corporate action within a month of the GM agreement to do so C. When the GM agreement has been contrary to the liability requirement -They have direct legitimation when the director has infringed the duty of loyalty -When the corporate action has been exercised by partners or shareholders that represent at least 5%, if the judgment fully or partially upholds the claim, then the company will be obligated to reimburse the plaintiff partners/shareholders for the expenses of the action. 3.Lastly, and subsidiarily, by creditors -The company’s creditors will be able to exercise the corporate action against directors if the following requirements are met: -It hasn’t been exercised by the company itself or the partners/shareholders -The company’s patrimony isn’t enough to pay the creditor’s credits B.Individual action: -The exercise of this action requires for the interests of the partners/ shareholders or third parties, including creditors, to have been directly damaged by the acts of directors -Its purpose must be to compensate for the damages caused by the director in the exercise of his/her position -Requirements for the individual action: 1. Direct damage to the partners/shareholders or to third parties 2. The director’s act must be carried out in the exercise of his or her functions 3. Illegality of the director’s action or omission 4.Causal relationship between the director’s unlawful act and the damage suffered by the partner or the third party C. Action for debts (art. 367 LSC): -Directors who don’t comply with the following obligations will be liable for the company’s debts -Convene, in a two month term after the occurrence of a legal cause of dissolution (art. 363 LSC), a GM so that it adopts a dissolution agreement -Request the judicial dissolution or the bankruptcy proceeding where appropriate, within the two month term after the foreseen date for the celebration of the GM when it has not been celebrated or when the GM’s agreement has been contrary to the company’s dissolution -The director’s liability will ONLY include the debts contracted after the cause of legal dissolution has occurred, but not for the previous debts