Shareholder Rights and Corporate Governance in Spain

Posted on Jan 19, 2025 in Philosophy and ethics

Contracts made in the corporation’s name and on its behalf prior to its registration in the Commercial Register may generally be accepted by the corporation within three months of registration.
Irregular company: Irregularity may appear once the first year from the deed has passed. General Partnership (S.C.) rules shall govern it if the scope of business is of a commercial character (or *sociedad civil*, in the case of a civil scope of business). (Articles 39-40 CCL)

Right to share in corporate earnings and in the assets upon liquidation.
Preferential right to subscribe to new shares or convertible bond issues.
Right to attend and vote at shareholders’ meetings (except non-voting stock) and to challenge corporate resolutions.
Right to obtain information about the company’s affairs.

The governing bodies are the shareholders’ meeting and the directors (who may or may not be organized as a Board of Directors, as explained below).
The shareholders’ meeting is the supreme governing body (Article 160 CCL: powers reserved).
“The directors shall be empowered to manage and represent the company under the terms provided in this act” (Article 209 CCL).
The management of the company can be conferred upon a sole director, multiple directors acting severally or jointly, or a board of directors. The bylaws may establish different means of organizing the management. If a Board of Directors is created, it must have a minimum of three members (no maximum legal limit exists).

It is convened by the Board of Directors or, failing that, by the court. Notification is to be published in the Official Bulletin of the Mercantile Registry and one newspaper among those with major circulation in the province where the registered address is located.
Exception: The universal meeting. It is validly held when members holding the entire capital are attending.
Two modalities:
- Ordinary meetings: They are to be held in the first half of the year to evaluate management, approve the previous year’s accounts, and allocate the current financial result.
- Extraordinary meetings: Defined by exclusion as those meetings other than ordinary meetings.
To be validly convened, certain quorums, established by law or agreed upon in the articles of association, are needed in S.A. (Articles 193-194 CCL). The S.L. does not require a quorum.
Decisions are adopted on a majority basis (Articles 198-201 CCL).
Decisions adopted are subject to contestation by members on the following grounds: being against the law, infringing articles of association, or harming the company’s interests to the benefit of one or several shareholders/partners or third parties. According to the interest infringed, decisions are classified as null or voidable (Articles 204-208 CCL).

The Board of Directors is entrusted with management functions, the performance of adopted decisions, and the representation role of the company in relations with third parties.
It adopts the following structures: sole manager; several managers acting on a joint and several basis; two managers acting on a joint basis; board of directors.
Director’s duties: “Directors shall act diligently as required for an organized entrepreneur and a loyal agent”:
- Duty to get due and complete information on company matters.
- Duty to keep secret confidential information as far as disclosure thereof is likely to harm the company’s interests.
- Duty of loyalty to the corporation.
- Duty to avoid and report to the board of directors any conflict of interests.
- Duty to report on their share and interest in other rival companies.