SL & SA: Constitution, Functioning, Responsibilities & Differences

Posted on Sep 6, 2024 in Law & Jurisprudence

1.4 Constitution and Functioning of the Board

a) Quorum

Quorum means the Board is constituted and can start under the leadership of its president and secretary, with the attendance of the minimum necessary quorum set by the LSA members. This quorum varies based on whether the meeting is for approving regular or special arrangements.

To take ordinary agreements requires:

  • 1st convocation: Attendance, present or represented, of 25% of share capital with voting rights (the statute may set a higher quorum).
  • 2nd convocation: Valid to constitute the Board regardless of the number of concurrent partners and capital (the statutes may set a higher quorum).

For special arrangements (statutory and structural changes, basically) it is required:

  • 1st convocation: The audience, present or represented, of 50% of share capital with voting rights (the statute may set a higher quorum).
  • 2nd call: 25% attendance will suffice (the statutes may set a higher quorum).

b) Adoption of Resolutions

Social arrangements are adopted, as a rule, by majority vote. The Supreme Court repeatedly required an absolute majority, i.e., more than half of the capital present and represented, not just the majority of attendees. The statutes may require an enhanced majority but never unanimity. For matters that require a special quorum, where there are shareholders who represent less than 50% of capital, a majority vote of two-thirds of the capital present will be required.

c) Development of the Board’s General Meeting

The general meeting will be held at the domicile office of the SA (or anywhere for universal joints). The President of the General Meeting should moderate the session, ensure respect for the agenda, propose votes, and proclaim the existence of an agreement on the outcome of the vote. Agreements exist only insofar as such a claim is made. However, ties cannot be solved by the casting vote of the President.

The minutes of the general meeting attest to the content of private discussions, the resolutions adopted, the results of votes, and the opposition to the agreements in order to challenge them. The agreements are not enforceable until that record is approved. Normally, the secretary writes the minutes with the approval of the president and they are approved at the Board, although it can be delegated to the president and two auditors. The record function is not only for evidence but is required for the registration of agreements in the commercial register.

Responsibilities of Administrators

Administrators must perform their functions with the diligence of a businessman and a loyal representative, keeping confidential information secret, even after their cessation. Thus, they are responsible to the company, shareholders, and creditors for any social harm caused in the exercise of their office for acts contrary to the Act, the statutes, or those made without due diligence.

To demand accountability from administrators, the following conditions must be met:

  • That they have committed an unlawful act, i.e., against the law, statutes, or public policy.
  • That it has caused damage.
  • That there is a causal link between the act and the harm caused.
  • That they have not acted with due diligence.

Social Responsibility Action

Where the interests of society are directly injured, the Social Responsibility Action can be exercised.

The following are entitled to bring a Social Responsibility Action:

  1. The company itself, with the agreement of the general meeting, without requiring that the item be put on the agenda.
  2. Shareholders representing 5% of the capital, provided they fulfill the following requirements:
    • When they request the convening of the Board to decide on the exercise of responsibility and this action is not convened by the administrators.
    • When the company does not engage in responsible action within one month of adopting the agreement.
    • When the Board has adopted an agreement contrary to the exercise of responsibility.
  3. The creditors of the company when the share of responsibility has not been exercised by the company or shareholders, provided that the assets are insufficient to satisfy their claims.

In addition, partners and third parties have an individual action against administrators for responsibility for damage directly to their interests.

Common Notes Between SL and SA

  • No liability of the members for company debts. Only the social heritage is liable.
  • Top of merchantability by form.
  • Capital determined and protected by mandatory rules for their role in ensuring social creditors.
  • Corporate organization, that is, internal structure through two bodies: General Meeting and administrative organ.

Differential Notes Between SL and SA

  • Social capital threshold set at 500,000 pts.
  • Social capital divided into shares.
  • Capital fully paid at source. Consequently, the SL cannot be passive dividends.
  • Character steeper than the SA. The SL is a capitalist society but with some personal element, in particular restrictions on the free transferability of shares.
  • Legal system more flexible than the SA.
  • The SL cannot go to the stock market.
  • Control other than social contributions.