1 September 2010




The consolidating text of the Capital Companies Law, approved by Royal Legislative Decree 1/2010 of 2 July (Ley de Sociedades de Capital, “LSC”) comes into force today 1 September 2010, except for the prohibition of the clauses in the listed companies’ bylaws that limit the vote in said companies, which will not come into force until 1 July 2011. The LSC repeals and replaces, since its coming into force, the laws applicable to date to public limited companies (“SAs”), limited share partnerships and limited liability companies (“SLs”). It also includes the framework for listed companies, previously contained in title X of the Securities Market Law.

The purpose of the LSC is the regularisation, clarification and harmonisation of the abovementioned legal texts. Although a consolidating text, the following novelties, amongst others, are worth highlighting:

1. Contributions. Stakes and shares. Debt

(i) The minimum capital required for SAs and SLs is rounded down to €60,000 and €3,000, respectively.

(ii) Unpaid capital is referred to as “pending disbursements or contributions” (arts. 81 and following).

(iii) In SLs, the legitimising effect of the partners registry book is expressly stated (art. 104) and the bylaws are prohibited from vesting on the company’s auditor the assessment of the stakes to be transferred (art. 107).

(iv) With regard to indirect treasury shares or stakes, the regulation applicable to SLs, establishing that the framework of treasury shares or stakes will be that of the subsidiary company acquiring the shares or stakes from the parent company, now also applies to SAs (arts. 134 and following).

(v) Creditors of issuances of bonds seem to have preference over creditors of subsequent issuances, but not over other creditors in the insolvency proceedings (art. 410). This provision adds uncertainty to the existing issuances and, should it prevail, could lead to an increase in the cost of new issuances.

2. Corporate bodies

(i) The regulations on both judicial calls and the special cases when general partners meetings of SLs may be called now also apply to SAs (arts. 169 and following). Moreover, an SA may call and hold general shareholders meetings in a location other than the municipality where the corporate address is located, provided that the company’s bylaws establish so (art. 175).

(ii) The provisions applicable to SAs concerning directors’ attendance at general shareholders meetings, revocation of proxy and extension of meetings now also apply to SLs.

(iii) The duties of loyalty (refraining from voting in the event of a conflict of interest) of SA directors expressly apply to SL directors. References to the duties of fidelity are removed (art. 225 and following).

(iv) The provision applicable to SLs regarding directors’ prohibition to undertake, on their own behalf or on behalf of another, the same, similar or complementary activities to those set out in the corporate purpose, unless expressly approved by the company, also applies to SA directors (art. 230). Nevertheless, this provision is not suitably consistent with the removal procedure, which continues to be that established in the former art. 132.2 LSA.

(v) Conflict of interest situations must be explained in the annual report (without prejudice to the obligation of listed companies to report these situations in the Corporate Governance Annual Report). Likewise, the LSC specifies that the information to be provided by directors regarding their stake in other companies which carry out the same, similar or complementary activities also includes indirect stakes or stakes held through related persons.

3. Amendment of bylaws

(i) The report of SA directors regarding a capital increase by means of non-monetary contributions must include a detailed description of the assessment of the contributions (art. 300).

(ii) Balance sheet for reductions (art. 323): the term between the date of the balance sheet and the date of the resolution approving the capital reduction may not exceed 6 months. This requirement applicable to SLs now also applies to SAs.

(iii) Certain provisions applicable to SAs regarding, amongst others, the right to information (art. 287), audited balance sheets for increases with reserves (art. 303), reductions to increase legal or voluntary reserves (art. 317) or restrictions on the distribution of dividends after capital reductions (art. 326) now also apply to SLs.

4. Withdrawal and removal

(i) In addition to the legal causes of withdrawal (which now include the extension of the company’s term and its revival), other causes may be provided in the bylaws, which is a novelty for SAs (art. 347).

(ii) The bylaws of an SA may now foresee the removal of a shareholder when he/she involuntary breaches his/her ancillary obligations (art. 89). However, the reasons for not applying the sanction in the event of voluntary breaches and the fact that it is not consistent with the removal framework for SLs (arts. 350 and following) are surprising.

5. Winding up and liquidation

The winding up and liquidation framework applicable to SLs (arts. 360 and following) now also applies to SAs with regard to: (i) the need to draft a complete report on the liquidation transactions and a proposal for the division of the remaining assets, (ii) the term to challenge the resolution approving the liquidation and (iii) the framework applicable to the assets and liabilities emerging after extinction.

6. Listed companies

(i) The framework applicable to the preferred dividend of preference shares issued by listed companies is now that for non-voting shares issued by non-listed companies. Thus, the existing flexibility when conferring privileges is no longer present for no apparent reason (art. 499).

(ii) The need for listed companies to make available on their websites an electronic shareholders’ forum prior to holding any general shareholders meeting is reiterated.

(iii) The fourth additional provision of the LSA -on the need for the general shareholders meeting to approve the remuneration systems consisting of shares or option rights over shares or referenced to the value of the shares, addressed to general managers and similar officers in listed companies- is removed.


The information contained in this Newsletter is of a general nature and does not constitute legal advice. This Newsletter has been prepared as of 1 September 2010 and Uría Menéndez does not undertake any commitment to update or revise the contents hereof.