PARTIAL AMENDMENT TO THE COMPANIES
Law 25/2011 of 1 August, which partially amends the Companies Law and
transposes Directive 2007/36/EC of the European Parliament and of the
Council dated 11 July 2007 on the exercise of certain rights of
shareholders in listed companies, was published in the Official Spanish
The law will enter into force on 2 October 2011. The new law is
primarily intended to: (i) amend and modernise specific aspects of the
Spanish legal framework on companies (as contained in the Companies Law,
“Ley de Sociedades de Capital”, “LSC”) and (ii) transpose
Directive 2007/36/EC into the Spanish legal system by also
inserting certain other amendments in the LSC. Other noteworthy
provision is the amendment of article 34 of Law 3/2009 of 3 April on
structural modifications of commercial companies (“Ley de
Modificaciones Estructurales”, “LME”).
Among the most important novelties, which are summarised
below, the following are the most noteworthy:
The electronic corporate address or corporate website is
formally recognised, reducing any previous doubts in connection with
the publication of shareholders meetings notices.
Non-listed companies must distribute a third of
distributable profits “derived from activities within their core
corporate purpose” from their fifth year of existence, or appraisal
rights will apply.
Financial intermediaries must disclose proxies to listed
companies at least seven days in advance of a shareholders meeting.
The new rule does not clarify who will be considered a financial
Other modifications are either highly technical or have a
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1. Electronic corporate address
The new law explicitly recognises a company’s electronic corporate
address as a website designated for legal corporate purposes (“sede
electrónica”). The creation of the website ‑which in most cases
will merely consist of a formal designation of that status, given the
likelihood that an appropriate website already exists‑, will require
approval at the general shareholders meeting. The new wording under the
LSC states that Directors must be in a position to evidence the content
of the website; however, it also ensures that, in the absence of proof
to the contrary, their declaration will be sufficient to affirm the
content at the electronic corporate address (art. 11 bis of the
These two amendments resolve specific technical uncertainties
introduced in 2010 as a result of an amendment to the LSC requiring that
notices for shareholders meetings be published on a company’s corporate
website, which had in turn caused the Registries and Notaries
Directorate to issue a clarifying instruction on 18 May 2011. In
particular, Law 25/2011 and article 11 bis of the LSC (as
modified) are designed to mitigate any doubts regarding the
classification as the official corporate website (particularly when a
company may have more than one website) and the way in which its content
can be evidenced.
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2. Appraisal rights
and forced sales
Appraisal rights in
the event of a substantial amendment to the corporate purpose.
The new law establishes that any substantial amendment to the company’s
corporate purpose will trigger appraisal rights for dissenting
shareholders (art. 346.1. a) of the LSC). This amendment codifies the
Supreme Court’s holding in its decision of 30 June 2010 (the Borrás
case), which stated that a substantial amendment (including any
substantial addition of activities or potential businesses) to the
corporate purpose is equivalent to a replacement of the corporate
purpose and, therefore, causes a vesting of appraisal rights in the same
way as replacement.
Appraisal rights in the event dividends of non-listed companies are not
distributed. The new law recognises appraisal rights
in the event that a non-listed company fails to distribute at least one
third of distributable ordinary profits derived from activities within
its core corporate purpose as from the fifth year following its
incorporation (art. 348 bis of the LSC). This provision is one
of the most significant innovations of Law 25/2011 and introduces some
doubt regarding whether or not any profit could be considered as
constituting profit from activities within the core corporate purpose.
Association may provide for forced sales for shareholders.
The new law allows all types of companies ‑and not only private limited
liability companies (“SLs”) as previously‑ to establish,
subject to the unanimous consent of shareholders, additional
circumstances to those established by the law granting the company the
right to forcibly redeem the shares of such shareholder (art. 351 of the
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provisions on calling a meeting pursuant to a request by minority
shareholders. The maximum period between a request by
shareholders for a shareholders meeting (which may be made by
shareholders representing 5% of the share capital, or any lower
threshold established in the company’s articles of association) is
extended from one to two months of the date that the request was
submitted through a notary to the Directors (art. 168, second paragraph,
of the LSC). The previous period of one month was insufficient given
that the mandatory period for calling shareholders meetings in public
limited liability companies (“SAs”) has been one month
since 2005, invariably leaving Directors with no time to prepare the
Flexibility on forms of publishing notices for shareholders meeting.
Excluding SAs with bearer shares, a company’s articles of association
may allow the waiver of the obligation of publishing the notice for the
general shareholders meeting in the Official Gazette of the Commercial
Registry (“BORME”). A company’s articles of association
may also waive the requirement of publishing the notice for the meeting
on the corporate website if written notification is made in a way that
ensures that the notice will be received by all shareholders on an
individual basis. The publication of the notice in one of the most
widely distributed daily newspapers in the province corresponding to the
corporate address will be voluntary unless the company has no corporate
website or its articles of association establish otherwise (art. 173 of
Unification of the
provisions on the content of meetings. The minimum
content of notices for the shareholders meetings of SLs and SAs is
unified under the new wording of the LSC. The notice must indicate the
position of the person(s) calling the shareholders meeting (art. 174 of
increasing the information rights of minority shareholders.
The articles of association of an SA may reduce the minimum shareholding
required to override any rejection by the Directors against a
shareholder’s information request in connection with a shareholders
meeting from the statutory threshold of 25% to any percentage exceeding
5% (art. 197.4 of the LSC).
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4. Management of
Flexibility for changing the management structure in SAs.
An SA’s articles of association may establish alternative systems for
managing the company, allowing the form of the management (e.g., by a
Board, sole Director or joint Directors) to be changed by shareholders
without amending the company’s articles of association. This flexibility,
which was only available to SLs, now extends to SAs (art. 23. e) of the
Clarification on the framework for legal persons serving as Directors
and their representatives. The new article 212
bis of the LSC codifies the requirement that any legal person
appointed as a Director of a company must appoint a natural person to
exercise its functions on a permanent basis and also establishes that,
in the event of the removal of that individual, the legal person must
record the appointment of a new representative in the corresponding
commercial registry (“Registro Mercantil”).
third of a company’s Directors may call a Board meeting.
One third of a company’s Directors are entitled to call a Board of
Directors’ meeting if it had not been called by the Chair within the
month following the corresponding request (art. 246.2 of the LSC).
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5. Winding-up and
cessation of activities constituting a
company’s corporate purpose will be considered as a mandatory cause for
winding-up for all forms of companies. The cessation
of activities constituting the corporate purpose of a company will be
considered as a mandatory event for the winding-up of all companies (in
contrast to previous regulations, under which such winding-up event
applied only to SLs). The cessation of activities will be presumed to
exist if the inactivity exceeds one year (art. 363.1 of the LSC).
the legal framework applicable to liquidators. The
framework on the liability of the liquidators of SLs will also apply to
other types of companies, including SAs (art. 397 of the LSC), as well
as the automatic conversion of Directors into liquidators in the event
that the company is wound-up, unless the articles of association
establish otherwise or other liquidators have been appointed by virtue
of a shareholders resolution (art. 376.2 of the LSC).
Flexibility on the disposal of real estate in connection with the
liquidation of SAs. The new law removes the
obligation to sell any existing real estate through a public auction
within the liquidation proceedings (art. 387 of the LSC).
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6. Listed companies:
specific requirements for the general shareholders meeting
Reinforcement of equal treatment. Existing
provisions on equal treatment are reaffirmed by a new provision
establishing that listed companies must ensure the equal treatment of
all equally situated shareholders in connection with information,
participation and exercise of voting rights at the general shareholders
meeting (art. 514 of the LSC).
Possibility of a fast-track call for extraordinary shareholders meetings.
The new law introduces additional flexibility for calling an
extraordinary general shareholders meeting with a minimum notice period
of 15 days prior to the date of the meeting (as opposed to the one month
period generally required). Should a company intend to exercise this
option, it must grant all shareholders the opportunity to vote by
electronic means in that meeting and the reduction of the notice period
must be approved at the most recent annual shareholders meeting by a
majority of shareholders representing at least two-thirds of the
subscribed share capital with voting rights (art. 515 of the LSC). The
supermajority required for allowing the reduced term is likely to
diminish the practical application of this new option.
Publication of notices for shareholders meetings.
Companies are required to call the general shareholders meeting using
any means of communication that affords shareholders fast and free
access throughout the European Union and the public and effective
dissemination of the call by publishing the notice in at least: (a) the
BORME or one of the most widely circulated daily newspapers in Spain;
(b) the website of the Spanish Securities and Exchange Commission
(CNMV); and (c) the company’s corporate website (art. 516 of the LSC).
Content of notices for
shareholders meetings. The law establishes specific
provisions on the content of the notice for shareholders meetings for
listed companies, which do not significantly depart from the current
general practice (art.517 of the LSC).
content of the corporate website once a shareholders meeting has been
called. Listed companies must publish the
information indicated in article 518 of the LSC (as amended) on their
corporate website from the date of the notice for the meeting is
published until the date of the meeting.
Shareholders rights in connection with the agenda.
The shareholders right to request new points in the agenda (available to
shareholders holding at least 5% of the company’s share capital) is
limited to the annual shareholders meeting and the right to make
proposals on the points in the agenda of the general meetings is limited
to shareholders holding at least 5% of the company’s share capital (art.
519 of the LSC). The new provisions further clarify that shareholder
information requests need not be satisfied if the corresponding
information was clearly and directly available on the company’s
corporate website under a question-answer format (art. 520 of the LSC).
Participation through a proxy holder. Any provisions
in the company’s articles of association that restrict the exercise of
the shareholders rights through proxy holders (whether legal or natural
persons) will be considered null and void. If the shareholder provides
specific voting instructions to the proxy holder, the latter will be
obliged to vote accordingly and maintain a record of the same for a
period of one year following the meeting (art. 522 of the LSC).
Conflicts of interest and proxy holders. Article 523
of the LSC now requires prospective proxy holders to disclose all
conflicts of interest before the corresponding shareholder grants the
proxy. If a conflict arises once the proxy has been granted and the
proxy holder did not disclose the potential existence of such conflict,
the proxy holder must immediately inform the principal of that
circumstance. In that event, the proxy holder must abstain from voting
if it has not received new specific voting instructions. The modified
provisions also establish specific cases in which a conflict of interest
may exist, including when the proxy holder is a controlling shareholder,
employee, or Director of the company. Also, no conflict of interest will
be considered to exist if a public solicitation for proxies by a
Director had been submitted and the principal has given specific voting
instructions for all items on the agenda (art. 526 LSC).
Disclosure of proxies held by financial intermediaries.
Within the seven days preceding a shareholders meeting, financial
intermediaries appointed as proxy holders must provide a list to the
company disclosing the identity of each client from which they have
received a proxy, the number of shares voting on his/her behalf and any
instructions issued by the appointing shareholder (art. 524 LSC). This
obligation represents a significant modification and its application
raises a number of doubts, including the potential effect on proxies
received by financial intermediaries within the seven days preceding a
shareholders meeting and the interpretation of what institutions fall
under the definition of “financial intermediary” in this context.
Mandatory publication of voting results following a shareholders meeting.
Listed companies must publish the approved resolutions and the voting
results on the company’s corporate website within five days of the
general shareholders meeting (art. 525 LSC).
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7. Other amendments
The law also amends article 34 of the LME by establishing that
independent expert reports required in the merger of companies into an
SA (or a “sociedad comanditaria por acciones”) must contain two
distinct sections. The first section must assess the exchange ratio and
the Directors’ justification of the same. The second section must issue
an opinion on whether the net assets held by the absorbed companies are
equal to or greater than the capital increase in the absorbing company (or
the share capital if the resulting entity is newly formed). The report
will be solely comprised of the second part if all the shareholders of
the companies participating in the merger so agree or the absorbed
company is a direct or indirect wholly-owned subsidiary of the absorbing
company. The new law therefore resolves any doubt regarding whether or
not an independent expert report remains mandatory for mergers in which
the resulting company is an SA, even if it is limited to the absorption
of a wholly-owned subsidiary.
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The information contained in this Newsletter is of a general nature
and does not constitute legal advice. This Newsletter has been prepared
as of 2 August 2011 and Uría Menéndez does not undertake to update or
revise its contents.
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