The latest reform of the Companies Law capital (LSC) introduced two developments in the regime of capital companies in relation to situations of intervention of the board of partners in what a priori could be considered management powers, own, in another case, administrators.

These new features are:

  • Article 160 f) of the Companies Law of Capital that attributes to the general meeting competence to decide and agree on the acquisition, the alienation is not contributed to another company of essential assets.
  • Modification of article 161 of the Companies Law of Capital that regulates the faculty of intervention of the Board of partners in management matters (own of the administrators), extending its scope of application to all capital companies.

There are two mechanisms that operate differently but have in common that they attribute a greater role to the board and both partners.

We will focus attention on this writing in the attribution of express competence to the board to decide on the acquisition, sale or contribution to society other essential assets, Contained in said article 160 f) of the LSC.

So that the operation must be approved by board members should accumulate two requirements:

  • One on the type of legal business ( "acquisition, sale and contribution to another company").
  • Another on the subject of business, must be "essential assets".

So if performed by the company one of the aforementioned legal transactions without affecting a "critical asset", giving only one of the above requirements, competition remains administrators.

But what happens in practice?

This allocation to the board of partners has fuzzy contours, which is generating many doubts in practice in relation, for example, to: i) what affects legal businesses; ii) what is meant by "essential asset or iii) what are the consequences of infringement of Article 160 LSC hand.

What legal transactions affect?

The rule indicates that affects "the acquisition, disposal or contribution to society." Here the question of whether it refers only to the current transmission assets or also applicable to acts of encumbrance or creation of real rights affecting an essential asset to the extent that we can find with a subsequent transfer of assets is posed by compulsorily.

We understand that the rule also applies to cases of mortgage constitution, option, transfer of ownership as collateral for a loan ... if levied on an essential asset.

Another question that arises is whether it is applicable when the counterparty is a natural person or corporate entity not nature. Again we understand that the answer must be yes.

Another dilemma is whether the board should approve the acquisition or sales transactions that occur in the context of the liquidation of a company. In this case, we understand that should not be required the agreement of the board.

What is meant by "essential asset"?

It is considered that an asset is essential when its sale or acquisition represents a significant alteration of the equity, economic or financial composition of society. Alteration can occur: a) both the quantitative weight of the active, and in this regard as set out in the provision in question, there is a presumption that the active is essential when the amount of the transaction exceeds 25% of value of assets stated in the last approved balance sheet; b) as qualitative relevance (importance for the development of the corporate purpose of the company).

Another definition would be in assets that are essential those whose alienation, acquisition or contribution to another company determines an effective modification of the corporate purpose. For example, if an essential asset is disposed of, is producing a modification of the corporate purpose facto since society after the sale no longer have the assets that would allow developing social object that was developing. On the contrary, the transmission of safe assets for the development of social order would be outside the scope.

On the other hand, we might find that an asset that is transferred is essential to the acquiring company and not for the transferor.

So, served fuzzy contours of the standard must be discerned in each case if we have a legal business that requires or not the approval of the Board. And for this purpose, managers he moved the obligation to examine in each case whether the asset is essential or not according to the specific circumstances, or the sale or acquisition represents a significant alteration of the asset composition or determines a modification effective corporate purpose.

Note, however, that even if the decision of those agreements the need to adopt the board members, business or contract in any case will be signed by the directors.

In the case of witnessing transfers of property subject to registration in the Land Registry, it will be necessary to include in the deed administrator a statement regarding the essential or not the active character. In this regard, the Directorate General of Registries and Notaries (DGRN) argues that the omission of the demonstration in a public deed on non-essential character of the asset is not in itself defect that prevents the registration since, in these cases the third party purchaser in good faith and without gross negligence must be protected.

What would be the consequences of the agreement adopted by the administrator without the required agreement of the board?

It would lead to the possibility of challenging the resolution adopted by the board of directors and in addition, to the extent that it is adversely affecting the corresponding liability claims administrators.

And in relation to the consequences that such an infringement may have on the operation and the counterparty, if proper precautions are taken, we understand that the rights of bona fide third party without gross negligence would be protected.

As always we remain at your disposal to discuss any questions that arise about it.

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Carmen Lopez

DiG Lawyers