The adoption of corporate resolutions by shareholders without the need to formally gather in a shareholders' meeting
Published on 25th Apr 2019
A registrar from the Commercial Registry of Madrid accepts a statutory clause that allows the adoption by shareholders of corporate resolutions "by written consent in lieu of a meeting".
Article 159 of the Spanish Companies Act (Ley de Sociedades de Capital, “LSC“), by stating that shareholders, gathered in a general shareholders’ meeting, will decide by the legal or statutory majority established, on matters within the competence of the general shareholders’ meeting, emphasises the need to hold a formal meeting with the shareholders physically present to adopt the corporate resolutions that shall govern the company.
Likewise, article 160 of the LSC states that it corresponds to the general shareholders' meeting "deliberating and agreeing" on matters within its competence.
However, the LSC also establishes the following exceptions to this requirement:
- Article 182 allows telematic attendance and voting (including by videoconference) in shareholders' meetings for public limited liability companies (sociedades anónimas), provided that it is expressly stated in their bylaws and that the shareholders' identity is duly guaranteed, thus avoiding their physical presence in a given place.
The General Directorate of Registries and Notaries (Dirección General de los Registros y del Notariado) extended this possibility to limited liability companies (sociedades de responsabilidad limitada) in its resolution dated 19 December 2012 (with a reiterated criterion in its resolutions dated 25 and 26 April 2017) "as long as it is certain that remote attendees receive real-time information about what takes place and to the extent that shareholders can intervene at any time, given that it does not offer less guarantee of authenticity than physical attendance".
- The decisions made by the sole-shareholder, when the public or private limited liability company is a sole-shareholder company.
- With respect to the board of directors of public limited liability companies, voting is allowed by written consent in lieu of a meeting if no director opposes to the use of this procedure (article 248.2 LSC).
Article 100 of the Regulations of the Commercial Registry, when regulating special cases for the documentation of corporate resolutions, allows that "when the Law does not prevent the adoption of corporate resolutions by correspondence or by any other means that guarantees their authenticity" the individuals with authority to certify corporate resolutions expressly put on record on the minutes the resolutions that have been adopted, stating the name of the shareholders or, where appropriate, the directors, and stating the procedure followed to form the will of the relevant corporate body, indicating the vote cast by each of them (considering in this case that the corporate resolutions have been passed at the registered corporate offices and on the date of the last vote cast). Its second section states that, "if the resolutions of the board of directors are adopted by written consent in lieu of a meeting, then it must also be expressly stated that no director has opposed to such procedure."
The tendency on this matter in comparative law is not to require holding a formal shareholders' meeting to adopt corporate resolutions. In this sense, the German law of limited liability companies expressly provides that resolutions by shareholders may be adopted "by written consent in lieu of a meeting", if they are unanimously approved by all shareholders, even allowing the possibility for the bylaws to provide procedures for the adoption of resolutions that lack any formal requirements. Likewise, in the United States what is known as "action by written consent" is applied, which is not only an excellent way for companies to pass resolutions quickly, but it also allows to overcome the setbacks that may arise when trying to reconcile agendas and schedules of directors and shareholders in order to hold a physical meeting.
The General Directorate of Registries and Notaries seem to follow this trend towards flexibility in the voting procedure of shareholders having accepted, both in terms of public and private limited liability companies, casting their vote in advance by physical or telematic means on the matters on the agenda. That is, without their presence (physical or telematic) being necessary in the same place and at the same time (RDGRN of 8 January 2018).
The latest development on this matter has been the filing of a statutory clause in the Commercial Registry of Madrid that allows for the adoption of corporate resolutions by shareholders "by written consent in lieu of a meeting" (without the need to formally gather in a meeting) as long as (among others):
- all shareholders express their consent to the adoption of the corporate resolutions without the need to hold a meeting;
- the matters on which the vote of the shareholders' meeting is sought are subject to a simple affirmative or negative vote;
- the communications are made in writing, either by physical or electronic means, or by any other means of remote communication that duly guarantee the identity of the person carrying out such communication, as well as the integrity of its content; and
- the procedure followed and resolutions passed are put on record on the minutes, stating the identity of the shareholders, the conformity of all of them to the procedure followed, the system used to form the will of the shareholders' meeting and the vote cast by each shareholder.
Based on the principle of free will established in article 28 of the LSC, the Commercial Registry of Madrid has accepted the validity of a statutory clause that provides that shareholders may pass resolutions "by written consent in lieu of a meeting", avoiding the need to hold a formal meeting to deliberate corporate resolutions (matters which are not contrary to mandatory or prohibitive regulations). If this interpretation is admitted, the use of new technologies would be encouraged and the adoption of corporate resolutions by shareholders would become more agile, simple, and cheaper (as the costs associated with traveling or the appointment of representatives would be avoided), all combined with the due respect of the individual shareholders' rights.
However, we will have to wait for future rulings from the General Directorate of Registries and Notaries in this regard to have more certainty about the validity of this type of clause, the guarantees that they must offer to shareholders in order to respect their individual rights and the admissibility of such type of clauses for the Commercial Registry.