Non-attendance of directors at a general meeting

Published on 22nd Jun 2016

On 19 April 2016, the Supreme Court published its ruling number 225/2016 regarding the director’s duty to attend general meetings, regulated by the provisions of article 180 of the Spanish Companies Law, and the consequences of not attending.

The Spanish Companies Law sets forth the duties of companies’ directors, among them, the duty to attend all general meetings, as established in article 180 of the Spanish Companies Law. The ruling of the Supreme Court number 225/2016, published on 19 April 2016, addresses the consequences that may arise from the non-compliance of such duty because, as it points out, the precept does not provide any “sanction” for such non-compliance.

According to this ruling, the non-attendance of directors at a general meeting resulted in an applicant minority shareholder not being able to exercise her right to information. This caused the meeting to be void because she did not have the opportunity to ask or be informed about a specific item on the agenda regarding certain credit transactions that had to be approved at that general meeting.

Directors must attend general meetings because the tasks undertaken by the general meeting are essential for the proper functioning and development of a company. That means that, on the one hand, the general meeting can perform its function and monitor the directors’ management of the company and, on the other hand, the shareholders can exercise their right to information and request any information or clarification that they deem necessary relating to any item on the agenda.

As a general rule, the Supreme Court establishes that the non-attendance of directors to a general meeting cannot result in its adjournment or nullity because, otherwise, the deliberate or wilful non-attendance of the directors could vitiate the nullity of the general meeting and, ultimately, endanger the functioning of the company.

It should be noted that, unlike shareholders, the law does not allow directors to be represented by third parties at a general meeting. Attendance at general meetings is a substantive competence of directors and, therefore, their representation cannot be delegated. This is why directors may be held responsible if they fail to comply with their legal duty to attend a general meeting.

Notwithstanding the foregoing, the Supreme Court also points out that there are exceptional cases where the non-attendance of directors may justify the adjournment or nullity of a general meeting. Thus, the impact of a director’s non-attendance on the shareholders’ rights that have to be exercised at a particular meeting should be weighted on a case by case basis.

To conclude, we can say that the non-attendance of directors at a general meeting does not involve its nullity per se, except in those cases where such non-attendance has proved to be a decisive factor depriving shareholders of their rights.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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