The Directorate General for Registers and Notaries (Dirección General de los Registros y del Notariado) (“DGRN“) recently expressed its view on the interpretation of new article 160 f) of the Companies Act, which is related to the acquisition, sale and contribution of essential assets by a company.
Law 31/2014, of 3 December, amending the Spanish Companies Law in order to improve corporate governance, modified article 160 by requiring that any acquisition, sale or contribution to another company of material assets must be approved by the general shareholders’ meeting. The Companies Law presumes that an asset is material when the amount of the transaction exceeds 25% of the total value of the assets in the last approved balance sheet.
Following the entering into force of this new rule, some Spanish registrars have rejected registration of a number of deeds regarding the acquisition, sale or contribution of material assets by Spanish companies. Generally, the registrars argued that either the deed did not include a specific statement on the materiality of the particular asset, or that the corresponding certificate of the resolution of the general shareholders’ meeting approving the transaction was not attached to the deed.
The GDRN ruled on this issue in its resolution of 11 June 2015, which has been subsequently reproduced and developed by other recent rulings. This article summarizes the main conclusions reached by the DGRN on its interpretation of the new article 160.f):
- Article 160 of the Companies Law consecrates a genuinely exclusive authority of the general shareholders’ meeting in relation to the acquisition, sale and contribution of material assets. Therefore, if an asset is material, only the general meeting can authorize its acquisition or sale.
- All notaries are required to diligently perform their legal duties requiring them to make sure that the deals authorized by them are lawful. This means that the notary should request a statement from the company’s representative or a certificate issued by directors confirming that the assets in question are not material.
- However, the lack of this statement or certificate does not prevent registration of the deal with the corresponding public registry, based on the fact that the affected third parties must be protected, provided always that they acted in good faith and without gross negligence. Notwithstanding, the registrar may turn down the registration of the deed when he/she has evidence enough to determine that the relevant asset is material.
- The registration of the transaction with the corresponding registry does not limit in any way the liability of directors or representatives towards the company, if they negligently disregarded the materiality of the asset being sold, acquired or contributed.