Sunday, March 30, 2014

Commercial Law: Amendment to the by-laws

They are done by the Shareholders Meeting. Proposals made by directors and corporations need a written report justifying the proposal. The SHM is called and the resoltion is or isnt passed.

A notarial deed is required at the Trade Registry. Publicity must be made to: Change corporate name, transfer address or change corporate purpose. Amendments implying new obligations for shareholders require their consent.

Capital increase: New shares or increased par value via a SHM resolution. Shareholders have preemtive rights to purchase new shares.

Capital reduction: Aims to reestablish balance between assets and equity by writing off, reducing par value, or grouping shares.

Sunday, March 23, 2014

Stock Companies: Directors

Competence: The directors shall be empowered to manage and represent the company under the terms provided in the Stock Companies Act.

Directorship type:

  • Sole director
  • Several directors acting jointly or severally
  • Board of directors
In corporations: 2 directors = jointly. More than 2 = Board.
In LLCs: The Shareholders Meeting may opt.
Changes are made in the Trade Registry.

Determination of number of directors: Bylaws state min-max. General meeting determines the exact number.

Who can be director: Individuals, legal entities.
Who can't: Shareholders, minors, incompetents, disqualified, convicted...

Incompatible with Public officials, judges and others.

  • SHM
  • Deputy directors
  • Registered Trade Registry
Remuneration: Non remunerated unless stated in the bylaws.

  • LLCs: Indefinite
  • Corps: 6 years max.
  • Re-elegible
  • SHM
  • In LLCs majority can be required.
  • In corps: Conflict of interest or IMMEDIATELY after a legal prohibition.
  1. Due diligence (businessman, be informed)
  2. Loyalty
  3. Dont use the company name on your behalf
  4. Dont take advantage of business opportunities on your behalf.
  5. Conflict of interest (dont take part if it happens)
  6. Prohibition of competition (dont engage in similar business by your own)
  7. Secrecy

Individuals: Close relatives and companies whose director is affiliated.
Legal entities: Partners, De facto directors, companies of the same holding

Power of representation:
  • 1 director: all powers
  • 2+: Purely internal decision upon representative powers, but all shall have.
  • LLCs: At least 2 directors shall jointly be representatives
  • Board of director: The board itself and its delegates eg CEO.
Directors liability:
  • Damage caused
  • Acts or omissions contrary to law
  • Breaching duties
Features: Authorization by SHM does not release from a liability. Joint and several liability unless otherwise proven.

Demanding liability is decided by the SHM and implies automatic dismissal.

The board of directors:

A minimum of 3 members. Max 12 for LLCs. SHM decides number.

Sunday, March 16, 2014

Corporate Bodies: The Shareholders Meeting

The concept is gathering the shareholders to adopt decisions on the matters of its competence. There are two types: Ordinary (to approve fin. statements) or Extraordinary.

The meeting has these powers:
  • Approval of financial statements, distribution of profits and corporate governance.
  • Appointment of directors, liquidators, auditors...
  • Changes in Bylaws
  • Capital increase / decrease
  • Removal or limitation of preemptive rights.
  • Conversion, merger, spinoff...
  • Winding-up of the company
  • Approval of the final liquidation Balance Sheet.
  • Others stated in the law/bylaws.
Universal shareholders meeting: Validly constituted to discuss any matter without notice when the 100% of the capital is represented.

The meeting needs to be called by directors or liquidators or when requested by 5% of the stock. If it isnt called, it can be requested to the Court. The call shall contain the agenda and those with 5% stock can add issues to the agenda. It has to be called with a 1 month notice (15 days for LLCs) in an official journal or a popular journal or as forseen in the bylaws. It must state place and date.

In LLCs all shareholders shall attend the SHM. In corporations bylaws may restrict a minimum number of shares to attend even virtually.

QUORUM: A minimum of attendants are required to enable to pass resolutions. Normally: 25% attend first call, no minimum second call. A reinforced quorum may be required for some special issues (50%/25%)

Voting rights:
  • LLC: 1 share 1 vote. They arent allowed to vote on issues with conflict of interest. Mayority and 1/3 represented to pass a resolution. Sometimes 2/3 of votes for some issues.
  • Corps: Some voting limitations may be foreseen. Same as LLCs to pass a resolution.
  • All corporate decisions shall be recorded in the minutes. Minutes shall be approved by the meeting at the end of it or after 15 days. Resolutions may be implemented since their approval. Directors can ask a notary public to attend "notarial minutes".
Challenging resolutions:
  • Contrary to law can be challenged (null)
  • Null resolutions can be challenged withing a year. Others shall be challenged within 40 days.
  • Non attending SH who opposed in the minutes are entitled to challenge resolutions.
Challenged resolutions require bringing a lawsuit against the company to the Commercial Court of the registered address.

Sunday, February 23, 2014

Spanish Legislation: Shares

General issues of shares and bonds:

Shares are non-divisible equal parts of the capital of a company. They provide rights to shareholders. They are securities in the case of corporations.

Bonds shall be only issued by corporations and stock partnerships. They must be detailed and guaranteed. A syndicate and a trustee for bondholders can be appointed. Convertible bonds may be exchanged for shares at least for their par value. SH have pre-emptive rights to purchase them.

Shareholders rights:

  • Profits
  • First refusal right
  • Voting right
  • Information
  • Equal treatment
Shares can be of different classes: Only preference in the distribute of corporate profits, and they can or not have voting rights.

Representation of shares:

  • LLCs: The shares are registered in the Shareholder's Register book. Transfers of shares required a notarial deed.
  • Corporationss: Shares can be nominative, to the holder or book entries. In the case of nominative a share certificate is issued and it shall be recorded in a Nominative Shares Register book.
 Transfers of shares:

  • LLCs: Voluntary transfers shall be offererd to other shareholders first. Bylaws can't allow a free transfer method of shares. There is a procedure for the voluntary and compulsory transfers.
  • Corporations: Bylaws can't allow a system that hinders share transferability.
Property rights of shares:
  • Co-ownership
  • Beneficial use (dividends for beneficiary but NOT voting rights)
  • Pledge
  • Shares can be seized thus keeping voting rights.
Dealing with own shares:
  • Original Adquisition: Forbidden to subscribe new shares. Shareholders + Board are liable. They must be sold in 1 year or be written off.
  • Derivative Adquisition:
    -LLCs: Accepted in case of donation, estate adquisition, execution, reduction of capital, auction. They must be sold or written off within 3 years. Rights are suspended. Own shares can't be accepted as pledge nor be financed.
    -Corps: Reduction of capital, estate, donation, by court. 3 years. They can agree to back-own 20% of shares for 5 years. No voting rights. Economic profit distributed to all shareholders. Reserve to be set.
Acceptance as guarantee / financial assistance:

In LLCs they CANT.
In Corporations own shares can be accepted as guarantee within the limits of back-owned shares. They can additionally finance the adquisition of own shares in the case of staff remuneration and banks.

Reciprocal stockholding:
10% maximum. The stockholding shall be reduced within 1 (3 exceptionally) year beyond that limit. Political rights are suspended.
  • This is not valid for Holding-subsidiary regime.
  • Affected companies must be immediately informed revoking political rights.
Front-person and penalties:
  • Agreements with a front-person are void.
  • Not complying with own-shares regulations can be punished with a fine ( = toall nominal value of affected shares)
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