The General Directorate of Legal Affairs (DGSJyFP) has confirmed that corporate boards of directors have autonomy in the matter of remunerating executive directors of unlisted companies. In its decision, the DGSJyFP concluded that the bylaws are permitted to refer to an existing contract between the company and the executive director that states whether they will be paid for all or some of the remuneration items included in the bylaws.


The DGSJyFP allowed an appeal lodged by a notary who had authorised a deed amending articles of association, including a paragraph that was subsequently rejected by a registrar at the Mercantile Registry of Madrid. The wording of the rejected paragraph related to remuneration of executive directors in an unlisted company:

(…) when one of the members of the Board of Directors is granted executive duties (...), a contract must exist between the director and the Company (...). The contract (...) should outline all remunerative items paid to the director in relation to the carrying out of executive duties. Where applicable, this may include possible compensation for the early termination of said duties and any amounts to be paid by the Company as insurance premiums or contributions to savings schemes.

The registrar argued that the general shareholders' meeting should approve the remuneration of executive directors mentioned in the paragraph above in accordance with articles 217 and 249 of the Spanish Capital Companies Act and a Supreme Court judgment dated 26 February 2018.

The appellant, however, argued that the proposed wording is legally correct and adheres to the interpretation provided by the Supreme Court and the DGSJyFP after the Spanish Capital Companies Act was amended by Law 31/2014(1) in order to improve corporate governance.

The key issue is whether the proposed executive director remuneration was subject to approval by the general shareholders' meeting or, conversely, whether it fell within the responsibilities of the board of directors.

The appellant disagreed with the Supreme Court's most recent interpretation of the legal regulations concerning the remuneration of directors (in the aforementioned judgment of 26 February 2018) and three DGSJyFP subsequent judgments of the DGSJyFP.(2)

According to the Supreme Court's explanation of its decisions on these cases, articles 217 to 219 and article 249 of the Capital Companies Act are not alternatives to each other (as has been interpreted so far) and are to be read cumulatively.

Articles 217 to 219 cover general governance (applicable to all directors) and article 249 covers particular aspects of governance that are applicable to executive directors, such as granting a contract with the company where the contract's contents are limited by the bylaws and to a maximum annual amount approved by the general shareholders' meeting.

Therefore, as the scope of the board of directors' decision-making powers concerning remuneration of directors and the contract between the executive director and the company are limited by the bylaws and the maximum annual amount set by the general shareholders' meeting, the bylaw provision should, consequently, be understood in more flexible terms.

The appellant concluded that the outlined bylaw clause complied with the above principles. Firstly, it established:

  • the nature of the remuneration for the executive director;
  • the way the remuneration was to be paid; and
  • the maximum annual amount approved by the general shareholders' meeting.

On the other hand, the outlined bylaw clause contained the powers to distribute remuneration between directors and determined the executive director's remuneration in their contract with the company, which was in line with the flexibility of the bylaw provision and with the autonomy of the board of directors in this matter.


In light of the above arguments, the DGSJyFP reviewed the interpretation of the remuneration regime for directors and focused on sections 3 and 4 of article 249 of the Capital Companies Act, which state that such a contract between a company and an executive director should "be in line with the remuneration policy approved by the general shareholders' meeting" and further specifies "all the items which can receive remuneration for carrying out executive functions".

Therefore, the DGSJyFP allowed the appeal, concluding that, even though the bylaws should establish remuneration items for all the executive directors, such bylaws can refer to a contract between the director and the company that will determine whether remuneration is for all or some of the remunerable items covered in the bylaws.


This allows for shareholders to be protected (via the bylaw provision and the annual maximum amount) while creating flexibility required by the economy, by enabling a board of directors to decide the specific remunerable items of each director without requiring statutory amendments.

For further information on this topic please contact Victoria Vilar at CMS Albiñana & Suarez de Lezo by telephone (+34 93 494 10 22) or email ([email protected]). The CMS Albiñana & Suarez de Lezo website can be accessed at www.cms.law.


(1) Dated 3 December 2014.

(2) Dated 8 November 2018, 31 October 2018 and 12 December 2018.