The Spanish Corporate Act (Ley de Sociedades de Capital ‘LSC’) was amended on the 3rd of December 2014 by Law 31/2014. Part of Law 31/2014 will impact how Board of Directors and Shareholders operate in Spain, with a view to improving the overall corporate governance of Spanish entities.
For entities with a Board of Directors, the LSC previously only required one Board of Directors meeting per year which was to approve the annual accounts, however recent amendments mean that the Board must now meet at least once per quarter. The LSC does not provide any guidance on the specific content of these meetings, however if more content is included in the minutes of the quarterly meetings then this could imply a higher standard of governance within the company by the Board of Directors, should their diligence ever be investigated.
In addition to the frequency of Board meetings, Law 31/2014 also addresses conflicts of interest. Going forward, where a resolution will be passed in a Board of Directors meeting, any member of the Board with a potential conflict of interest must refrain from voting on such matter. Further, if a member of the Board is appointed as Managing Director or General Director then the company must now prepare a contract with details of the powers granted to the Director on behalf of the Company, the reporting duties of the Director and the remuneration, if applicable. The contract must then be approved by the Board of Directors with an affirmative vote of two thirds of the members, with the relevant member of the Board refraining from voting. The contract should be attached as an annex to the minutes of the Board meeting.
The Amendments to the LSC in Law 31/2014 also introduce changes to Shareholder meetings and how matters should be resolved. Any matters which are materially different from each other, for example the resignation of one director and the appointment of another, must now be resolved separately and all resolutions should be approved by simple majority of votes (regardless of what is stated in the bylaws), unless it is a matter which requires a qualified majority. As with conflicts of interest of the member of the Board, Shareholders should not participate in voting on any resolutions where there may be a conflict of interest.
Another change to the LSC relates to the acquisition, sale or contribution of assets. It is now necessary for the Shareholders to approve the disposal of significant assets which represent a value of over 25% of the total assets of the company, according to the last approved balance sheet.
Please note, Law 31/2014 does not state that companies are required to amend their bylaws however in some cases the recent changes could result in a conflict between the current bylaws of the company and the new requirements of the LSC.