Appointment of Administrators: General rule and exceptions.
How and who can appoint an administrator?
As a general rule and with a few exceptions, the competence for appointing and administrator lies with the General Meeting of Shareholders. Furthermore, this is an exclusive competence, so it cannot be delegated neither to the shareholders individually, nor to the administrative body.
The appointment will need the majorities required in each case by the By-Laws, and, in the absence of such majorities, the “ordinary majority” in limited liability companies -a majority of the votes validly cast, provided that they represent at least one third of the votes corresponding to the shares in which the share capital is divided- and the “simple majority” in public limited companies -a majority of the votes of the shareholders present or represented at the meeting, meaning that agreements will be adopted when more votes are cast in favour of reaching the agreement than against the same, taken into consideration all share capital present or represented. Similarly, the number of administrators that can be appointed will be set out in the By-Laws, taking into account that, in the case of a Board of Directors, it should be made up of a minimum of three members and, in the case of limited liability companies, a maximum of 12 members, with the possibility of appointing substitutes in all cases.
The appointment period shall be as established, once again, in the By-Laws. In public limited companies it is essential that this term is determined and shall not exceed six years, being the same for all members of the administrative body. In limited companies, it is not necessary to state the appointment period, and, in the absence of statutory provisions, it shall be understood that they have been appointed for an indefinite period.
In any case, the appointment takes effect from the moment when position is accepted by the appointed administrator or board member, without prejudice to the fact that it is an act subject to registration in the Companies Register.
Are there any exceptions to the general rule for the appointment of administrators?
Although the appointment is an exclusive competence of the General Meeting of Shareholders, as referred above, there are two exceptions to this general rule, both in the case of public limited companies, and always and when no substitutes have been appointed:
- Article 243 of the Spanish Law on Corporations grants a right of the minority shareholders to be “represented” on the Board of Directors provided that;
- there are vacancies (not when the positions are filled for the first time), and
- such minority has enough votes, individually or by pooling its shares. The number of votes required varies depending on the structure of each company.
The procedure to be followed is regulated by Royal Decree 821/1991, dated May the 17th, which states that, in addition to the regular member, the grouped minority shareholders may appoint up to three successive substitutes in the event that, for any reason, the appointed member no longer belongs to the Board of Directors.
Shareholders may appoint several board members, in proportion to their stake in the share capital of the company and, as long as it is a “minority” right, it cannot be restricted or eliminated by the statutes of the company.
- Article 244 of the Law on Corporations empowers the Board of Directors itself to fill anticipated vacancies (not in case of expiration of the appointment period) by temporarily appointing one of the shareholders to fill the vacancy. This is not a minority right, so it can be abolished by the By-Laws if the Shareholders wish so.
In limited liability companies these procedures may not be invoked to fill vacancies, without prejudice to the fact that the shareholders may establish a procedure that seeks to achieve equivalent effects.
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