The Directorate General for Legal Certainty and Public Trust has recently expressed its opinion in its decision dated 11 March 2024 on the situations that give rise to a substantial modification of the company’s objects and confer a right of withdrawal on the shareholders.
Modification of the Articles of Association
In the case in question, the corporate purpose, prior to the modification, consisted of the cleaning and maintenance of premises, as well as the provision of care services in centres for the elderly, the disabled, drug addicts and people at risk of social exclusion. Similarly, the company could also develop educational or personal activities for the users of these centres.
After the reform, the article maintained the aforementioned activities within the corporate purpose and developed them. However, it also referred to new activities, such as the transport of goods by road or the recruitment of personnel.
Decision of the Commercial Registrar.
In the case analysed by the Registrar, the company sought the elevation to public deed of a corporate resolution approved with the support of 94.47% of the share capital, in which the corporate purpose was extended and, consequently, the company’s articles of association were amended.
After reviewing the amendment, the Registrar determined that the amendment entailed a substantial modification of the company’s corporate purpose, which gave rise to a right of separation in favour of the shareholders who had voted against it. Although the fact of specifying and specifying the pre-existing corporate purpose would not have posed a major problem for registration purposes, the Registrar found that new elements had been added to the corporate purpose which constituted a substantial modification of the corporate purpose. Thus, the registration of the resolution was refused, as the company had not complied with the provisions of Articles 206 and 208 of the Commercial Registry Regulations.
The requirements of the Capital Companies Act and the Companies Register Regulations for the registration of this type of resolution.
Article 346.1 a) of the Capital Companies Act grants a right of withdrawal to shareholders who have voted against a corporate resolution resulting in a substitution or substantial modification of the corporate purpose. It should also be borne in mind that such resolutions must be published in the Official Gazette of the Commercial Registry, as stipulated in Article 348 of the Capital Companies Act.
Similarly, if such resolutions have not been adopted unanimously, their registration in the Companies Register depends on their publication in the BORME or on the attachment of a declaration by the directors stating that none of the shareholders has exercised the right of separation within the period legally established for this purpose (Article 206.1 of the Companies Register Regulations). If, on the other hand, the right of separation has been exercised by one of the shareholders, Article 208 of the Commercial Registry Regulations stipulates that the deed to be registered or a subsequent deed must state the capital reduction, as well as the shares redeemed, the identity of the shareholders affected, the amount of capital after the reduction and the new wording of the articles of association.
Appeal against the Commercial Registrar’s classification.
The company argued that there had not been a substantial amendment of the company object, but that the company resolution merely specified the company object which was already provided for in the previous articles of association. For this reason, the appellant considered that, in accordance with the case law of the Supreme Court as set out in Supreme Court Ruling 102/2011 of 10 March, the mere specification of the corporate purpose did not entail a modification of the corporate purpose that would give rise to the right of separation of the shareholders who had voted against it.
Position of the Directorate General for Legal Certainty and Public Faith.
In relation to the above, the Directorate General for Legal Certainty and Public Faith concluded that:
1. There are two doctrinal positions on when a substantial modification of the corporate purpose occurs. According to the first one, this change would occur when the activities of the corporate purpose are replaced by new ones. On the other hand, the second position is that it is not necessary for there to be a modification of the activities included in the corporate purpose; it is sufficient if the activities included in the corporate purpose are extended or restricted.
2. The interpretation adopted by the Supreme Court is the second interpretation. The SC has also considered that, in order to establish whether we are dealing with one of these modifications, it must be done from a relative point of view, i.e., it must be considered whether the modifications ‘respect the will of the shareholder who entered into a company that exploited a specific corporate purpose’.
3. In this case it is clear that there has been a change in the object of the company. This is because, in addition to specifying certain activities that were previously included, the new object of the company adds new activities such as the “transport of goods by land ’, which clearly entails a change in the economic and legal reality of the company.
4. As a consequence of the above, the modification of the articles of association implies an essential modification of the corporate purpose which generates a right of separation for the shareholders who have voted in contract and whose registration implies the fulfilment of the aforementioned requirements.
The PDF of the resolution is attached below: