Corporate Governance: Directors and Company Validity
Managing Body: Definition, Composition, Competences
The managing or governing body directs and represents the company. The Spanish Companies Act (LSC) allows various structures: single director, two joint directors, two or more acting severally and jointly, three or more joint directors, or a board of directors. Representation covers all acts within the corporate purpose defined in the by-laws. Limitations on directors’ powers are void against third parties, even if registered.
Requirements, Appointment, Remuneration, Separation, Resignation
Requirements: Directors can be individuals or corporate bodies. A designated natural person fulfills duties for corporate directors. Directors need not be shareholders unless specified in the by-laws.
Appointment: Generally, directors are appointed by the general meeting, requiring acceptance and registration.
Remuneration: The role is typically unpaid, but by-laws can establish remuneration (fixed assignment, attendance fees, profit shares, shares, or dismissal compensation).
Term of Office: LLC directors may hold office indefinitely. JSC directors’ terms are limited to six years by by-laws.
Separation: JSC directors can be dismissed anytime by the general meeting without cause. LLC by-laws may require a qualified majority for dismissal. Dismissal is mandatory for directors under legal prohibition or with conflicting interests.
Resignation: JSC boards must accept resignations unless by-laws state otherwise. Resignation is permissible if it doesn’t paralyze company operations.
Company Nullity
Invalidity occurs due to missing essential requirements. After registration, a company can only be declared null and void on limited grounds (Art. 56.1 LSC):
- Lack of at least two founding partners (or one in single-member companies).
- Incapacity of all founding partners.
- Failure to include partners’ contributions in the deed.
- Failure to include the company name in the deed.
- Unlawful or incompatible corporate purpose.
- Failure to include the share capital amount.
- In LLCs, failure to pay up capital; in JSCs, failure to meet the legal minimum.
Accounts in Participation
Participants contribute capital, while the manager conducts business for a mutual objective. The nature of this arrangement (company or bilateral contract) is debated due to varying levels of personal involvement.