What can I do after the Anual General Meeting?

As every year, for those companies that end the fiscal year on December 31, the following June is considered as a key period, since a large number of general meetings of shareholders are held for approval of the annual accounts.

However, as a result of these meetings of the corporate body convened for the purpose of discussing and making agreements by majority on social matters of its competence, discrepancies are usually derived that may range from the previous period of convocation, constitution of the board, order of the day … to discrepancies after the taking of agreements, for example relating to the formulation of accounts, distribution of dividends, approval of management of the administrators, etc.

In situations like the ones we describe, it is possible that every single person wonders if after the Board something can be done ori f any legal action is posible to be taken related the agreements adopted, etc.

For the protection of shareholders, but also for third-party creditors, the  Law of Capital Companies establishes a basic mechanism for challenging social agreements, as a tool to control the legality of such decisions and, ultimately, for the greater protection of the interests of the minority of the shareholders.

In this sense, the Parlamient wanted to reinforce its importance through the reform made in 2014, thus modifying its legal framework, by which it goes on to clarify the model for challenging such agreements, simplifying it.

Thus, and entering into the substance of the matter, in what cases can a social agreement be appealled  or be questioned? First, the previous distinction between voidable and void agreements is eliminated. That is to say, only one criterion is taken into account, and is that all agreements that are contrary to the law, the statutes, the board regulations, or that damage the social interest for the benefit of one or several partners or third parties.

This last case includes agreements taken abusively by the majority, that is, when it is adopted by the majority in its own interest and to the unjustified detriment of the other partners.

The exceptions established by the new Law referring the generic definition of negotiable agreements are interesting and quite positive. Thus, the standard leaves out of the means appeal a series of assumptions because of a standard of low corporate relevance: (i) when the partner is not provided information if it is not essential; (Ii) persons not legitimized participate in the meeting, unless such participation had been decisive for the constitution of the AGM and; Finally, (iii) when it considers invalidity of one or more votes or the wrong calculation of those issued, unless it is decisive for the achievement of the demandable majority.

Secondly, who can appeal these agreements? the law provides that both the administrators of the company, third parties that have a legitimate interest, and partners who have acquired such a condition before adoption of the agreement, provided that they represent, individually or jointly, at least one percent of the capital. This last requirement is also novel, which allows as we said the intervention of minority partners.

However, when the agreement is contrary to public order, any partner may be challenged, even if they have acquired that status after the agreement, administrator or third party. This distinction corresponds to the former section 1 of the Law prior to the reform, provided for the challenge of null agreements.

For that reason, to obtain prior advice to the Board to examine the same call, agenda, etc. It is very important to later analyze better when we are facing agreements that are going to be challenged or not, as well as to study what we are most interested in obtaining by challenging the agreement:

– if the elimination of the effects or,

– repair of the damages that the agreement may have caused while it was in force.

How long do we have to exercise our actions?

The maximum term for such action is 1 year, and it can not be interrupted. This period begins to run well from the date of adoption of the agreement if it had been adopted at a meeting of members or at a meeting of the board of directors, or from the date of third-party effectiveness of the registration if it had been entered in the Mercantil Register.

The action would not, however, prescribe, if it is concerned with agreements that are contrary to public order.

Although it may seem a long period of time, the fact is that focusing and resolving a corporate conflict always requires a defined strategy, so that the minimum suspicion or reason to understand that the society is not complying with the law, or are taking illegal decisions that harm us is necessary to analyze possible actions. If you need legal advice in corporate law, do not hesitate to contact the team of Navarro Llima Abogados.

 Héctor González

Attorney atl Law

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