Spanish Royal Legislative Decree 1/2010 of July 2nd Passed, Approving the Consolidated Text of the Corporations Act

21 July 2010

The Corporations Act complies with the provision set forth in the seventh and final regulation of Act 3/2009 of April 3rd, on structural modifications of companies, whereby the Government authorized the consolidation into one text of the Public Limited Companies Act, Limited Liability Company Act, Chapter X of the Stock Market Act regarding quoted public limited companies and Section 4, Chapter I, Book II of the Commercial Code regarding general and limited partnerships.

The Corporations Act contains all general legal regulations for corporations, except for those related to structural modifications which continue to be governed by the Structural Modifications Act.

In reference to the minimum share capital amount, the Corporations Act rounds out the amount for public limited companies and limited liability companies to €60,000 and €3,000 respectively.

The Corporations Act lists the competences of the corporate general meeting, generalizing the list which already existed in Article 44.1 of the Limited Liability Company Act for all public limited companies. It likewise distinguishes between ordinary and extraordinary general meetings- a distinction which previously only existed for public limited companies.

Reference is also made to remuneration for administrators as Article 66.3 of the Limited Liability Company Act now extends to public limited companies. Said Article states that if remuneration is not based on profit shares, it will be set by the general meeting each fiscal year. Thus it will no longer be necessary to specify the specific remuneration for administrators in public limited company by-laws in order to qualify for fiscal deductions.

The Corporations Act extends the obligations introduced in the Public Limited Companies Act with Law 26/2003 of July 17th, to administrators of limited companies. The Corporations Act likewise obligates corporations to report conflicts of interest in the governing body. This was previously a requirement for quoted companies, who included the information in their annual corporate governance report and which now must be included in the annual reports for all corporations.

As regards convening a meeting to modify by-laws, prior to the Corporations Act shareholders could review the text of the proposed modification in the registered office whereas now they can request free delivery of the documents, and the right thereto must be expressly stated in the call to meeting.

The Corporations Act includes many other modifications relating to the definition of groups of companies, capital increases through the capitalization of reserves, preferential rights in capital increases, distribution of dividends, separation of shareholders and winding-up and liquidation of corporations.

As regards quoted companies, the Corporations Act sets out the eminently corporate economic aspects while Law 24/1988 of July 28th on the Stock Market regulates the financial aspects of these types of companies.

The Corporations Act is provisional and reforms are expected including an increase in the fiduciary obligations of the administrators, a more detailed regulation of quoted companies and the creation of substantive law for groups of companies. In this last regard, the General Codification Commission’s work on the drafting of a Code for Companies or a new Commercial Code will have to be reviewed by the Administration.

For further information, please contact Enrique Marinel-lo: emarinel-lo@mmmm.es