The drittwirkung or the voluntary renunciation of the ‘right of veto’ of the shareholder affected by a statutory reform

‘As we said yesterday’[here] [1], the General Directorate of Registers and Notaries (‘DGRN’) decided on December 4 on the registration criteria for the registration of drag along clauses and, therefore, on any modification of the Articles of Association that will impact on the rights and obligations of the dissenting partner.

It is the purpose of these lines to address some of the questions contained in the conclusions drawn from the previous entry, since there is no subsequent publication of any resolution on the subject in the Spanish Official Gazette. At this point, it can be said that the Organization has consecrated the old brocardo quod omnes tangit ab omnibus approbari debet [2]. As we know, this is so by direct application, not only of Article 291 of the Capital Companies Act (‘the LSC’), but also by its Siamese rule in the following Article, which enshrines the need for the consent of the shareholder concerned as regards the modification of his individual rights. With dubious normative technique, this precept 292 only replicates the general sense given by its previous one, introducing only two new evaluative elements: firstly, it is addressed only to limited liability companies (the case arising from the Resolution of the DGRN); secondly, it includes the assignment of individual rights of the shareholder, while article 291 exclusively refers to the taxation of new obligations – the erosion of individual rights referred to in article 292 is nothing other than a new obligation, a clear case in article 291.

A number of issues emerge from the above conclusions. We would like to address one: the possibility of the partner to waive the rights he has under Articles 291 and 292 of the LSC. The latter, in turn, would have to deal with issues relating to the implementation of its right of separation and, finally, with the way of the shareholders’ agreement.

The mere expectation of a partner’s rejection of a legal right that may be favorable to him does not match what is expected of his behaviour. However, the autonomy of the will has an expansive vision, as befits Private Law in a regime of liberties. And however this eventuality may occur, it must be answered.

The possibility of resignation of an affected partner in the face of a statutory reform is translated into a kind of legal right of veto, of course not conceived in general terms, but only in relation to its private and patrimonial sphere. What we are proposing here would not even be a refusal to exercise the right, but rather an early renunciation of the right to exercise it, in the event that the enabling circumstance were to occur in order to be able to give consent to the modification of the statutes. Is this possible? Well, the rights of articles 291 and 292 of the LSC contain the development of a constitutional right – which is not fundamental – such as the freedom to conduct business under article 38 of the Constitution, which contains a mandate for the public authorities, but does not regulate relations between individuals (as is the case here, between the company and its partners). One might therefore wonder about the horizontal effectiveness of this right. And it turns out that, even if it were a fundamental right, it would be limited in its effectiveness. A fortiori, in the case of a subjective, constitutional but not fundamental right. The Constitutional Court has been incorporating the German doctrine of the Drittwirkung der Grundrechte [4] into our system since the beginning of its existence (Judgement 34/1984 of 9 March [3]). By virtue of this doctrine, the provision of a right such as that enshrined in the LSC is perfectly possible, up to the limit of its renunciation. This provision admits no red lines other than law, morality and public order (Article 1255 of the Civil Code), as well as the canon of interpretation of Article 10 of the Constitution: human dignity.

Safeguarding public order would remain unchanged, as the shareholder would continue to retain a mechanism of last resort: the exercise of the right of separation. Through article 346 of the LSC, the dissenting shareholder has a legal basis to separate from the company, simply under the assumption of a statutory modification such as the one envisaged and not to vote in favour of it. The term will be one month from the publication of the corporate agreement in the Spanish Companies Registry Gazette (BORME), or from the individualized communication (article 348 of the LSC).

We do not want to end these lines without referencing the practical alternative that can be seen in commercial traffic to rescue these modifications to the articles of association from the control of the legality of registration. The way of the parasocial pact is the most suitable one. Not so much because it can contain a drag along agreement between shareholders (once the agreement has been reached, the consent is obtained, then the obstacle of the Mercantile Registrar for its registration as a statutory reform is overcome and the agreement would be as feasible as the reform of the statutes), but because of the possibility it offers to reach an agreement, mandatory and not by statute, on the resignation of all the shareholders to exercise at any time the rights of articles 291 and 292 of the LSC, or simply the agreement by which the shareholders regulate the procedure for amending the articles of association in a manner different from that of those articles. Whether it is a relationship agreement or an organization agreement [5], it would have the enforcement inter partes proper to any obligatory relationship (the action for damages, the action for compliance, or the resolutory power, among others), plus the enforceability against the company if all the partners are signatories of the agreement.

In short, the shareholder has a wide range of legal possibilities at his disposal. It can not only contribute to the amendment of the articles of association, but also refuse to do so; it can renounce any right that may benefit it (without infringing public order or the limits of the dignity of the person); it can enter into agreements with other shareholders outside the articles of association and, finally, it can separate itself from the company.

Escrito por José Ignacio Bernardo, Lawyer, Corporate Law Department, Adarve

[1] Paraphrasing Fray Luis de León and Miguel de Unamuno, who pronounced, at different times, this expression of beginning and at the same time of link with the previous lessons
[2] What concerns everyone must be approved by everyone.
[3] Spanish Official State Gazette (BOE) of 3 April 1984.
[4] Theorized by NIPPERDEY, RAISER or HESSE, and introduced in our national law by QUADRA-SALCEDO.
[5] According to the famous tripartite classification of G. OPPO in I contratti parasociali, 1942): relationship agreements, attribution agreements and organisational agreements.