Who can manage an S.A. (Sociedad Anónima) and an S.L. (Sociedad Limitada)?
Continuing with our ongoing series on “Doing Business in Spain,” we will delve deeper into investors’ options when selecting the most suitable management structure for their companies in Spain.
Specifically, we will focus on companies operating as either Sociedad Anónima (“S.A.”) or Sociedad Limitada (“S.L.”), which can be overseen by:
- a sole administrator;
- multiple administrators jointly or severally, considering that the joint form is preferable for significant matters, while the severally form is suitable for swift day-to-day decisions and enhanced operability; or
- a board of directors.
What are the requirements for appointment as an Administrator or a Director of a S.A. or a S.L.?
A company or an individual can be an administrator or director. As regards the requirements to be appointed as an administrator (in its various forms) or director, specific criteria must be met, including:
- the individual must be of legal age (not applicable if it is a company);
- they may not be disqualified by a court or bankruptcy law to hold positions; and
- they may not be a public official whose position is related to the company’s activity or be affected by a legal incompatibility. Moreover, other more specific requirements may be applicable, especially in the case of regulated businesses.
Additionally, it is worth noting that a foreign person may be appointed as an administrator or director, but they must hold a fiscal identification number in Spain (Número de Identificación Fiscal or NIE).
What is the Director’s Term of Office in an S.A. and an S.L.?
Significant distinctions exist depending on whether the company is an S.L. or an S.A. Directors or board members of S.L.s are elected for an indefinite term, whereas S.A. directors have a maximum term of six years, with the possibility of later re-election.
In relation to the distinctive features of the Board of Directors in an S.A. and an S.L., if a company is managed by a board of directors, a minimum of three members is required, with a maximum of twelve for an S.L. In the case of an S.A., however, there is no maximum limit.
The Board of Directors must elect a chairman and a secretary. Both individuals must sign the minutes that document the discussions and resolutions of the board of directors, which must be included in the minutes transcribed in the corporate ledger (according to Article 250 of the Corporate Enterprises Act).
The chairman is elected among the board members, as stated in Article 529 sexies of the LSC. The chairman is responsible for the effective functioning of the board and, in addition to the powers granted by law, the bylaws, or the board regulations, must summon and preside board meetings, preside over the general shareholders’ meeting, ensure directors are sufficiently informed, and encourage debate and active participation of the members.
The secretary, on the other hand, is chosen by the board but is not required to be a board member. In addition to duties assigned by law, bylaws, or board regulations, the secretary must perform duties outlined in Article 529 octies of the LSC regarding the preservation of documentation, compliance with applicable rules, and assistance to the Chairman.
Additionally, the board of directors may optionally appoint a managing director from among its members, who may act individually on behalf of the company, unlike other directors who might be required to act jointly.
It is important to note that certain decisions, such as the election or determination of director remuneration or the approval of annual accounts, must exclusively be made at the General Meeting of partners or shareholders. This implies that the resolution must be adopted by the shareholders' meeting, and no powers will be delegated to the administrative body. Observing the rights of shareholders, the law, the company's bylaws, and the company's interests are crucial limitations when making decisions.
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