Some time ago, a person who frequently visits my Notary Office and who has some problems with other partners in different companies in which they participate, came to me somewhat perplexed, because he had been told that if a legal entity was appointed as the administrator of the company, it would be the latter, exclusively, who would suffer the consequences, in the form of liability, that could arise from its actions.
If this were the case, it would be fantastic, because due to the increase in assumptions that may result in personal liability of the directors of commercial companies, which undoubtedly makes the position a risky profession, such risk would be eliminated.
That is why I have decided to try to shed some light on this subject, which is so prone to nuances, where not everything is black or white, and whose regulation, in addition to being recent, does not contemplate all the nuances that may arise.
At first glance, the functions of an administrator can hardly be performed by a company, if we stop to think about what those functions are that the law attributes to it, such as the management and representation of the company.
A company, as such, cannot sign checks, contracts or make decisions in general. All these actions are carried out through its representatives, so the basic idea to start from is that in the event that the administrator is a legal entity, it must designate a natural person through whom it acts.
When can the figure be useful?
In my opinion, the figure makes sense in several situations that I mention, but not exhaustively:
1.- When a company is a partner of others, and for reasons of proportional representation, holds positions on various Boards of Directors.
2.- In the case of holding companies, in which one company is the owner or has control over others, with the holding company being the administrator of all of them.
3.- And when not being a partner, a legal entity is chosen, specialized in the management of companies and/or assets.
In all cases, it is within the internal sphere of the management company to determine who will be its representative in the managed company, facilitating its activity.
Is it always possible to appoint a legal entity as administrator?
The general rule, included in article 212 LSC, is that the directors of the capital company may be natural or legal persons.
There are some exceptions, such as the case of the limited company (new company), which has really disappeared from daily practice, in which only natural persons can be directors.
On the other hand, the legal entity that administers it must not be a commercial company, but it can be any legal entity that our legal system recognizes as having legal personality. In this way, the administrator of a company could be not only another company but also a cooperative, an association or any other legal entity.
What requirements must the legal entity administrator have?
There is no determination in the law of the requirements to be a company director. Article 213 LSC only establishes a series of prohibitions, the scope of which, in most cases, will be natural persons.
A different issue is whether the duty of diligence of administrators makes it reasonable not to offer the position, or accept it, when there is not sufficient training to perform it.
The bylaws of a company, in my opinion, can establish certain requirements for accessing the position of director. In any case, and based on my own experience, if any type of requirement is imposed to be a director of a company, other than that relating to being a partner in the company, the formal vehicle is usually the family protocols, which may require professional experience, gained outside the company, specific qualifications or knowledge of languages.
The appointment of a representative.
We have already pointed out above that the essential thing, in the event that a legal entity is appointed as administrator of a company, is that it must designate a natural person through whom it will act.
Article 212 bis of the LSC tells us that if a legal entity is appointed as administrator, it will be necessary for the latter to designate a single natural person to permanently exercise the functions inherent to the position.
Furthermore, in accordance with article 236.5 LSC, the representative must meet the legal requirements established for administrators and will be subject to the same duties.
The wording of the law seems clear, so that it is only possible to designate a natural person, who may or may not be a member of the management body of the company designated as administrator.
The appointment of the legal entity administrator and its representative.
The appointment of the legal entity administrator corresponds to the General Meeting of the administered company. If the administrative body were a Council, appointment by co-optation would be possible.
The term of the appointment is the same as that established for any other type of administrator and in the event of re-election of the legal entity administrator, the previously appointed representative will continue to exercise the functions of the position, as long as his or her replacement is not expressly carried out.
The acceptance of the appointment by the administrator is an essential requirement for its registration in the Commercial Registry (articles 141 and 142 RRM).
When the appointed administrator is a legal entity, article 143 RRM adds: In the case of a legal entity administrator, the appointment will not be registered until the identity of the natural person that the legal entity has designated as its representative to exercise the functions of the position is established.
The appointment of the representative of the legal entity administrator as stated in the Resolution of the General Directorate of Registries and Notaries of July 10, 2013 It is a management act that corresponds to the administrative body of the designated company., and unless expressly excluded, in principle the CEO could do so.
Having elaborated a little more on these registry aspects of the appointment of a legal entity as administrator of another, using as a summary what is indicated in the aforementioned Resolution of the General Directorate of Registries and Notaries of July 10, 2013, the following points should be highlighted:
1.- It is the legal entity designated as administrator, and not the administered company, who has the authority to appoint the natural or physical person who exercises the functions of the position.
2.- There must be only one natural person appointed, and the appointment of several persons is not valid even if there are joint or several administrators in the administrator's office.
3.- This natural person will act on behalf of the legal entity administrator and on a permanent basis for the stable exercise of the functions inherent to the position of administrator.
4.- If the designated person belongs to the administrative body of the legal entity administrator, it will be sufficient to present a certification corresponding to the agreement issued by the body of the legal entity administrator that is competent for this purpose; while in other cases, the designation must appear in a public deed of power.
5.- The appointment is the responsibility of the administrative body, as it is responsible for the management and representation of the company, as established in articles 225 et seq. and 233 et seq. of the Capital Companies Law.
6.- There is no problem with the sole administrator appointing himself as a natural person representative, and no problems with self-contracting are observed.
7.- The identity of the designated representative, moreover, must be registered at the same time as the appointment of the legal entity administrator in the sheet of the administered company.
THE RESPONSIBILITY OF THE LEGAL ENTITY ADMINISTRATOR
Before Law 31/2014, of December 3, there were two opinions regarding this matter: a) one defending the liability of the natural person jointly with the commercial Administration and b) another that exclusively the legal person Social Administrator was responsible, without prejudice to the fact that in the internal relationship of solidarity it is subsequently repeated against the person who has represented it.
With the publication of Law 31/2014, of December 3, which modifies the Capital Companies Law to improve corporate governance, the legal regime of the legal entity administrator is regulated for the first time in a law with the rank of law, adopting the system of joint liability of the legal entity represented and the representative.
This is how Section 5 of Article 236 of the Law is reworded, which states: “The natural person appointed to permanently exercise the functions of the position of legal entity administrator must meet the legal requirements established for administrators, will be subject to the same duties and will be jointly liable with the legal entity administrator.”
This is not the time to recall in detail the duties that the Law imposes on directors in the exercise of their duties, but since the entry into force of Law 31/2014, of December 3, these duties are also imposed on the natural person designated by the legal entity for the permanent exercise of the functions of the position of director of that entity.
With the introduction of this regime of joint liability, natural persons who occupy positions in the administrative bodies of capital companies representing the legal persons who are members of these bodies will be required to show greater professionalism, vigilance and attention than could be required of them when it was difficult, if not impossible, to extend to them the liability required of the company's directors.
Leganés, November 25, 2018.
