Who Certifies the Termination and Appointment of Administrators?

The registration of the termination and appointment of directors in the Commercial Registry is an important requirement for the enforceability against third parties and legal effectiveness of such corporate resolutions. For this procedure, the administrative body of the company must issue a certification in which the resolution adopted by the Shareholders` Meeting is faithfully recorded, unless this has been formalized by means of act of notarial testimony. 

Problem: The certification issued by a non-registered director

In practice, there are numerous scenarios in which the Commercial Registry refuses the registration of corporate resolution of termination and appointment of directors when the certification is signed by the new director. The refusal is based on the lack of registry legitimacy of the incoming administrator, who, not being yet registered, lacks the formal power to certify acts on behalf of the company at the time of the certification. 

In order to resolve this situation, the reputator proposes by means of Article 111 of the Real Decreto 1784/1996, of July 19, 1996, approving the Regulations of the Commercial Registry (hereinafter, the "RRM"), a series of scenarios from compliance with which the new director appointed, but not yet registered, derives full certification capacity.

Notification of the termination and appointment to the outgoing director

The first paragraph of Article 111 RRM provides that "the certification of the resolution appointing the holder of a position with certifying power, when it has been issued by the appointee, will only be effective if it is accompanied by reliable notification of the appointment to the previous holder, with registered office, at the domicile of the latter according to the Register".

The intention of the reputator in establishing the requirement of reliable notification to the dismissed administrator is to safeguard his rights and the veracity of the resolution intended to be registered in the Commercial Registry thus strengthening the legal security in the processes of change in the administration of the companies and avoiding possible conflicts that may arise from a lack of adequate information or communication. 

This requirement seeks to ensure that the outgoing director has full knowledge and indirectly gives his consent to his termination as director. 

Consent of the outgoing director

Although the first paragraph of article 111 of RRM establishes the obligation to notify the outgoing director in a reliable manner, legal practice has shown a notable problem with respect to the validity of such notifications, which has led, on most occasions, to go for the solution in the second paragraph of the same article.

In accordance with the aforementioned paragraph, it will not be necessary to comply with the specific requirements of reliable notification, as long as the consent of the outgoing director is duly accredited by his signature in the acts or in the certification of the General Meeting that approves the resolution of termination and appointment. 

This alternative has several advantages compared to the procedure of reliable notification, since it greatly simplifies the complex and formal procedures derived from the notification, allowing changes in the administration to be carried out in a more agile and efficient manner. 

In addition, by requiring the signature of the outgoing director on the act or certification, it is guaranteed that the outgoing director has been informed and has expressly consented to the termination and appointment, which provides greater legal security, since there is tangible proof of the outgoing director`s consent, which minimizes the risks of any litigation or dispute related to the lack of knowledge or consent about changes in the administration. 

Other cases

Finally, it is important to emphasize that the provision of the previous sections will not be applicable in situations in which the judicial declaration of absence, death or incapacity of the outgoing administrator is duly accredited. In such cases, it will only be necessary to submit, together with the certification to be registered, a testimony of the judicial declaration of death, absence or incapacity, or a death certificate issued by the Civil Registry.

Likewise, it will not be required the reliable notification to the outgoing administrator when the inscription of the certification made by the appointed one has been formalized through a notarial deed or testimony. Although this option simplifies the administrative process by eliminating the need to comply with the requirements of reliable notification, its practical application is usually limited to very specific cases due to the time involved and the costs that it may mean for the company.

Finally, article 111 of the RRM establishes mechanisms to solve the problem of certifications issued by non-registered administrators, ensuring legal certainty and transparency of the acts registered by the companies. 

The reputator contemplates different solutions such as the reliable notification to the outgoing director and, as a more agile alternative, the signature of the outgoing director himself on the minutes or certification to be registered. It also provides for specific expectations, such as the death, incapacity or judicial absence of the administrator, or the formalization of the agreement by means of acts or notarial testimony, offering solutions adapted to different practical realities. 

At Gentile Law, we have an expert team ready to assist you in understanding, addressing your questions, and guiding you through the process of terminating and appointing directors. 

Marta Batalla Eguidazu

martabatalla@gentile.law

+34 684 460 426