Introduction: In the realm of corporate governance, the removal of administrators is a critical aspect that demands careful consideration. This article delves into the nuances of administrator removal agreements, shedding light on potential avenues for successful challenges. The legal landscape, as outlined in the Spanish Companies Act (LSC) Article 223.1, allows administrators to be ousted without cause and by a general meeting’s agreement, even if not initially on the agenda. This provision introduces a unique set of circumstances that can catch administrators off guard, particularly minority shareholders.
Navigating Unforeseen Administrator Removals: Administrators, unsuspecting and confident, may attend a general meeting, contributing to the quorum’s formation. However, they may discover during the meeting that their removal is proposed by other shareholders. If aware of the impending discussion, administrators could have strategically avoided a valid meeting constitution or garnered sufficient support to prevent the removal agreement from reaching the required majority, as per legal or statutory provisions.
It’s essential to note the established legal and jurisprudential doctrine stating that the same general meeting that removes administrators can designate replacements without explicitly including the new appointments in the meeting’s agenda. However, challenges may arise if the appointment requires a statutorily reinforced quorum that isn’t achieved in that specific meeting – a scenario exemplified by the SJM Gijón, 3, 28.2.22 case.
Legal Perspectives: Insights from legal scholars such as Díaz Moreno (2022), Sánchez-Calero Guilarte (2023), and Jesús Alfaro contribute to a comprehensive understanding of the complexities surrounding administrator separations. Alfaro’s stance on the discretionary separation of administrators challenges the notion that it is a fundamental societary order, emphasizing the importance of careful interpretation. The legal community, represented by scholars like Rodríguez Ruiz de Villa, engages in ongoing debates, exploring the impact of unilateral parasocial agreements on the challengeability of removal agreements.
The legal framework, particularly Article 223.1 LSC, is seen by many as safeguarding the social interest through the administrators’ revocability, juxtaposed against the individual interest of the removed administrator. The consensus is that the removal agreement doesn’t necessitate extensive justification, as it falls within the bounds of a faculty expressly recognized by the law, underlining a principle of public order.
Contrasting Views on Challenging Removal Agreements: Sánchez-Calero Guilarte (2023) supports the majority view, emphasizing the protection of social interest. This perspective dismisses per se challenges to removal agreements, asserting that the continuity of a removed administrator in their position is reflective of an individual interest, making challenges futile. The notion of abuse of right is contested, as the legal exercise of a recognized faculty shouldn’t be questioned without substantial reasoning.
Contrarily, Alfaro Águila-Real (2023) challenges the prevailing viewpoint, advocating for the validity of statutory clauses that demand reinforced majorities for administrator removal, inclusion in the meeting’s agenda, and justification for removal. This perspective diverges from the conventional stance, suggesting that such clauses, approved by majority vote, should be deemed valid, adding a layer of protection for administrators.
Unresolved Questions: The unsettled debate over the applicability of unilateral parasocial agreements in cases where minority-appointed administrators face removal remains a key issue. As Alfaro Águila-Real (2023) notes, this debate holds the key to the success or failure of challenging social agreements. The recent resolution of such a case prompts a reevaluation of the significance of parasocial agreements, potentially elevating them beyond mere contractual obligations.
Case Analysis – SJM Oviedo, 2, 11.12.23: Examining a notable case decided in the SJM Oviedo, the court ruled in favor of a plaintiff challenging the abrupt removal of a social administrator. The decision declared the removal of board members from a limited company and the subsequent appointment of new administrators null and void. Notably, the court refrained from imposing costs, acknowledging the legal ambiguity surrounding the issue.
Unique Case Circumstances: The case involved the removal of the plaintiff, a social administrator and shareholder holding 27.91% of the limited company’s capital. The plaintiff’s position was defined by unilateral parasocial agreements, granting her the authority to appoint a majority of board members. The general meeting, convened by the Mercantile Registrar to approve the company’s annual accounts, had a restricted agenda focused on accounts and management, with no formulated annual accounts due to a missed legal deadline.
During the meeting, a shareholder proposed the removal of all administrators, gaining approval from 59% of the capital present. The plaintiff, present at the meeting, refrained from participating and subsequently witnessed the approval of three new social administrators. The impetus for the plaintiff’s legal challenge, invoking Article 204.1 LSC, was rooted in the belief that the removal agreements violated parasocial pacts on board composition, harming social interest for the benefit of a select few.
Judicial Rationale for Upholding Challenge: The Oviedo Mercantile Court, aligning with majority jurisprudential doctrine, initially acknowledged the resistance to per se challenges of removal agreements violating parasocial pacts. However, it departed from the conventional stance by favoring the plaintiff’s challenge