Company Representation in Spain: Company Director or Senior Manager?
When referring to a company’s representation in Spain, it is essential to know the difference between the position of the company director and that of the senior manager. While the duties of both may overlap, in both cases there are important differences in the applicable law, appointment, hiring, and the degree of independence in the performance of said duties.
Company Directors and Senior Managers
Directors take responsibility for the management and representation of the company, setting out its strategies and general guidelines; hence, they are necessary in all companies. Senior managers exercise powers relating to the legal ownership of the company, in other words, they make decisions on its behalf, with almost full autonomy and responsibility, only limited by the generic guidelines and objectives of the management body.
Applicable Legal Policy
Regarding the applicable legal policies, senior managers maintain a special employment relationship of Senior Management with the company, governed by Royal Decree (RD) 1382/1985, of 1 August (DAD) and, alternatively, by the Workers’ Statute. The company director, on the other hand, maintains a fully commercial relationship and is subject to the regulatory scope of the Law on Capital Companies (LCC).
By law, all companies in Spain must have a managing body that represents the company in its day to day affairs. This may consist of a single director, various directors acting jointly or separately, or a board of directors. The hiring of a senior director, however, is discretionary and depends on the specific needs of each company.
Differences between Company Directors and Senior Managers
- The General Board is obliged to appoint at least one company director, who acquires duties from his or her mere appointment. The appointment must be registered in the Commercial Register
- The director usually grants general powers to represent (with limitations) to the senior manager. Their duties, rights, and obligations within the company will be regulated in their senior management contract.
- For directors, the signing of an individual contract (which, in any case, would be of commercial nature), is, as a general rule, merely discretionary. Nonetheless, in the case that there is a board of directors, both the managing director and anyone holding an executive role must enter into a contract with the company
- In any case, at the beginning of their role, senior managers must enter into a written special senior management employment contract. It is important for the contract to specify aspects such as remuneration and dedication of time, especially insofar as senior managers are excluded from the collective agreement of ordinary workers and the DAD provides its own system that is more flexible than that of the labour system.
Freedom of Action
One key difference between the company director and the senior manager is their freedom to decide. Thus, it is worth highlighting the criteria which differentiate the autonomy and limitations with which they exercise their roles.
- The director personifies the maximum representation of the company. With his or her mere appointment by the General Board and his or her registration in the Commercial Register, he or she has the full ability to enter into commitments with third parties on behalf of the company. As a general rule, the duties of a company director cannot be limited beyond the limitations established by law or in the company bylaws.
The General Board, which also has its own powers established by law, is the competent body to dismiss directors from their position.
- Senior managers are equally attributed powers relating to the legal ownership of the company and its general objectives. They exercise their role through powers of attorney – either general or specific, with or without limitations. In all cases, senior managers will be limited by the provisions established by the management body. The latter is able to revoke or, where appropriate, increase said powers at any time.
The delegation of a company’s representation to a company director or senior manager is conditioned by the trust existing between the company and the person that will hold the position. In a small and medium-sized company, it is recommended to assign the position of director to someone linked to the company (owner or workers with a certain seniority in the company). In the absence of this trust, the drafting of a senior management agreement and simultaneous granting of powers may be considered, with the limits deemed appropriate.
This article is not considered as legal advice