Directors’ retribution in the bylaws of the company in Spain
The General Directorate of Registries and of the Notary issued a Decision on March 7, 2013 relating to the appeal of the refusal of the Commercial and Personal Property Registrar to register a public deed of company agreements. The Decision states that to rebut the presumption of gratuity, the bylaws must establish:
- That the administration body receives payment
- Establish the particular remuneration system of the directors.
The appealed clause states The precise amount of the remuneration shall be fixed annually at the general meeting, and it is clear that the general meeting is responsible for setting arbitrarily the particular system of remuneration for the board of directors. This entails a lack of security for both the current and future partners of the company and for the director himself or herself whose remuneration would depend on the specific majorities within the general meeting.
Due to recent changes in the Spanish Tax Agency’s criteria on directors’ remuneration, modifications and clarifications of bylaws regarding board of directors’ remuneration are frequent at Commercial Registries.
The Decision from the General Directorate of Registers and Notaries clarifies what the criteria are for the section of the bylaws dealing with the directors’ remuneration registered in the Commercial Registry — regardless of the tax consequences that this may have.
Commercial requirements for the registration of remuneration in the Commercial Registry represent one issue, and the admissibility of tax requirements for the remuneration is another issue. Ideally, however, both aspects should coincide.
From the commercial point of view, this Decision (as a summary of the General Directorate of Registers and Notaries’ Doctrine) establishes that the following requirements are necessary for the article of the bylaws (which sets the remuneration of the directors) to be registered:
- It should be clear that the position of director is a paid one
- The specific remuneration system must be clearly stated (e.g. a share in profits with the limits legally established; allowances; an annual or monthly salary in life insurance or pension plans; the possibility to use social goods for personal benefit; in shares or call option; or any other desired system
- The bylaws can establish several systems — but always in a cumulative and not alternative way.
This article is not considered as legal advice