Doctrine has reiterated on several occasions through judgements and resolutions of the General Direction of Registry and Notary the ability that administrators of a company in Spain have to resign or renounce their position. In a company where there is a sole administrator, the termination of this position will depend on holding a Board Meeting with the final purpose of naming a new administrator and avoiding a standstill of the company and the ineffectiveness of the administration´s bodies.
Procedure to follow with the resignation of a sole administrator:
- It is essential to send a letter to the company communicating the intention to quit the position. The first paragraph of Article 147 of the Regulation of the Commercial Register contains the following requirement: The filing of an administrator’s resignation is completed with the administrator writing a resignation letter and reliably notifying the company, or by virtue of the certification of the act by the General Meeting or the Board of Administrators, with the legitimate and notarized signatures, stating the filing of the resignation.
- Following the Supreme Court´s doctrine, an administrator who, for whatever foreseeable cause, should cease to exercise the position, must organize a meeting in order to prevent the company from being left without a leader. Judgement 667/2009, of 23 October 2009, affirms: If there is no other titled administrator or substitute, the administrator whom renounces or quits is obliged to organize a meeting to fill the vacancy and attend, in the interregnum, to the needs of the management and representation. It is understood that the position is temporary, and consequently the administrator’s responsibility, to prevent any harm to the company that may result from the standstill of the administrative body. This follows from the duty of care, as the doctrine of the DGRN envisions, in that the administrator must continue exercising the position until the company can adopt the necessary measures, on the basis that it is contrary to that duty to leave the company without an administrative body.
Therefore, until no other administrator has been selected, the obligation to undertake the necessary steps to continue the social activity remains.
The administrator has the obligation to convene a Board Meeting and place on the agenda the task of naming a new Administrator.
Once the Board has been convened, two situations may present themselves:
- The Board accepts the resignation and names a new administrator. The resignation of the previous administrator must be recorded in the Commercial Register.
- The Board, conveniently called, does not adopt an agreement to name a new administrator. As a result of this, the obligations of the leaving administrator cease since his or her duty of care are fulfilled simply by organizing a Board Meeting and having the appointment of a new administrator written in the agenda.
In conclusion, if a company finally stays without an administrator, there will be a standstill of the social bodies, which will consequently prevent an adequate functioning of the company. This situation appears in Article 363.1.d) of the Company Act as a cause of dissolution. Therefore, if at the meeting organized by the administrator, no new administrator is selected, the result could become the dissolution of company.
Carlos Hernández & Nicolás Melchior
This article is not considered as legal advice