NEW COMPANY
ACT IN SPAIN (2014). DIRECTORS DUTIES.
The
amendments to the Revised Text of the Corporations Act (LSC), approved by Royal
Legislative Decree 1/2010 of July 2, introduced by Law 31/2014 affect Directors’
duties, as it follows
1.- The
reform provides important developments in the regulation of the legal status of
the directors (functions, duties, liabilities and remuneration)
2.- Thus, in the case of the duty of care, the comprehensive reform of the general statement ("directors must perform and discharge the duties imposed by the laws and statutes with the diligence of a prudent businessman, (...)"). Diligence in performing the duties should be assessed according to the functions assigned to each member of the board, thus taking into account the division of functions therein. (Article 225.1 LSC). The 2014 reform includes a duty to dedicate time in accordance with the position of each director (Article 225.2 LSC) as well as the duty to demand and the right to obtain from the company the information necessary (Article 225.3 LSC)
3.- As for the duty of loyalty the Reform Act 31/2014 reinforces its regime expressly stating that it is mandatory: "The rules governing the duty of loyalty and liability for its violation are mandatory. Statutory provisions restricting this duty will be void (Article 230.1 LSC). It also
·
Reformulates the definition of generic duty:
"Managers must hold their position with the loyalty of a faithful
representative, acting in good faith and in the best interest of society"
(Article 227.1 LSC).
·
Increases the detail in the definition of unfair
behavior, completing the previous catalogue (especially on conflicts of
interest), and dividing the content of the preceding Articles 227-230 and 232
LSC into two groups:
o
i) obligations derived from the basic duty of
loyalty (new Article 228 LSC) and
o
ii) the duty to avoid conflicts of interest (new
Article 229 LSC):
The former
include the traditional duty of secrecy, abstaining from voting in cases of
conflict of interest and acting independently without interference from third
parties. The later refer to the duty not to take advantage of business
opportunities of the Company and not to compete with the company.
The reform regulates dispensation from the obligations associated with the duty of loyalty (Article 230.2 LSC)in relation with conflicts of interests the waiver may be granted by the board, provided that it is safe for the company's assets , it takes place at market conditions, and with transparency. However, in the most relevant cases listed in Article 230.2 LSC, this is authorizing Directors to perform competing activities (it can only be waived when it is not expected to harm the Company) or the expected damage would be compensated by providing benefits obtained (Article 230.3 LSC). This waiver is granted by express and separate agreement of the general meeting. The duty of loyalty extends to de facto directors managers (art. 236.3 LSC).
The scope of the penalty for breach of duty of loyalty is extended because not only will bring the obligation to compensate the damage to the Company but also there would be an obligation to give back to the Company any unjust enrichment obtained (Article 227.2 LSC).