Consequences of the confirmatory acts of a non-attendee to a Meeting

1.- Am I entitled to challenge corporate resolutions?

2.- Not attending the Meeting: Can I challenge the resolution?

3.- Does my absence at the Meeting have any effect on the challenge?

• Consequences of the confirmatory acts of non-attendees to the Meeting.

4.- Conclusion.

Consequences of the confirmatory acts of a non-attendee to a Meeting. The absence at the Meeting, as we will see later, does not preclude the challenge of a corporate resolution. However, it does have an effect on whether or not this challenge is admissible.

1. Am I entitled to challenge corporate resolutions?

As we know, the resolutions passed at a General Meeting can be challenged. This power is protected by our corporate legislation. It attributes the power to exercise this action to specific subjects.

The parties entitled to challenge are:

• The directors of the company.
• Third parties, provided they have a legitimate interest.
• The partners of the company, provided that they make up at least 1% of the capital stock. This percentage may be considered to be reached by several partners who challenge jointly, even if individually this is not the case. It is also necessary for the partners to have such status prior to the adoption of the resolution.

However, when dealing with the challenge of an agreement because it is contrary to public order, the requirements change. In this case, the third party does not have to prove a legitimate interest. Nor shall the shareholder have such a condition prior to the adoption of the contested agreement.

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2. Non-attendance at the General Shareholders’ Meeting: Can I challenge the resolution?

The answer in this sense is emphatic: It is not necessary for a partner to attend the Meeting in order to be able to challenge the resolution in question. However, this does not imply that having attended the Meeting (or not) is irrelevant. The importance of this fact lies in the time limit to be able to challenge the corporate resolution.

The term to challenge a corporate resolutions is one year in most cases. Except for cases where the resolution is contrary to public order. In such a situation, the period for challenging  an agreement contrary to public order ceases to exist. However, in the general case of the one-year term, when should we consider that the term to file the action has started?

If we have attended the Meeting, either in person or represented, the period starts from the date of adoption of the resolution. On the other hand, if we have not attended the Meeting in question, the period starts from the date of receipt of the copy of the minutes.

3. Does my absence at the Meeting have any effect on the challenge?

As mentioned above, it is not necessary to have attended the Meeting in order to be able to challenge a corporate resolution. Attendance, therefore, has no effect on the legitimacy of the partners in the exercise of the challenge action. However, it is a circumstance that our jurisprudence values in considering whether this action is admissible.

Our legislation includes specific cases in which it is not appropriate to challenge a corporate resolution. Although we develop it in detail in another article, it is worth mentioning it briefly. It is not appropriate to challenge a corporate resolution when:

1. This challenge is based on the infringement of procedural requirements regarding the convening or constitution of the partners’ meeting. There are exceptions.
2. It is based in a situation of incorrect or non-delivered information, in relation to the use of the right to information. As an exception we find, the essential nature of the information that, is not provided or that is provided incorrectly.
3. It is based on the participation in the Meeting of persons without the proper legitimacy. Unless the participation of this person was essential for the constitution of the partners’ meeting.
4. It is based on the invalidity of votes. However, it shall be admissible if these votes are decisive to reach the necessary majority.

• Consequences of the confirmatory acts of non-attendance at the Meeting. 

As we can see, none of these legal situations of inappropriateness mentions the presence of the shareholder at the Meeting. However, as we have mentioned, our case law does take this fact into account. And it does so in relation to what has been called an unfair exercise of the challenge action.

Let us suppose that in our company an agreement is reached at a meeting that we do not attend. Once we are informed of this agreement, we make acts, declarations that seem to indicate that we consider it valid and effective. Subsequently, however, we decide to challenge it for whatever reason we deem appropriate. This challenge was made within the legally established time limit and we are entitled to do so. Nevertheless, the courts will consider the exercise of this action inadmissible.

This assertion is based on the validity and effectiveness that the person challenging has previously provided to the agreement in question. The partners cannot argue that an agreement must be ineffective when their previous actions suggest the contrary opinion. This contradiction between the acts performed by the partners and their subsequent challenge, entails the inappropriateness of the latter. The contrary would be to allow the partner to unfairly exercise this action, that is to say: to benefit from an agreement when it benefits him, and when it ceases to do so, to challenge its validity.

4. Conclusion.

The partners who meet the legal requirements may challenge a resolution adopted at a Meeting. Whether or not they have attended the meeting does not limit their standing. However, this fact is relevant when it comes to whether or not this action is admissible. Therefore, the courts evaluate the acts carried out by the non-attending partners who challenge the resolution. If, being aware of its existence, they carried out acts prior to the challenge that indicate that they considered it valid, this action will be inadmissible: the contrary would be to admit the unfair exercise of this action of challenge.

If this article has been of interest, we also suggest you to read the following article published on our website: Can the non-competition agreement with a partner, who will eventually leave the company, be unlimited?