How to apply for the supplement to the shareholders meeting’s notice?

How to apply for the supplement to the shareholders meeting’s notice? This is a question that he partners of a “Sociedad Anónima” (A Corporation) must know. However it is not a right held by the partners of a “Sociedad Limitada” (Limited Liability Company). 

The right to apply for the supplement of the notice is a political right that only belongs to shareholders holding a certain percentage of the share capital. This right allows to deal with issues that were not on the agenda due to situations that occurred after the call. 

Can a partner add points to a meeting agenda?

The supplement to the notice allow directors to ask for points to be discussed in a notice of meeting. Therefore, if after the call of the General Meeting, events occur that should be discussed, the shareholders can request it. The supplement allows for new points of the day to be discussed at the meeting, in addition to those previously established in the notice of meeting. Likewise, these new points may not be related to the points agreed upon in the initial call. 

Is it a right in both “Sociedades Limitadas” and “Sociedades Anónimas”?

Even though there are doctrinal authors in favor of its application to limited partnerships (Sociedades Limitadas), its partners will not have this right. The legislation has included the right to supplement the call of the meeting only in the corporations (Sociedades Anónimas). 

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Proxies and Directors in Fact: Are they the same?

It cannot be equated to de facto administrators with proxies. Both their appointment and their liability regime are clearly differentiated.

What are the requirements?

There are requirements for shareholders to be able to exercise this right. These requirements are the following: 

• The general rule is that the partners must hold at least 5% of the share-capital. 
• It can also be requested by the heirs if the deceased was registered in the register of nominative shareholders. 
• The deadline to apply is 5 days from the publication of the call 

• It must be made by means of a reliable communication at the registered office 
• Voting rules must be identical to those already made or proposed 
• The publication by the management body must be made 15 days before the meeting. 

This last requirement is especially important since the lack of publication implies the nullity of the Shareholders’ Meeting. 

Specialties of listed companies 

In the case of listed companies, the requirements have certain specialties: 

• Shareholders must hold at least 3% of the stock capital. 
• The publication must be made on the company’s website 
• It can only complement an Ordinary Meeting and not an extraordinary one 
• It cannot include issues that imply obligations for managers to perform functions. An example could be the preparation of reports. 

• New issues must be justified 

The lack of inclusion of the supplement in the notice of the Meeting will allow contesting its resolutions. In this way, the matters agreed upon at the Ordinary General Meeting may be ineffective. 

When should it be done?

As it has been noted, there are two relevant deadlines: 

• 5 days for shareholders to request the supplement to the notice of meeting. 

• Directors’ publication of the complement at least 15 days before the meeting 

The importance is in the computation of these deadlines. 

The 5 days’ term that the shareholders have to request the complement begins from the publication of the summons. Within these 5 days the shareholders must notify the request to the Company. This communication will be sent to the registered office. Depending on the communication method chosen by the shareholder it can be a tight deadline. This is because there are ways that require more time than others such as certified letter. However, to compensate for the short time period, there is a guarantee. This is that the notice will be counted from the time that an intention to deliver the notice at the registered office was made. In other words, the shareholder is protected against the event that the Company tries to deny reception. 

The date of this first deadline depends on the type of call. If it was a public call, it will be from the moment the announcement is published on the web page, the BORME or the corresponding newspaper. If the call is communicated individually to each partner, the period will begin from the date of each individual shipment. However, that particular day of the mailing will not be part of the 5-day period. Therefore, in reality, the period will begin on the day after the call is sent. On this particularity, in the case of individual communications, there may be statutory provisions to the contrary. 

Regarding the second term, the managers do not have a maximum time to publish it. On the contrary, they have a minimum time. They must publish the supplement to the notice of meeting 15 days before the General Meeting. In fact, there is nothing to prevent the meeting from being called earlier. For this calculation, the day of publication does count, but not the day in which the meeting is held. 

Obligation of the directors

It is the duty of the directors to comply with this shareholders´ request and to publish it in accordance with the legal requirements. In addition, in the event that several shareholders request different complements, the directors will include all the items on the agenda. The shareholders must denounce in the Meeting the breach of this obligation by the directors. 

The only thing that they could refuse is an illegal or abusive request. It will be abusive if the item to be included in the agenda is repetitive of one already dealt with by the Board. It is also considered abusive if the request is made for the purpose of obtaining previously denied information. 

A controversial issue, resolved by the DGRN, has been the need for the Board of Directors to approve this supplement. The doubt lay in discerning whether the mere request for a supplement to the call for applications entailed an automatic publication of the same. The DGRN considered that it was not an automatic issue, but that the Board should approve the supplement to the call for applications. Otherwise, this body would not be able to review compliance with legal requirements or the content of the call. For example, the verification of whether the member requesting it has the necessary legal standing. In reality, therefore, the publication of the supplement requires a prior analysis or filtering by the governing body. This filter is necessary since the Board may refuse publication in the above-mentioned cases. 

What happens if this right is not observed?

When the manager does not attend the member’s request, the latter will have two faculties. It will be able to claim responsibility to the manager or to appeal to the judicial authority to do the call. However, this last possibility is not useful in practice. This is due to the duration of the judicial processes. When the Court issues a judicial resolution, the meeting will have already been held according to the original call. In addition, this judicial process will entail expenses ( hiring of lawyers) for the shareholder. 

For his part, the manager has the power to modify or reformulate the new items on the agenda. However, this power has a limit. The new wording of the points of the supplement may not result in matters other than those proposed by the member. 

Is the supplement for calling a meeting of the Board of Directors also possible?

The legislation is not as strict for the call of the Board of Directors as for the call of the Meeting. In fact, each company is allowed to establish the way of calling the Board in its Bylaws. The only thing that is established legislatively is the power to call. This will belong to the President of the Board or to the members that represent a third of it. Only in the case of a call by the latter is it established as an essential requirement to set an agenda. 

In order to clarify the need of the agenda, beyond that assumption, the intervention of the courts has been unavoidable. Thus, the Supreme Court clarified that setting an agenda is not an essential requirement for convening the Board of Directors. Furthermore, all the matters that the Board, by majority, deems appropriate, are allowed to be dealt with at its meetings. 

Therefore, there is no need to supplement the call as in the case of the Board. For the Board, greater flexibility is allowed and points to be addressed at the meeting can be added on the run. This is because this social body is the one that must execute the daily management of the company. 

Conclusion 

In order to make the request for a supplement to the call by the shareholders, the legal requirements must be considered. In this way, it is necessary to have the legitimation, among other aspects, the usual minimum percentage being  5% of capital. This right is usually recognized almost automatically. Although it requires the formation and approval by the board that only in exceptional circumstances, such as being abusive, may deny it. Otherwise, the directors may be held liable or the judicial authority may be requested 

If this article has been of interest, we also suggest you to read the following article published on our website: What are the instructions shareholders can give to the directors of a company?