Is it necessary to justify the transfer of registered office in order for such transfer to be approved?

he registered office

The legislation states that the registered office should be established in one of the two places it offers as possible. The founding partners must choose whether to establish it in their effective administration center or the place of their main establishment. 

The first refers to the place where the day-to-day management of the Company is carried out. This place, however, does not have to coincide with the place where the management body conducts its meetings. While the second refers to the main place where business is performed. So, if the Company has several headquarters, branches or permanent establishments, the address will be the where the main office is located. In order to know which is this office, objective criteria such as turnover or number of employees will be considered. 

This registered office can be changed at any time and this constitutes a modification of the Company’s Articles of Association. Like all statutory modifications the competence is of the General Meeting. However, to facilitate its practice, the legislator established an exception to this competence for the change of domicile. 

Who has the power to change the registered office?

Previously, the authority to transfer the registered office was held exclusively by the Shareholders’ Meeting, except for changes within the same municipality. In the event of a change of domicile within the same municipality, the administrative body could also approve it. Since 2015 this situation has changed and the scope of the administrative body has been extended. Currently, the administrative body can agree to a change of address throughout all of Spain. 

Although this is the legal scope, the contrary can be established by statutory provision. However, in 2017 this exception was modified. Therefore, after 2017 an agreement of the partners is necessary to remove this competence from the managing body. 

In the past, the bylaws of the companies included only the competence of the Shareholders’ Meeting. This meant that the directors could not agree on a change of registered office. Therefore, if this power was to be conferred, it was necessary for these companies founded before 2015 to change the statutes. To avoid this complexity, the 2017 amendment was introduced. So now a modification of the statutes is required to reserve this power to the Shareholders’ Meeting. If this modification is not made, the change will be allowed by the administration body, always within Spain. 

Si te ha interesado este artículo no dudes en leer:

Is the administrator who is unaware of the injury that his or her actions generate responsible?

The liability of company directors is regulated in articles 236 to 241 bis of the LSC. The administrators are responsible for the damages caused by their acts or omissions to the company, to the partners or to third parties.

Requirements for the transfer

Requirements are needed to make this change by eliminating all possible arbitrariness and harm to society. 

The new address must be the center of its effective administration or main establishment. The same happens when the company is incorporated. Therefore, this requirement is inflexible throughout the life of the company. However, this new registered office may be located outside the area where the business is perfected (a “borrowed” or “invented” registered office). In that case, it is necessary that in the short term the new domicile becomes the center of effective administration or main establishment.  In addition, it is required that such change does not impair the corporate interest. If so, this decision may be challenged. Both the directors who have not voted in favor of it and the partners will be entitled to challenge this transfer. All this would finally imply that the partners could demand responsibility to the administrators who took this decision. 

To avoid such conflict, the directors shall justify that they make the change of address in accordance with their duty of care. This duty implies that the directors must take the necessary decisions for the good management of the company. Therefore, the directors must justify that the transfer will consequently be beneficial to the company.  This justification and protection of the company’s interest is required because of the importance of the registered office. This is not a mere place, but it is, among other things, the meeting place of the corporate bodies. 

And finally, since the transfer of the domicile implies a modification of the Statutes, a public deed is required. Subsequently, this deed must be registered in the corresponding Commercial Registry. 

Conclusions

If since 2017 the members have not agreed to reserve the competence to the General Meeting, the directors may move the domicile. However, this power has limits. Firstly, to establish the new domicile in one of the two places mentioned by the regulations. And, secondly, to make this change in accordance with their duty of care and consequently in the benefit of the company. Otherwise, the directors may be liable. 

If this article has been of interest, we also suggest you to read the following article published on our website: SCS 601/2019 and 3 very relevant interpretations of administrators’ responsibility