The system for determine the retribution of the CEOs or executives of the unlisted companies is still not closed. The feeling that the Supreme Court's ruling in February pacified this issue only lasted a few months; which has taken the General Directorate of Registries and Notaries (DGRN) to publish two resolutions (of October 31 and November 8) that question the scope of the decision of the judges and opt for a more flexible interpretation of the Law of Capital Companies.
The debate is complex. After the reform of the norm approved in 2014, the majority of the doctrine and the DGRN itself defended that a double remuneration system was established for the administrators of the unlisted. On the one hand, that of ordinary directors (with deliberative functions), whose position would be free unless the bylaws stipulate otherwise and the board of partners approved the maximum amount of their annual remuneration (article 217). On the other hand, that of the delegated or executive directors (with management tasks), whose salary should be included in the contract between the latter and the company and which, in turn, should be approved by the board of directors (article 249 ).
The SupremeHowever, he departed from this interpretation and embraced a more protectionist position with the interests of the minority partners, imposing more transparency. In its ruling, it rejected the existence of two types of directors (with two different remuneration systems) and argued, instead, for a cumulative reading of articles 217 and 249 of the Capital Companies Act. Thus, the system of retribution, when there are executive functions, must pass three filters: first, to be included in the bylaws; second, that the general meeting approve the maximum annual amount for all administrators; and, third, that its distribution be specified in the contract.
Lack of concretion
The high court, however, did not enter to specify what elements of remuneration should be included in the statutes and, consequently, what margin of maneuver the board had in drafting the clauses of the contract. To this indeterminacy the DGRN is now grabbed to extend the autonomy that, a priori, the sentence granted by the administrative body. A crack that ends remembering that February "is the only pronouncement dictated in this regard." To settle case law you need at least two.
The cases studied by the General Directorate of Registries and Notaries raise frictions with the position of the Supreme Court, but not a frontal clash. This can arrive, as foreseen by Pedro Martín (Larrauri & Martí Abogados), when statutes are questioned that foresee that the position of ordinary administrator is free and, at the same time, the contract between the executive director and the administrative body set a remuneration in the contract of the executive directors. His bet, in view of the two published resolutions and despite contradicting the criterion of the high court, is that the address would validate them.
The formula followed by the DGRN to extend the limits imposed by the Supreme Court is to admit a completely open statutory wording, without requiring any determination. Thus, for example, the resolution of October 31 validates statutes that are limited to stating that the contract "must detail all the concepts by which the director can obtain remuneration for the performance of their executive functions, including, where appropriate , the eventual compensation for early termination ".
Pedro Martín, Larrauri & Martí Abogados, explains that "the DGRN welcomes the fact that the Supreme Court said that the articles of the Capital Companies Law should be interpreted flexibly". Thus, in cases in which the charge is paid and the board has approved the annual maximum, "it will not require that the statutes include aspects such as who is charged, how much and for what concepts".
Martín believes that this position is "more in line" with the Spanish business reality. "Because of its size, in 90% of societies, the council and the board represent the same interests. The position of the Supreme is absurd because it is based on a presumption of abuse by the councilors, "he says.
In the same vein Lluís Basart, partner of Auren, who sees an "excess of zeal" by magistrates in the defense of minority partners. As he explains, the uncertainty surrounding the model is not just a commercial problem. Article 15 of the Corporate Tax Law excludes from the deductible expenses those derived "from actions contrary to the legal system". A forecast that, if the system is considered invalid, will be applied to the remuneration.
Both jurists point out that the Treasury has never entered into that level of detail and they assume that, given that the interpretation of the Supreme Court is the furthest removed from the literal tenor of the law, it will not question the statements of the companies. "Now, if a creative inspector appears, you never know," adds Martín.
From the fiscal point of view, it is also relevant that the retention for those charged as an administrator is 35% (except if the turnover is less than 100,000 euros, which is reduced to 19%). Therefore, the majority of those who hold executive functions prefer to be paid for these functions, which, with much greater probability, will have a more beneficial taxation.
For those who want to guarantee the absence of problems, the recommendation is clear: that they include in their bylaws the remuneration of the executive directors. However, this procedure raises two problems: the cost in time and money of reforming them and the submission to the opinion of any member of the remuneration of the directors. "Can a company not pay what it wants to its CEO or human resources without asking for permission from the last shareholder?" Basart asks.