General Meeting: The Partners (S.L) or Shareholders (S.A) make decisions on matters which are under their responsibility by majority vote as defined by law or in the by-laws. The following, among others, are matters under the jurisdiction of the General Meeting:
- Approval of annual financial statements and distribution of earnings.
- The approval of corporate governance.
- Appointment and dismissal of directors.
- Capital increase and reduction
- Acquisition, disposal or transfer to another company, of any essential assets.
- Conversion, merger, spin-off or global assignment of assets and liabilities and transfer of registered office abroad.
Company Administration: The Director or Directors manage and represent the company.
It is important to note that the General Meeting is not superior in comparison to the Company Administration, as they act as independent bodies.
It is for that reason that the Directors have liability whereas partners and shareholders have limited liability.
The selection of the Company Administration
The selection of the Company Administration is essential because they manage and represent the company.
The Spanish Corporate Enterprise Act, allows us choose between different types of governing body:
- Sole Director
- Two or more separate directors, in an SA there can only two (2) members.
- Two joint directors, in an SA there can only be two (2) members.
- A board of Directors (must have a minimum of three (3) members.
The type of governing body have been established by by-law, but, in Limited Liability companies, the by-laws may envisage several organizational schemes, vesting the general meeting with the authority to opt for any one of these alternatives with no need to amend the by-laws.
The choice depends on the preference or necessity between agility and security.
Indeed, the option of Sole Director is the most agile because only one person could carry out all activities relating to the management and representation of the company without the agreement of other Directors. However, it is the least secure because all the power is in only one hand. Naturally, Directors must perform their roles as loyal representatives, operating in good faith and in the best interest of the company.
The board of Directors, on the other hand, could be the safest option, indeed, the Directors must act as a board so they have to make the decision together through a quorum and majorities system.
To solve this problem, the law enables the board of Directors to delegate powers, establishing the content, limitations and duties of said delegation.
In the case of two joint Directors, one could be delegated powers through Powers of Attorney.
In short, the law enables a lot of different options to establish and customize the Company Administration and we have to choose the best option for our interest between agility and security.