The Spanish Supreme Court, in its judgment No. 536/2022, of July 5, 2022, has ruled on the regime of voluntary representation in the general meetings of limited liability companies in those cases in which, despite the representation is conferred contrary to the bylaws and the provisions of the Corporate Enterprises Act, the validity of this representation is rejected in bad faith.
In the present case, the partners of the defendant entities attended the meetings of two companies represented. Despite the fact that the method of attributing the representation used by the partners had been carried out for a long time without being rejected, it differed from what is established in the bylaws and in the Corporate Enterprises Act, which is why the presidents of both boards rejected the validity of the representation in the act of the board itself.
As a preliminary consideration, the Spanish Supreme Court points out that the representation regime provided for limited liability companies responds to their closed nature and aims to avoid the presence of strangers at meetings, without prejudice to the fact that the bylaws expand the number of people who can assume representation of the partners. In this sense, it is usual that in this type of companies the same partners attend meetings for long periods of time, which means that the requirements to accredit correct representation are adapted to this circumstance and mitigated.
According to the Spanish Supreme Court, the fact that the form of representation used by the partners had been allowed in several previous meetings without being rejected and that it is now prevented in the same act of celebration, in a strict interpretation of the representation regime provided for in the normative shows a bad faith in the presidents of those. In this sense, it argues, citing the judgment under appeal, that a form of representation cannot be accepted repeatedly over time and then, suddenly and surprisingly, reject that form, preventing the partners from exercising their right to assistance.
This action supposes a contravention of the own acts, as well as a violation of the duty of good faith that must be fulfilled by whoever exercises the position of chairman of the meeting, as guarantor of the rights of the partners.
For this reason, Supreme Court rules in favor of the partners and considers that the chairmen of the meetings have not acted in good faith by not giving sufficient advance notice of the change in criteria, leaving the partners with no room for reaction.
