The directors of listed companies may only be individual persons

  • This is established in the proposed draft amending the law of capital companies and other financial provisions
  • The objective is to promote the long-term involvement of shareholders

Lady Justice, Legal, Law, Justice


On May 28, 2019, the Spanish Ministry of Economy and Business published on its website the Draft Law by which it is proposed to amend the revised text of the Capital Companies Law, approved by Royal Legislative Decree 1/2010, of July 2, and other financial regulations, to adapt them to Directive (EU) 2017/828 of the European Parliament and of the Council, of May 17, 2017, which modifies Directive 2007/36 / EC with respect to the promotion of the long-term involvement of shareholders.

One of the novelties that the Draft Bill proposes to incorporate in matters of corporate governance is the obligation that the boards of directors of listed companies be integrated exclusively by natural persons, being forbidden the incorporation of legal entities (with their corresponding representative natural person)

Article 529 bis. Required nature of the board of directors.

Current Draft Proposed Modification
1. The listed companies must be managed by a board of directors. 1. The listed companies must be managed by a board of directors that will be composed exclusively by individuals.

This proposal to amend article 529 bis of the Capital Companies Law[1], in our opinion, would follow the trend set by previous legal reforms in matters of corporate governance, such as Law 31/2014, of December 3[2], which, among other modifications , introduced the joint and several liability for the legal entity administrator and his physical representative when incorporating number 5) to article 236 of the Capital Companies Law, including:

“5. The natural person appointed for the permanent exercise of the functions of the position of administrator legal entity must meet the legal requirements established for administrators, will be subject to the same duties and will be jointly and severally liable with the legal entity.”

It should be remembered that, in general, Articles 212 and 212 bis of the Capital Companies Law expressly admit the possibility that the administrators of the capital companies may be natural or legal persons. In the same vein, Article 143 of the Mercantile Registry Regulations[1] also provides for this circumstance, indicating the need that “in case of a legal entity administrator, the registration of the appointment will not proceed until the identity of the physical person designated by the former has been established, as his representative for the exercise of the functions of the office “.

This proposal to amend article 529 bis of the Capital Companies Law would exempt listed companies from this regime, being in the same situation as the company Nueva Empresa [1].

The Draft Bill is limited to justifying this change laconically in “reasons of transparency and good corporate governance” without providing further explanation in this regard.

In our opinion, we have certain doubts that this modification could per se provide a greater degree of transparency to the corporate governance system of listed companies.

In fact, in accordance with the current wording of the aforementioned article 143 of the Mercantile Registry Regulation, in any registration of a legal entity administrator there is both the corporate name and other information of the legal entity as well as the information corresponding to the natural person designated as representative.

If, on the contrary, as advocated by the Draft Bill, all the directors of a listed company are individuals, it would be forced to have to dive into the corporate documentation and in the different registers of the CNMV to know the identity of the company, the entity holding the shareholding by virtue of which the individual has the status of member of the board of directors of a listed company on a proprietary or external basis, which we believe will entail the need to adapt the content of the government’s information corporate to fill this gap.

Another of the issues that we are facing problems and that we anticipate could be source of different conflicts in case of carrying out this modification contained in the Draft Law is related to those companies or entities that, by their shareholding, by pacts for social or for another reason, they have acquired the right to appoint directors in a listed company.

The possible problem would arise in those cases of loss of confidence in the appointed individual or in those cases in which a change of control occurred and the new managers of the shareholder entity were interested in replacing the director representing them in the board of directors of the listed company.

In these cases, if the voluntary collaboration of the director were not counted by presenting his resignation, he would have to wait for the next General Meeting and gather sufficient quorum and majorities for his early dismissal or, in the most extreme cases, be forced to wait for the expiration of his position as a director, this situation may be prolonged until the maximum term established by the bylaws or, as the case may be, up to 4 years, in accordance with article 529 of the Capital Companies Act[1].

In accordance with the First Transitory Provision of the Draft, this limitation would be effective, in the event that the proposed reform is approved, for appointment and renewal of directors that will take place as of January 1, 2020.

In any case, we will have to be attentive and aware of the development and evolution of this Draft Bill in its proceedings in Congress and the Senate.

Authors:Luis Manuel García and   Borja de Cárdenas                                    


Luis Manuel García, +34 91 436 00 90,

Ángel Valdés Burgui, +34 93 488 28 02,

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