The General Directorate of Legal Security and Public Faith issued a resolution on October 30, 2020 (BOE of November 23, 2020), in which it resolved on the cancellation of registrations, journeys and deposits of books subsequent to a social agreement that it was annulled by court ruling and that are contradictory with said annulled agreement.
It was an agreement adopted on October 7, 2015 by the General Shareholders Meeting of a limited liability company, which was annulled by judgment of the Commercial Court number 1 of Seville. This ruling, in addition to annulling said company agreement, ordered the cancellation in the Companies House of any registration, journey or deposit of books that derives from the annulled agreement and all subsequent contradictory journeys.
The particularity of this case was that, during the provisional execution of the sentence, the companies house registrar determined the inscriptions and journeys that were contrary to the annulled agreement and did preventively note the cancellation of said agreements, which in this case were the 4th to 12th registrations, both included.
1. Cancellation of contradictory registrations with the cancelled agreement.
The effectiveness of a sentence ordering the cancellation, due to nullity, of the corporate resolutions adopted at a general meeting of a company and subsequent journeys and registrations contradictory with the former was debated in the appeal resolved by the General Directorate.
It must be taken into account that in the field of Commercial Law, and more specifically, in the field of Company Law, the declaration of nullity of company agreements does not always have the radical effects that occur in civil order, since together with the interest of the negotiating parties, other considerations equally deserving of protection come into play, such as the principle of company preservation and the safeguarding of the principle of legal security. Therefore, the general doctrine on the nullity of legal acts and businesses is modulated by the legislator himself in the field of Company Law, in favour of legal security and the protection of commercial traffic.
The protection of commercial traffic requires that the birth of companies and their main legal acts are associated with their publication, so that third parties can make decisions and act in accordance with the published facts with the confidence that, in the event of an inaccuracy of the publication, their interests will be protected. That is why, in the event of nullity, the position of third parties must be protected in order to avoid making the protection that the legal system proclaims illusory.
2. The qualification of the effects produced by the nullity in the commercial sphere according to the Supreme Court.
The Judgment of the Supreme Court of February 23, 2012 determined that the traditional civil principle “quod nullum est nullum effectum producit” in the commercial sphere must be qualified, since the nullity must exclusively apply to subsequent acts that are entirely incompatible with the act annulled, and the formal rigorism must be considered to have been overcome, to the contrary that in other previous decisions had prevailed.
On the other hand, the Sentence of the Supreme Court of June 12, 2008, issued in application of the Public Limited Companies Law –because the current Capital Companies Law came into force in 2010– declared the article 6.3 of the Civil Code is not transferable to the causes of nullity of the Companies Law, and that the legal violations do not have all of them the same entity and effects. Furthermore, the jurisprudential doctrine has been recommending “extreme prudence and flexible criteria” in the application of radical nullity.
3. Doctrine of the General Directorate on the cancellation of the journeys after the annulled agreement.
The General Directorate of Legal Security and Public Faith has considered that in order for the commercial registrar to be able to carry out the cancellation of subsequent journeys incompatible with the annulled act or agreement, it is necessary a judicial declaration of which journeys should be or a statement that allows to property identify those journeys. That is why the General Directorate considers that if with the presentation of the judgment the cancellation of the current journeys in the registry is intended, it should be specified in said judgment which journeys should be subject to cancellation, because it is not the responsibility of the registrar to determine which is the scope of the effects produced by the judgment presented.
However, it is not possible to go too far by applying an unjustified formalistic rigor if there is no doubt about the cancellation scope. Therefore, the registrar cannot demand an express pronouncement on the content and scope of the sentence, in relation to the journeys after the annulled agreement, which may be affected by the nullity, in order to cancel the journeys after the agreement or annulled agreements, as long as there is no doubt about said journeys.
Thus, in order to determine the subsequent journeys that must be cancelled, it is an essential requirement that the contradiction with the annulled agreements be clear. Otherwise, the interested parties must request the execution of the sentence and, if they do not do so, it will be up to the Board of Directors to urge the necessary resolutions for the regularization of the company, so that they must call a general meeting so that it takes the agreements that proceed.
4. Particular case: Preventive annotation of cancellation of inscriptions, journeys and deposits in provisional execution of sentence.
The resolution of the General Directorate we comment on here, in addition to all the above, considers that in this particular case there is a circumstance that must be taken into consideration. This circumstance is that in the proceedings of the provisional execution of the sentence, executed when it was not yet firm, a preventive inscription of cancellation of the contested corporate agreement and those journeys that led to the subsequent registrations, as well as the deposits of the subsequent accounts, were taken.
The General Directorate thus determines that it is not appropriate to ignore the effectiveness of said preventive inscription or annotation in relation to the journeys to which it expressly refers. Therefore, since the judgment of nullity has been entered preventively, in the process of provisional execution of the sentence, ordering the cancellation of subsequent journeys, on the 4th to 12th inscriptions -which are those that were provisionally determined as contradictory with the annulled agreement-, the cancellation effectiveness of the sentence must now operate once firm, as long as the inaccuracy or nullity of the preventive annotation is not judicially declared, since as determined by article 1 of the Law of Mortgage and the article 7 of the Companies House Rule, the journeys of the registry are under the protection of the courts and it produces its effects as long as the judicial declaration of its inaccuracy or nullity is not registered.