Vietnam Tackles Global Minimum Tax Implications

2 febrero 2024

  • Vietnam
  • Derecho Societario
  • Inversiones extranjeras
  • Derecho Fiscal y Tributario

Vietnam has embraced the global minimum tax (GMT) to harmonize its tax policies with global standards. While this new tax regime is anticipated to have certain adverse effects on foreign direct investment (FDI), the Vietnamese government is devising proactive measures to mitigate these repercussions and maintain the country’s appeal as an investment haven.

Key Ramifications of the GMT for Vietnam

The GMT mandates multinational corporations (MNCs) with consolidated revenue surpassing €750 million to pay a minimum tax rate of 15%, irrespective of the tax rate in the country where they operate. In Vietnam, this translates to the concept of a qualified domestic minimum top-up tax (QDMTT).

The QDMTT places an extra tax burden on foreign-invested enterprises (FIEs) that are part of an MNC, potentially deterring them from investing or expanding in Vietnam. This is particularly concerning for industries that heavily rely on tax incentives to attract FDI.

Vietnam’s Response: Investment Support Fund and Proactive Measures

In response to the anticipated negative impacts of the GMT, the Vietnamese government has established an investment support fund (Fund) to incentivize investments in targeted sectors. The Fund is primarily funded by proceeds from the State Budget generated by the GMT.

Eligible enterprises for the Fund are those engaged in high-tech product manufacturing, high-tech enterprises, high-tech application projects, and enterprises with investment projects in research and development centers. Eligibility is based on capital size, annual revenue, industry, or technology utilized.

Eligible taxpayers can receive cash subsidies for five specific expense categories:

  1. Human resource training and development
  2. Research and development expenses
  3. Fixed asset investments
  4. High-tech manufacturing expenses
  5. Social infrastructure systems

To qualify for Fund benefits, eligible taxpayers must submit an application dossier to the Fund Office in Hanoi between August 15th and 30th of the year following the incurred Supported Expenses. Each Supported Expense category will have a distinct reimbursement ratio, and support payments will be contingent on the actual expenses incurred by eligible taxpayers.

In addition to the Fund, the Vietnamese government is also implementing proactive measures to address the concerns of foreign investors. These measures include:

  1. Focusing on targeted industries with high growth potential that align with Vietnam’s strategic development goals
  2. Utilizing the additional revenue collected from top-up tax to enhance infrastructure and labor quality
  3. Considering cash grants for long-term qualified investments in high-tech industries

Conclusion

The introduction of the GMT poses challenges for Vietnam in attracting FDI. However, the government’s establishment of the investment support fund and proactive measures demonstrates its commitment to safeguarding the country’s competitiveness as an investment destination. By combining targeted support with infrastructure improvements and incentives for specific industries, Vietnam can mitigate the negative impacts of the GMT and continue to attract foreign investors.

Summary:

The heavily amended PRC Company Law will take effect on July 1, 2024. Please find below a summary of some of the important novelties embodied by this amended Company Law, which may have a significant impact on the rights and duties of the shareholders and management of a limited liability company (“LLC”).

The businesses active in the PRC may be interested in carefully reviewing their corporate documents (including the Articles of Association) in light of the amended Company Law and deciding necessary adaptive measures for compliance/optimization purposes during the transition period leading to the effective date of the said amended Company law.

Capital contribution.

The amended Company Law provides that the subscribed capital of an LLC shall be paid up as per its Articles of Association within a time period up to 5 years from its incorporation (NB: The previous law does not set a time limit for the capital contribution.). This requirement will retroactively apply to the companies incorporated prior to July 1st, 2024.

Despite the foregoing, a creditor or the company shall be entitled to request the shareholder(s) concerned to accelerate its/their capital contribution ahead of the due date for capital contribution should the company be unable to settle due debt(s) with its own assets.

The equity and credit may be used for the capital contribution.

Duties of directors/senior managers

The directors shall bear the obligation to form the “liquidation team,” which shall proceed with the liquidation within 15 days of the occurrence of a number of statutory circumstances substantiated in Article 229 of the Company Law. The directors shall be held liable for losses incurred by the company or creditor(s) arising from their failure to fulfill the above liquidation obligation on time.

The director(s)/senior manager(s) shall be held liable (along with the company itself) for compensating others should they cause any damages to the latter due to their intentional acts or gross negligence in the course of performing their duties.

The board of directors of an LLC shall regularly check the status of capital contributions by the shareholders. It shall cause the company to issue written reminders to the shareholder(s) failing to make capital contributions on time. Should the shareholder fail to honor its subscribed capital contribution despite the reminder, subject to a specific board resolution and a written notification with immediate effect, the company may declare that the shareholder is disqualified from making the capital contribution.

Corporate governance

An LLC may set up an “audit commission” composed of directors to exercise the function of supervisor or supervisors’ committee as per its Articles of Association. In such cases, the company may no longer need to set up separate supervisors’ committees or appoint supervisors.

However, the board of directors of an LLC having more than 300 employees shall have employees’ representative(s) elected through the democratic process unless the same LLC has a Supervisors’ Committee in place and such Committee already has the employees’ representative(s).

Egypt, with its rich history and vibrant economy, presents promising opportunities for foreign investors looking to expand their business horizons. However, entering a new market can be a complex endeavor, and understanding the intricacies of doing business in Egypt is essential for success. In this article, we will delve deeper into the various aspects of establishing and managing a company in Egypt, providing valuable insights and guidance for prospective investors.

Conducting Market Research

Before venturing into any new market, conducting thorough market research is crucial. Egypt is a diverse country with a dynamic market, and understanding the local nuances, consumer behavior, and market trends is essential. It is advisable for foreign investors to consider setting up an initial representative office, allowing them to conduct in-depth market research without fully committing to commercial operations. A representative office can employ local staff to gather market insights and report back to the parent company, enabling informed decision-making for future business initiatives. This representative office may not engage in any commercial activities and may not invoice. Hence, it is not subject to any corporate tax but will be subject to salary tax for its employees and withholding tax.

Choosing the Right Business Structure

When establishing a legal entity in Egypt, foreign investors have several options to choose from. The most common business structures for foreign direct investment are a One Person Company (OPC), Limited Liability Companies (LLCs) and Joint Stock Companies (SAEs) as 100% of the shares can be wholly owned by foreigners. The choice of structure depends on the nature of the business and the specific objectives of the foreign company. Alternatively, for specific projects or contracts with defined purposes, establishing a branch office can be a viable option.

The Company Establishment Process

Setting up a company in Egypt involves navigating through certain legal procedures. The Egyptian government has implemented measures to facilitate foreign investments and ensure a favorable business environment. Foreign investors can own 100% of their businesses in most sectors, and the minimum requirement for establishing a company is typically having at least one shareholder. In the case of LLCs, a minimum of two partners is required while in case of SAEs a minimum of 3 shareholders is required. It is important to note that a foreign director can be appointed, except for activities that require an import license, which necessitates an Egyptian partner and director.

Import and Distribution Considerations

For foreign entities planning to import and distribute goods in Egypt, specific considerations come into play. Obtaining an import license requires meeting certain criteria, including demonstrating a minimum turnover, meeting nominal capital criteria, and having an Egyptian partner holding at least 51% of the shares. These regulations aim to ensure local participation and collaboration in import-oriented activities.

Timelines and Administrative Processes

Understanding the timelines and administrative processes involved in establishing a company in Egypt is crucial for efficient planning.
While, foreign direct investors may establish the legal entity in one working day through GAFI as the commercial registry and tax card will be issued on the same day. However, the process may take up to six months, it can vary depending on various factors as follows:

  • a significant factor is the legalization of documents, which may require coordination with embassies and consulates for the legalization of documents such as power of attorney, corporate documents, and their translated versions;
  • opening a bank account for the company's capital needs to deliver all corporate documents related to the ultimate business owner (UBO) which may potentially cause delays.

Efficient Branch or Subsidiary Management

Once the company is operational, efficient branch management is vital for sustained success  as clearly defining the director’s powers through the bylaws or separate agreements is recommended. Regular communication with local management, employing competent accountants, and maintaining oversight of operations are essential to maintain control and address any issues promptly.

Joint Ventures and Board Representation

In cases where foreign investors collaborate with local partners through joint ventures, establishing a board of directors plays a crucial role. The board oversees company management and decision-making processes. It is advisable for foreign shareholders to regulate their relations with their local partners by virtue of a shareholder agreement to ensure their representation on the board, allowing them to actively participate and safeguard their interests. Maintaining open lines of communication and regular meetings are fundamental for staying informed about the company’s performance.

Conclusion

Expanding into the Egyptian market holds immense potential for foreign investors. However, navigating the business landscape requires careful planning, market research, and adherence to legal procedures. By understanding the nuances of establishing and managing a company in Egypt, foreign investors can unlock new business opportunities and forge successful ventures in this dynamic market. With the right approach and strategic decisions, Egypt can prove to be a rewarding destination for those seeking growth and expansion

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Aceptar el cargo de administrador en una sociedad anónima o limitada cada vez entraña mayores riesgos; El Tribunal Supremo, sentencia a sentencia, va perfilando e interpretando los preceptos de la Ley de Sociedades de Capital (LSC) con un enfoque cada vez más riguroso y exigente a la hora de delimitar el marco de la responsabilidad de los administradores.

Desde luego, no es reciente en absoluto el contenido del artículo 43.1 b) de la Ley General Tributaria cuando sienta las bases de la responsabilidad subsidiaria de los administradores por las deudas frente a la Agencia Tributaria:

Serán responsables subsidiarios de la deuda tributaria las siguientes personas o entidades:

b) Los administradores de hecho o de derecho de aquellas personas jurídicas que hayan cesado en sus actividades, por las obligaciones tributarias devengadas de éstas que se encuentren pendientes en el momento del cese, siempre que no hubieran hecho lo necesario para su pago o hubieren adoptado acuerdos o tomado medidas causantes del impago.

Pudiera  deducirse de la lectura del precepto transcrito que se establecía la responsabilidad subsidiaria de los administradores quienes, al tiempo del cese de la actividad social, ocuparan efectivamente el tal cargo de administrador; pero que la responsabilidad no alcanzaría a aquellos administradores que lo hubieran sido en el pasado, pero no lo fueran ya, en el momento en el que la sociedad hubiera cesado de actuar en el tráfico jurídico y económico por las deudas tributarias pendientes en tal momento.

Pues bien, el Tribunal Supremo (Sala Tercera) en su reciente sentencia de 7 de marzo de 2023, remacha un clavo más en el ataúd de la responsabilidad de los administradores.

El caso objeto de la sentencia consistía en determinar la responsabilidad subsidiaria frente a la Agencia Tributaria de un administrador con el cargo caducado (por el transcurso del plazo estatutario) que había convocado una junta general para el nombramiento de nuevos integrantes del órgano de administración.

Pues bien, el Tribunal Supremo entiende (y sienta doctrina a efectos casacionales) que el administrador con el cargo caducado no “agota” sus obligaciones con la convocatoria de la junta en cuestión, sino que además debió, al amparo del art. 365 LSC convocar otra junta general para adoptar el acuerdo de instar el concurso o el acuerdo de disolución por concurrir las causas del art. 363 a) (cese de actividad) y d) (paralización de los órganos sociales) así como en su caso la solicitud de disolución judicial en su condición de interesado (art. 366.1 LSC).

La conducta reprochable según el Tribunal Supremo (que desencadena la responsabilidad subsidiaria) consiste en que, frente al cese de la actividad de la sociedad, lo único que hizo fue convocar junta para el nombramiento de nuevos administradores siendo que por lo tanto “no realizó los actos necesarios para poder afrontar el pago de las deudas tributarias concurriendo así el elemento subjetivo necesario para poder declarar su responsabilidad”.

La sentencia insiste en que la condición de administrador no se pierde con al agotamiento del mandato por caducidad del cargo toda vez que las obligaciones mercantiles y fiscales persisten; y que no basta la convocatoria de junta para nombrar administradores a los efectos de entender que tal junta, una vez celebrada, priva al administrador con cargo caducado de la condición de tal, cuando concurre una causa de disolución que habría obligado a convocar otra junta con otro objeto y otro orden del día para acordar la disolución de la sociedad inactiva.

Pero lo notable y llamativo del caso es que la junta convocada por el administrador (con cargo caducado) para el nombramiento de nuevos administradores se celebró en junio de 2012, los acuerdos se elevaron a público el 1 de marzo de 2013, se inscribieron en el registro mercantil en julio del mismo año y la sentencia afirma expresamente que el cese de la actividad societaria se produjo en abril de 2013 (es decir cuando ya se había celebrado la junta para el nombramiento de nuevos administradores, junio 2012 y cuando ya se había elevado a público el nombramiento de los nuevos administradores, 1 de marzo de 2013).

Textualmente reza la sentencia:

“Atendida la fecha en que el cese de la actividad empresarial fue establecido por la sentencia a quo, abril 2013, aun debía considerarse como administrador de la sociedad al recurrente en tal carácter debe reputarse negligente su conducta a efectos de incardinación en la causa de responsabilidad subsidiaria del art 43.1.b) LGT”

Pese al contenido del art. 222 LSC y 145.1 RRM que establecen que el nombramiento de  administradores caducará, entre otros supuestos, cuando venció el plazo se haya celebrado la junta (o transcurrido el plazo para su celebración) que haya de resolver sobre la aprobación de las cuentas del ejercicio anterior, el Tribunal Supremo insiste que, caducado o no el cargo, dicha caducidad no agota ni extingue sus responsabilidades como administrador que deben interpretarse extensivamente: no le basta con convocar junta para el nombramiento de nuevos administradores sino que debe actuar a los efectos de disolver la sociedad o instar el concurso, como si el cargo tuviera plena y completa vigencia.

De modo que, tras esta contundente sentencia, los administradores societarios, en caso de cese de la actividad, aunque su cargo haya caducado, deben saber que su responsabilidad (y en concreto la subsidiaria por deudas fiscales) solo se liberará si convocan junta para disolver la sociedad, en caso de que la junta no adopte dicho acuerdo, si solicitan al juzgado la disolución judicial o si presentan concurso voluntario.

En suma, serán responsables si no actúan igual que si su cargo siguiera plenamente en vigor. Como decíamos arriba, hay que pensarse muy mucho aceptar cargos de administrador de sociedades mercantiles.

Where is it more suitable to set up a new limited liability company in Europe?

I will deal in this article with two countries I know well (Spain and The Netherlands) and focus on the minimum capital requested and the online incorporation of a limited liability company, sharing some thoughts and my takeaways.

Spain: the “Create and Grow Law”

In Spain, the Business Creation and Growth Law 18/2022, of September 28, 2022 (related to aspects of incorporation of companies), known as the “Create and Grow Law”, was approved last September within the framework of the Recovery, Transformation and Resilience Plan of the Spanish government. This plan channels European funds to alleviate the consequences of the Covid-19 crisis. This law is an initiative that reflects this flexibility and, as its explanatory statement indicates, aims to encourage the creation and growth of companies, in order to contribute to the economic growth of the country and its long-term resilience. Spain thus aligns itself with other neighboring countries, where there is no minimum capital to set up a company of this type.

Is this new law interesting for foreign investors or companies looking to establish themselves in Spain?

It is certainly very interesting. The fact that the Spanish legislator abandons this reference figure of 3,000 euros is very favorable for medium-large companies willing to have a permanent establishment in Spain Nevertheless, as long as the capital does not reach the figure of €3,000, the following rules will be applied, which are intended to protect the interests of creditors or third parties that contract with the company:  (i) 20% of the profit must be allocated to the legal reserve until said reserve together with the social capital reach the figure of €3,000 (the legislator seeks that the SLs constituted in this way do not remain «undercapitalized»), and (ii) as a safeguard clause for creditors of the company, in the event of voluntary or forced liquidation of the company, if the company’s assets are insufficient to meet its obligations of payment, the partners will be jointly and severally liable for the difference between the subscribed capital and the figure of 3,000 euros.

Online incorporation of a company in Spain

The «CIRCE system» (procedure dependent on the Ministry of Industry, Commerce and Tourism that allows the start of the process of creating companies «over the Internet» ) entails an electronic procedure through agreements and communications with all the organizations and administrations that intervene in the process of incorporating companies.

The entrepreneur will only have to complete the Single Electronic Document (DUE) that includes a multitude of forms and CIRCE will automatically carry out all the necessary procedures to establish the company, communicating with all the organizations involved (Tax Agency, Social Security, Mercantile Registry, Notary, etc.). There is an obligation to review and sign the DUE before sending it. This system is not active yet, but it is expected that it will be in place when other complementary laws that support this digital process are approved by the Spanish Legislator which is necessary for the well-functioning of the system.

The Netherlands: The Flex BV law

The Flex BV law came into force on October 4, 2011. This law has given a lot of flexibility to the incorporation of new limited liability companies which has been very favorable for international companies working with different product lines, allowing to have one company for every product or service offered.

The Flex BV law has, among others, the following characteristics:

  • the creation of a Limited Liability Company is flexible, easy to establish and without many costs;
  • it only requires one shareholder who must be registered with the Dutch Trade Register. The minimum share capital for setting it up is 1 euro. The liability of the shareholder is limited to the amount of money he has invested in the company. Being a limited liability company, the BV is liable for any debts, not the director or shareholder as private individuals, except in case of mismanagement or fraud. The company requires at least one director, and the shareholders can fill this position. The company registration procedure is quite fast due to the minimum documentation required.

Online incorporation of a company in the Netherlands

 In the case of the Netherlands, in the Explanatory Memorandum of the bill implementing the Directive (EU) 2019/1151 of the European Parliament and of the Council of 20 June 2019 amending Directive (EU) 2017/1132 with regard to the use of digital instruments, it is proposed that incorporation of a BV electronically is only possible if payment on the shares takes place in cash, in order to initially limit the online formation of companies to simple situations. If it turns out that online formation works well, it can be considered whether it is useful to extend this possibility to situations in which contributions are made in a manner other than in money. Incorporation by natural persons using a model deed of incorporation must be possible within five working days from the date on which the notary has received all documents and information from the applicant or the date of payment of the share capital.

The incorporation of a BV digitally is postponed to the summer of 2023 since the House Committee for Justice and Security has decided that the act must be discussed in plenary.

The so called DOBV-system (Digital establishment of a BV), will entail a change in a number of work processes in the notaries in The Netherlands but for the Chamber of Commerce, no major changes will follow because the civil-law notary will supply the registration documents digitally to the Chamber of Commerce. Consequences the civil-law notary is the one who will have to offer a certain digital form of service, which citizens and companies will be able to use.

What positive and negative aspects can be highlighted?

Positives aspects:

  • it is very positive that through this new standard, many investors or international companies from both countries will be encouraged to create new SPVs, as the minimum capital is considered by many companies as a “barrier to entry”;
  • it will expedite the procedures for incorporating companies, essential vehicles for channeling the economic activities of businessmen in their transcendental task of creating wealth and employment, without notary and registration costs;
  • it will create a healthy competition between all the Notaries in Spain and between the notaries of Spain and the Netherlands. The Dutch notary bond expects that a further digitization of the notarial process could be achieved first in the real estate chain and subsequently also in business practice. It is important that the business market may be capable to respond quickly to this demand;
  • the share capital of a company will serve its partners to have the necessary funds with which to start their project, acquire the goods and resources necessary to start the economic activity and consolidate a long-term project (such as, for example, to buy the goods and services necessary to start up activities or to hire employees);
  • it creates business growth through financing alternatives to bank financing, such as crowdfunding or participatory financing, collective investment and venture capital.

Negatives aspects:

  • to search financing externally to start the company’s activity, which will also surely have a cost (in the form of loans, for example, with their corresponding interest rate). Additionally, in the short or medium term the company must have a capital increase to normalize their patrimonial situation and solve this evident «underfinancing» of own resources, with which, this will also suppose an additional cost in the form of notary and registry fees that must be faced in the medium or long term after the incorporation;
  • the possibility of establishing a limited liability company with only 1 euro of share capital can facilitate the creation of fictitious legal entities by people who do not wish to carry out a real economic activity, but only use the companies as a suitable instrument for the development of legal or illegal activities;
  • additionally, it also implies a clear risk for the legal certainty and the responsibility of those companies in large contracts with third parties, leaving a limit to their minimum liability while their businesses are millionaires;
  • the online constitution system can be rigid and can also generate management and processing problems if the interested parties have not been properly advised and guided by the professionals involved before arriving at the Notary. Additionally, CIRCE’s telematic systems must function properly in order to correctly serve all those interested in the constitution of a capital company;
  • there are new requirements for companies related to anti-laundry controls, for instance, to include relevant information on invoices and payments to suppliers in their annual reports and on their corporate website.

Conclusions

Although it may apparently imply a boom in the creation of limited liability companies due to the ease of incorporation, there is still much to be done at the level of corporate law at the national level and collaboration between notaries of both countries.

Spain is, with the entering into force of the Law Creation and Growth, considered among the most advanced countries in facilitating the creation of companies, reducing regulatory obstacles and favoring business restructuring and viability. The final decision will depend on the specific needs of the business, access to finance and tax regime, among others.

Additionally, to the incorporation flexibilities, we must not forget a couple of important aspects for the shareholders and directors to be aware of:

  • a company needs to be managed as well and we need to be aware of the treasury, labor or other obligations of the companies already incorporated, even if they are non-active, they must continue to publish the annual accounts and complying with all governance requirements and formal public register notifications;
  • the responsibility of the shareholders is also important to consider. A shareholder who has direct involvement in the management, may face liability in case of bankruptcy, also in the country where the subsidiary is located. As mentioned above, in Spain, in the event of voluntary or forced liquidation of the company, if the company’s assets are insufficient to meet its obligations of payment, the partners will be jointly and severally liable for the difference between the subscribed capital and the figure of 3,000 euros;
  • the last important aspect when you are doing business mainly in Europe is to consider restructuring your business or consider other forms of incorporation of companies, depending of the business model that you have opted to, for instance the use of the Societas Europaea (SE) which has the possibility to set up a holding company or a joint subsidiary together and to transfer the seat of the company without winding up the entity. The disadvantage is that you need €120,000 starting capital to set up and to have a minimum of 2 companies governed by the laws of different Member States. Other forms of incorporation are the European Cooperative Society (SCE) and the European Economic Interest Grouping (EEIG).

If you need additional information or you are planning to incorporate a limited liability company in Spain or in The Netherlands, get in touch to know more about your options and the right corporate advice for your business.

Under what conditions can company officers be dismissed in France?

This depends on the form of the company.

Let us take the most common forms of commercial companies in France.

The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed «ad nutum», i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed «ad nutum», but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

It concerns simplified joint stock companies («SAS»), the most successful company form in France: one in two newly created companies is an SAS.

In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

Our recommendation

One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

What do the mythical Vega Sicilia wines, El Cid Campeador and the abuse of rights have in common? If you read on, you will find out.

The Vega Sicilia Único was for many years considered the best, the most prestigious and the most expensive Spanish wine.

The abuse of rights is a legal institute that allows the defense of situations in which the opponent acts with (apparent and formal) subjection to the law, but making a spurious use of the law with the intention of harming the injured party.

Last October, the Supreme Court handed down a judgment declaring certain agreements adopted by Bodegas Vega Sicilia S.A., producer of Vega Sicilia Único wine, to be null and void based on the principle of abuse of rights.

The judgment in question is doubly interesting.

Firstly, because it highlights the endemic evil of Spanish justice: it declares the nullity of resolutions adopted at a meeting held in March 2013, which were the subject of a lawsuit in February 2014, with a first instance ruling that same year, appealed to the Provincial Court of Valladolid who issued its judgement on 2019  and  four years later the Supreme Court has put an end to the lawsuit: nine years after the shareholders meeting whose resolutions were the subject of the challenge.

As the Constitutional Court very recently reiterated in its ruling dated last October, «judicial slowness has no place in the Magna Carta». But, although it has no place, or should not have a place, our courts continue to insist that it does and, as an example, this case that we are commenting on is, unfortunately, no exception.

Beyond the barbarity of a litigant having to wait for nine years to find a final solution to his claim, the judgment we are commenting on is of interest for other reasons.

The plaintiffs sought the nullity of certain resolutions adopted at a shareholders’ meeting, basing their claim on the fact that these resolutions constituted an abuse of rights since, through them, the shareholders of Bodegas Vega Sicilia S.A. sought to take control of Bodegas Vega Sicilia away from the company of which the plaintiffs were in turn shareholders.

The legislation in force at the time the meeting was held (prior to the 2014 reform) established that «resolutions that are contrary to the law, oppose the articles of association or harm the corporate interest to the benefit of one or more shareholders or third parties» could be challenged, adding that those contrary to the law would be null and void and the remaining resolutions could be annulled.

Following the 2014 reform, article 204 considers that «corporate resolutions that are contrary to the law, are contrary to the articles of association or the regulations of the company meeting or harm the corporate interest to the benefit of one or more shareholders or third parties» can be challenged and no longer distinguishes between null and voidable resolutions; although it partially recovers the concept of radical nullity in the case of resolutions contrary to public order by establishing that in such cases the action does not have a statute of limitations or lapse.

But both with the regulations prior to the reform and with those currently in force, the controversy resolved by the ruling we are commenting on is the same: when the legislator requires the agreement to be contrary to «law» in order to be able to challenge it, does he mean that it contravenes a precept of the Capital Companies Act (LSC), or can it be considered a requirement for challengeability if it contravenes any other positive precept of any other legal text? And finally, if the resolution in question is classified as constituting an «abuse of rights», can such a situation be considered as «contrary to law» for the purposes of the application of article 204 LSC?

The Chamber reminds us of the requirements for the concurrence of abuse of rights in corporate matters:

  • formal or outwardly correct use of a right
  • causing damage to an interest not protected by a specific legal prerogative, and
  • the immorality or antisociality (sic) of that conduct manifested subjectively (intention to damage or absence of legitimate interest) or objectively (abnormal exercise of the right contrary to the economic and social purposes of the same).

And it then refers to the numerous occasions on which its case law has reiterated that, although the regulation on challenging corporate resolutions does not expressly mention abuse of rights, this is no obstacle to annulling resolutions in such cases, since according to article 7 of the Civil Code (which prohibits abuse of rights), they must be deemed as contrary to the law.

The interest and peculiarity of this case lies in the fact that the contested resolutions were neither adopted in the interests of the company nor did they cause any harm to it, since the alleged harm was caused to a third party formally outside the company.

And on these premises, the Supreme Court reiterates and insists that the expression «contrary to the law» in article 204 LSC must be understood as «contrary to the legal system», which includes those agreements adopted in fraud of the law, in bad faith or with abuse of rights, all of which are included and regulated in the Preliminary Title of the Civil Code. For these reasons, the judgment of the Provincial Court upholds the claim and declares the nullity of the contested agreements.

And what has El Cid got to do with all this? Is it a typo? No, not at all. Legend has it (invented, it seems, by a monk of the monastery of San Pedro de Cardeña to attract visitors) that Rodrigo Diaz de Vivar won a battle on the walls of Valencia against the Almoravids, after his death, saddling his corpse on his legendary horse Babieca.

It turns out that his almost fellow countryman, David Alvarez, buyer of the winery in the 1980s, the latter from León, the former from Burgos, but both old Castilians, also won his last battle after his death; David Alvarez was, together with one of his daughters, a plaintiff against the agreements of Bodegas Vega Sicilia and died in 2015; seven years later the Supreme Court has given him the right against the Almogavars, in this case, his own children.

And two lessons: first, justice is not justice if it is slow, a phrase apocryphally attributed to Seneca; it was not in this case for David Alvarez. Secondly, the abuse of rights is not only an «in extremis» recourse when one does not find frank legal support for one’s claims; on the contrary, it is, on many occasions, the solution.

¿Qué tiene que hacer un administrador para dimitir? ¿Basta con su renuncia comunicada fehacientemente a la sociedad? ¿O tiene que convocar Junta para que se nombre sustituto? ¿O incluso tiene que hacer algo más?

Una reciente Sentencia del Tribunal Supremo de fecha 12 de julio de 2022 (STS 561/2022) ha resuelto un interesante caso relacionado con la dimisión de un administrador único de una SRL confirmando que dimitir no es tan sencillo como pudiera parecer.

El TS establece que para que un administrador único pueda dimitir no solo debe acreditar que ha convocado Junta de Socios para que pueda nombrarse un sustituto (hasta ahí, doctrina pacífica) sino que debe hacer todo lo necesario en ese periodo de interinidad (entre la dimisión y la celebración de la Junta) para atender las necesidades de gestion y representación en evitación de daños a la sociedad en cuestión. Incluso, y este es el caso debatido en la STS, requerir la presencia de notario en la Junta si así se lo exigen socios que representen al menos un 5% del capital social.

Se trataba de una sociedad con dos socios, el mayoritario con el 75% del capital y el minoritario (y administrador único) con el 25%. El minoritario y administrador único renuncia a su cargo de administrador y convoca Junta para nombramiento de sustituto. El socio mayoritario le exige que requiera la presencia de notario en la Junta; el administrador dimisionario responde que, habiendo dimitido, con la convocatoria de Junta se agotaban sus obligaciones por lo que no le correspondía requerir la exigida presencia de notario. El día previsto para la celebración de la Junta se personó el socio mayoritario, pero no el administrador dimisionario y socio minoritario ni el notario, por lo que no se celebró Junta.

El administrador presentó en el Registro mercantil la escritura de renuncia y el socio mayoritario a su vez presentó un escrito denunciando el hecho de no haber solicitado la presencia notarial en la Junta el administrador dimisionario, pese a habérsele requerido para ello.

A partir de ahí, se encadenaron resoluciones con contenidos bien diferentes. El Registrador mercantil, suspendió la inscripción de la renuncia al cargo; la DGRN revocó el criterio del Registrador y resolvió que la renuncia debía inscribirse; el Juzgado de lo Mercantil de Barcelona confirmó el criterio de la DGRN y también lo hizo la Audiencia Provincial. Pero el Tribunal Supremo ha dado finalmente la razón al Registrador Mercantil y se la ha quitado a todos los demás:  a la DGRN, al juzgado de lo mercantil y a la Audiencia Provincial.

Las resoluciones favorables a la inscripción de la renuncia consideran, en primer lugar, que el administrador saliente agota sus responsabilidades convocando Junta y a partir de ahí nada más puede exigírsele; y en segundo lugar que el Registrador debe calificar examinando únicamente documentos con acceso al registro y no considerando la “realidad extra registral” como lo fue el escrito presentado por el socio mayoritario quejándose de la actuación del administrador.

El Tribunal Supremo discrepa, y defiende que la ausencia de notario solicitada válidamente, vicia de ineficacia todos los acuerdos de Junta; y a partir de esa premisa, considera “lógico” que en un caso como el que era objeto de la sentencia, el administrador no solo debía convocar la Junta sino requerir la presencia de notario ya que, de lo contrario, los acuerdos de la Junta devendrían inválidos e ineficaces.

Y respecto a la segunda cuestión controvertida, interpreta que el Registrador, aunque sea excepcional, puede tener en cuenta circunstancias o hechos ciertos de los que tenga “constancia registral” aunque no consten en virtud de documentos presentados para su inscripción, pero si estén relacionados con el documento “inscribible”.

En suma, un caso interesante que pone de manifiesto que dimitir como Administrador no es ni mucho menos tan sencillo y que como regla general, aunque no haya ningún precepto que así lo exija expresamente, el administrador dimisionario debe no solo convocar la Junta sino mantenerse interinamente en el cargo y atender sus obligaciones hasta la celebración de la misma; a partir de ahí, si la Junta no se celebra por inasistencia de los socios o si los socios no nombran un administrador sustituto, ya nada más le es exigible al dimisionario.

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    China – Changes to Company Law

    30 enero 2024

    • China
    • Derecho Societario

    Vietnam has embraced the global minimum tax (GMT) to harmonize its tax policies with global standards. While this new tax regime is anticipated to have certain adverse effects on foreign direct investment (FDI), the Vietnamese government is devising proactive measures to mitigate these repercussions and maintain the country’s appeal as an investment haven.

    Key Ramifications of the GMT for Vietnam

    The GMT mandates multinational corporations (MNCs) with consolidated revenue surpassing €750 million to pay a minimum tax rate of 15%, irrespective of the tax rate in the country where they operate. In Vietnam, this translates to the concept of a qualified domestic minimum top-up tax (QDMTT).

    The QDMTT places an extra tax burden on foreign-invested enterprises (FIEs) that are part of an MNC, potentially deterring them from investing or expanding in Vietnam. This is particularly concerning for industries that heavily rely on tax incentives to attract FDI.

    Vietnam’s Response: Investment Support Fund and Proactive Measures

    In response to the anticipated negative impacts of the GMT, the Vietnamese government has established an investment support fund (Fund) to incentivize investments in targeted sectors. The Fund is primarily funded by proceeds from the State Budget generated by the GMT.

    Eligible enterprises for the Fund are those engaged in high-tech product manufacturing, high-tech enterprises, high-tech application projects, and enterprises with investment projects in research and development centers. Eligibility is based on capital size, annual revenue, industry, or technology utilized.

    Eligible taxpayers can receive cash subsidies for five specific expense categories:

    1. Human resource training and development
    2. Research and development expenses
    3. Fixed asset investments
    4. High-tech manufacturing expenses
    5. Social infrastructure systems

    To qualify for Fund benefits, eligible taxpayers must submit an application dossier to the Fund Office in Hanoi between August 15th and 30th of the year following the incurred Supported Expenses. Each Supported Expense category will have a distinct reimbursement ratio, and support payments will be contingent on the actual expenses incurred by eligible taxpayers.

    In addition to the Fund, the Vietnamese government is also implementing proactive measures to address the concerns of foreign investors. These measures include:

    1. Focusing on targeted industries with high growth potential that align with Vietnam’s strategic development goals
    2. Utilizing the additional revenue collected from top-up tax to enhance infrastructure and labor quality
    3. Considering cash grants for long-term qualified investments in high-tech industries

    Conclusion

    The introduction of the GMT poses challenges for Vietnam in attracting FDI. However, the government’s establishment of the investment support fund and proactive measures demonstrates its commitment to safeguarding the country’s competitiveness as an investment destination. By combining targeted support with infrastructure improvements and incentives for specific industries, Vietnam can mitigate the negative impacts of the GMT and continue to attract foreign investors.

    Summary:

    The heavily amended PRC Company Law will take effect on July 1, 2024. Please find below a summary of some of the important novelties embodied by this amended Company Law, which may have a significant impact on the rights and duties of the shareholders and management of a limited liability company (“LLC”).

    The businesses active in the PRC may be interested in carefully reviewing their corporate documents (including the Articles of Association) in light of the amended Company Law and deciding necessary adaptive measures for compliance/optimization purposes during the transition period leading to the effective date of the said amended Company law.

    Capital contribution.

    The amended Company Law provides that the subscribed capital of an LLC shall be paid up as per its Articles of Association within a time period up to 5 years from its incorporation (NB: The previous law does not set a time limit for the capital contribution.). This requirement will retroactively apply to the companies incorporated prior to July 1st, 2024.

    Despite the foregoing, a creditor or the company shall be entitled to request the shareholder(s) concerned to accelerate its/their capital contribution ahead of the due date for capital contribution should the company be unable to settle due debt(s) with its own assets.

    The equity and credit may be used for the capital contribution.

    Duties of directors/senior managers

    The directors shall bear the obligation to form the “liquidation team,” which shall proceed with the liquidation within 15 days of the occurrence of a number of statutory circumstances substantiated in Article 229 of the Company Law. The directors shall be held liable for losses incurred by the company or creditor(s) arising from their failure to fulfill the above liquidation obligation on time.

    The director(s)/senior manager(s) shall be held liable (along with the company itself) for compensating others should they cause any damages to the latter due to their intentional acts or gross negligence in the course of performing their duties.

    The board of directors of an LLC shall regularly check the status of capital contributions by the shareholders. It shall cause the company to issue written reminders to the shareholder(s) failing to make capital contributions on time. Should the shareholder fail to honor its subscribed capital contribution despite the reminder, subject to a specific board resolution and a written notification with immediate effect, the company may declare that the shareholder is disqualified from making the capital contribution.

    Corporate governance

    An LLC may set up an “audit commission” composed of directors to exercise the function of supervisor or supervisors’ committee as per its Articles of Association. In such cases, the company may no longer need to set up separate supervisors’ committees or appoint supervisors.

    However, the board of directors of an LLC having more than 300 employees shall have employees’ representative(s) elected through the democratic process unless the same LLC has a Supervisors’ Committee in place and such Committee already has the employees’ representative(s).

    Egypt, with its rich history and vibrant economy, presents promising opportunities for foreign investors looking to expand their business horizons. However, entering a new market can be a complex endeavor, and understanding the intricacies of doing business in Egypt is essential for success. In this article, we will delve deeper into the various aspects of establishing and managing a company in Egypt, providing valuable insights and guidance for prospective investors.

    Conducting Market Research

    Before venturing into any new market, conducting thorough market research is crucial. Egypt is a diverse country with a dynamic market, and understanding the local nuances, consumer behavior, and market trends is essential. It is advisable for foreign investors to consider setting up an initial representative office, allowing them to conduct in-depth market research without fully committing to commercial operations. A representative office can employ local staff to gather market insights and report back to the parent company, enabling informed decision-making for future business initiatives. This representative office may not engage in any commercial activities and may not invoice. Hence, it is not subject to any corporate tax but will be subject to salary tax for its employees and withholding tax.

    Choosing the Right Business Structure

    When establishing a legal entity in Egypt, foreign investors have several options to choose from. The most common business structures for foreign direct investment are a One Person Company (OPC), Limited Liability Companies (LLCs) and Joint Stock Companies (SAEs) as 100% of the shares can be wholly owned by foreigners. The choice of structure depends on the nature of the business and the specific objectives of the foreign company. Alternatively, for specific projects or contracts with defined purposes, establishing a branch office can be a viable option.

    The Company Establishment Process

    Setting up a company in Egypt involves navigating through certain legal procedures. The Egyptian government has implemented measures to facilitate foreign investments and ensure a favorable business environment. Foreign investors can own 100% of their businesses in most sectors, and the minimum requirement for establishing a company is typically having at least one shareholder. In the case of LLCs, a minimum of two partners is required while in case of SAEs a minimum of 3 shareholders is required. It is important to note that a foreign director can be appointed, except for activities that require an import license, which necessitates an Egyptian partner and director.

    Import and Distribution Considerations

    For foreign entities planning to import and distribute goods in Egypt, specific considerations come into play. Obtaining an import license requires meeting certain criteria, including demonstrating a minimum turnover, meeting nominal capital criteria, and having an Egyptian partner holding at least 51% of the shares. These regulations aim to ensure local participation and collaboration in import-oriented activities.

    Timelines and Administrative Processes

    Understanding the timelines and administrative processes involved in establishing a company in Egypt is crucial for efficient planning.
    While, foreign direct investors may establish the legal entity in one working day through GAFI as the commercial registry and tax card will be issued on the same day. However, the process may take up to six months, it can vary depending on various factors as follows:

    • a significant factor is the legalization of documents, which may require coordination with embassies and consulates for the legalization of documents such as power of attorney, corporate documents, and their translated versions;
    • opening a bank account for the company's capital needs to deliver all corporate documents related to the ultimate business owner (UBO) which may potentially cause delays.

    Efficient Branch or Subsidiary Management

    Once the company is operational, efficient branch management is vital for sustained success  as clearly defining the director’s powers through the bylaws or separate agreements is recommended. Regular communication with local management, employing competent accountants, and maintaining oversight of operations are essential to maintain control and address any issues promptly.

    Joint Ventures and Board Representation

    In cases where foreign investors collaborate with local partners through joint ventures, establishing a board of directors plays a crucial role. The board oversees company management and decision-making processes. It is advisable for foreign shareholders to regulate their relations with their local partners by virtue of a shareholder agreement to ensure their representation on the board, allowing them to actively participate and safeguard their interests. Maintaining open lines of communication and regular meetings are fundamental for staying informed about the company’s performance.

    Conclusion

    Expanding into the Egyptian market holds immense potential for foreign investors. However, navigating the business landscape requires careful planning, market research, and adherence to legal procedures. By understanding the nuances of establishing and managing a company in Egypt, foreign investors can unlock new business opportunities and forge successful ventures in this dynamic market. With the right approach and strategic decisions, Egypt can prove to be a rewarding destination for those seeking growth and expansion

    Would you like to know more?

    Watch the video of this Episode here.

    Aceptar el cargo de administrador en una sociedad anónima o limitada cada vez entraña mayores riesgos; El Tribunal Supremo, sentencia a sentencia, va perfilando e interpretando los preceptos de la Ley de Sociedades de Capital (LSC) con un enfoque cada vez más riguroso y exigente a la hora de delimitar el marco de la responsabilidad de los administradores.

    Desde luego, no es reciente en absoluto el contenido del artículo 43.1 b) de la Ley General Tributaria cuando sienta las bases de la responsabilidad subsidiaria de los administradores por las deudas frente a la Agencia Tributaria:

    Serán responsables subsidiarios de la deuda tributaria las siguientes personas o entidades:

    b) Los administradores de hecho o de derecho de aquellas personas jurídicas que hayan cesado en sus actividades, por las obligaciones tributarias devengadas de éstas que se encuentren pendientes en el momento del cese, siempre que no hubieran hecho lo necesario para su pago o hubieren adoptado acuerdos o tomado medidas causantes del impago.

    Pudiera  deducirse de la lectura del precepto transcrito que se establecía la responsabilidad subsidiaria de los administradores quienes, al tiempo del cese de la actividad social, ocuparan efectivamente el tal cargo de administrador; pero que la responsabilidad no alcanzaría a aquellos administradores que lo hubieran sido en el pasado, pero no lo fueran ya, en el momento en el que la sociedad hubiera cesado de actuar en el tráfico jurídico y económico por las deudas tributarias pendientes en tal momento.

    Pues bien, el Tribunal Supremo (Sala Tercera) en su reciente sentencia de 7 de marzo de 2023, remacha un clavo más en el ataúd de la responsabilidad de los administradores.

    El caso objeto de la sentencia consistía en determinar la responsabilidad subsidiaria frente a la Agencia Tributaria de un administrador con el cargo caducado (por el transcurso del plazo estatutario) que había convocado una junta general para el nombramiento de nuevos integrantes del órgano de administración.

    Pues bien, el Tribunal Supremo entiende (y sienta doctrina a efectos casacionales) que el administrador con el cargo caducado no “agota” sus obligaciones con la convocatoria de la junta en cuestión, sino que además debió, al amparo del art. 365 LSC convocar otra junta general para adoptar el acuerdo de instar el concurso o el acuerdo de disolución por concurrir las causas del art. 363 a) (cese de actividad) y d) (paralización de los órganos sociales) así como en su caso la solicitud de disolución judicial en su condición de interesado (art. 366.1 LSC).

    La conducta reprochable según el Tribunal Supremo (que desencadena la responsabilidad subsidiaria) consiste en que, frente al cese de la actividad de la sociedad, lo único que hizo fue convocar junta para el nombramiento de nuevos administradores siendo que por lo tanto “no realizó los actos necesarios para poder afrontar el pago de las deudas tributarias concurriendo así el elemento subjetivo necesario para poder declarar su responsabilidad”.

    La sentencia insiste en que la condición de administrador no se pierde con al agotamiento del mandato por caducidad del cargo toda vez que las obligaciones mercantiles y fiscales persisten; y que no basta la convocatoria de junta para nombrar administradores a los efectos de entender que tal junta, una vez celebrada, priva al administrador con cargo caducado de la condición de tal, cuando concurre una causa de disolución que habría obligado a convocar otra junta con otro objeto y otro orden del día para acordar la disolución de la sociedad inactiva.

    Pero lo notable y llamativo del caso es que la junta convocada por el administrador (con cargo caducado) para el nombramiento de nuevos administradores se celebró en junio de 2012, los acuerdos se elevaron a público el 1 de marzo de 2013, se inscribieron en el registro mercantil en julio del mismo año y la sentencia afirma expresamente que el cese de la actividad societaria se produjo en abril de 2013 (es decir cuando ya se había celebrado la junta para el nombramiento de nuevos administradores, junio 2012 y cuando ya se había elevado a público el nombramiento de los nuevos administradores, 1 de marzo de 2013).

    Textualmente reza la sentencia:

    “Atendida la fecha en que el cese de la actividad empresarial fue establecido por la sentencia a quo, abril 2013, aun debía considerarse como administrador de la sociedad al recurrente en tal carácter debe reputarse negligente su conducta a efectos de incardinación en la causa de responsabilidad subsidiaria del art 43.1.b) LGT”

    Pese al contenido del art. 222 LSC y 145.1 RRM que establecen que el nombramiento de  administradores caducará, entre otros supuestos, cuando venció el plazo se haya celebrado la junta (o transcurrido el plazo para su celebración) que haya de resolver sobre la aprobación de las cuentas del ejercicio anterior, el Tribunal Supremo insiste que, caducado o no el cargo, dicha caducidad no agota ni extingue sus responsabilidades como administrador que deben interpretarse extensivamente: no le basta con convocar junta para el nombramiento de nuevos administradores sino que debe actuar a los efectos de disolver la sociedad o instar el concurso, como si el cargo tuviera plena y completa vigencia.

    De modo que, tras esta contundente sentencia, los administradores societarios, en caso de cese de la actividad, aunque su cargo haya caducado, deben saber que su responsabilidad (y en concreto la subsidiaria por deudas fiscales) solo se liberará si convocan junta para disolver la sociedad, en caso de que la junta no adopte dicho acuerdo, si solicitan al juzgado la disolución judicial o si presentan concurso voluntario.

    En suma, serán responsables si no actúan igual que si su cargo siguiera plenamente en vigor. Como decíamos arriba, hay que pensarse muy mucho aceptar cargos de administrador de sociedades mercantiles.

    Where is it more suitable to set up a new limited liability company in Europe?

    I will deal in this article with two countries I know well (Spain and The Netherlands) and focus on the minimum capital requested and the online incorporation of a limited liability company, sharing some thoughts and my takeaways.

    Spain: the “Create and Grow Law”

    In Spain, the Business Creation and Growth Law 18/2022, of September 28, 2022 (related to aspects of incorporation of companies), known as the “Create and Grow Law”, was approved last September within the framework of the Recovery, Transformation and Resilience Plan of the Spanish government. This plan channels European funds to alleviate the consequences of the Covid-19 crisis. This law is an initiative that reflects this flexibility and, as its explanatory statement indicates, aims to encourage the creation and growth of companies, in order to contribute to the economic growth of the country and its long-term resilience. Spain thus aligns itself with other neighboring countries, where there is no minimum capital to set up a company of this type.

    Is this new law interesting for foreign investors or companies looking to establish themselves in Spain?

    It is certainly very interesting. The fact that the Spanish legislator abandons this reference figure of 3,000 euros is very favorable for medium-large companies willing to have a permanent establishment in Spain Nevertheless, as long as the capital does not reach the figure of €3,000, the following rules will be applied, which are intended to protect the interests of creditors or third parties that contract with the company:  (i) 20% of the profit must be allocated to the legal reserve until said reserve together with the social capital reach the figure of €3,000 (the legislator seeks that the SLs constituted in this way do not remain «undercapitalized»), and (ii) as a safeguard clause for creditors of the company, in the event of voluntary or forced liquidation of the company, if the company’s assets are insufficient to meet its obligations of payment, the partners will be jointly and severally liable for the difference between the subscribed capital and the figure of 3,000 euros.

    Online incorporation of a company in Spain

    The «CIRCE system» (procedure dependent on the Ministry of Industry, Commerce and Tourism that allows the start of the process of creating companies «over the Internet» ) entails an electronic procedure through agreements and communications with all the organizations and administrations that intervene in the process of incorporating companies.

    The entrepreneur will only have to complete the Single Electronic Document (DUE) that includes a multitude of forms and CIRCE will automatically carry out all the necessary procedures to establish the company, communicating with all the organizations involved (Tax Agency, Social Security, Mercantile Registry, Notary, etc.). There is an obligation to review and sign the DUE before sending it. This system is not active yet, but it is expected that it will be in place when other complementary laws that support this digital process are approved by the Spanish Legislator which is necessary for the well-functioning of the system.

    The Netherlands: The Flex BV law

    The Flex BV law came into force on October 4, 2011. This law has given a lot of flexibility to the incorporation of new limited liability companies which has been very favorable for international companies working with different product lines, allowing to have one company for every product or service offered.

    The Flex BV law has, among others, the following characteristics:

    • the creation of a Limited Liability Company is flexible, easy to establish and without many costs;
    • it only requires one shareholder who must be registered with the Dutch Trade Register. The minimum share capital for setting it up is 1 euro. The liability of the shareholder is limited to the amount of money he has invested in the company. Being a limited liability company, the BV is liable for any debts, not the director or shareholder as private individuals, except in case of mismanagement or fraud. The company requires at least one director, and the shareholders can fill this position. The company registration procedure is quite fast due to the minimum documentation required.

    Online incorporation of a company in the Netherlands

     In the case of the Netherlands, in the Explanatory Memorandum of the bill implementing the Directive (EU) 2019/1151 of the European Parliament and of the Council of 20 June 2019 amending Directive (EU) 2017/1132 with regard to the use of digital instruments, it is proposed that incorporation of a BV electronically is only possible if payment on the shares takes place in cash, in order to initially limit the online formation of companies to simple situations. If it turns out that online formation works well, it can be considered whether it is useful to extend this possibility to situations in which contributions are made in a manner other than in money. Incorporation by natural persons using a model deed of incorporation must be possible within five working days from the date on which the notary has received all documents and information from the applicant or the date of payment of the share capital.

    The incorporation of a BV digitally is postponed to the summer of 2023 since the House Committee for Justice and Security has decided that the act must be discussed in plenary.

    The so called DOBV-system (Digital establishment of a BV), will entail a change in a number of work processes in the notaries in The Netherlands but for the Chamber of Commerce, no major changes will follow because the civil-law notary will supply the registration documents digitally to the Chamber of Commerce. Consequences the civil-law notary is the one who will have to offer a certain digital form of service, which citizens and companies will be able to use.

    What positive and negative aspects can be highlighted?

    Positives aspects:

    • it is very positive that through this new standard, many investors or international companies from both countries will be encouraged to create new SPVs, as the minimum capital is considered by many companies as a “barrier to entry”;
    • it will expedite the procedures for incorporating companies, essential vehicles for channeling the economic activities of businessmen in their transcendental task of creating wealth and employment, without notary and registration costs;
    • it will create a healthy competition between all the Notaries in Spain and between the notaries of Spain and the Netherlands. The Dutch notary bond expects that a further digitization of the notarial process could be achieved first in the real estate chain and subsequently also in business practice. It is important that the business market may be capable to respond quickly to this demand;
    • the share capital of a company will serve its partners to have the necessary funds with which to start their project, acquire the goods and resources necessary to start the economic activity and consolidate a long-term project (such as, for example, to buy the goods and services necessary to start up activities or to hire employees);
    • it creates business growth through financing alternatives to bank financing, such as crowdfunding or participatory financing, collective investment and venture capital.

    Negatives aspects:

    • to search financing externally to start the company’s activity, which will also surely have a cost (in the form of loans, for example, with their corresponding interest rate). Additionally, in the short or medium term the company must have a capital increase to normalize their patrimonial situation and solve this evident «underfinancing» of own resources, with which, this will also suppose an additional cost in the form of notary and registry fees that must be faced in the medium or long term after the incorporation;
    • the possibility of establishing a limited liability company with only 1 euro of share capital can facilitate the creation of fictitious legal entities by people who do not wish to carry out a real economic activity, but only use the companies as a suitable instrument for the development of legal or illegal activities;
    • additionally, it also implies a clear risk for the legal certainty and the responsibility of those companies in large contracts with third parties, leaving a limit to their minimum liability while their businesses are millionaires;
    • the online constitution system can be rigid and can also generate management and processing problems if the interested parties have not been properly advised and guided by the professionals involved before arriving at the Notary. Additionally, CIRCE’s telematic systems must function properly in order to correctly serve all those interested in the constitution of a capital company;
    • there are new requirements for companies related to anti-laundry controls, for instance, to include relevant information on invoices and payments to suppliers in their annual reports and on their corporate website.

    Conclusions

    Although it may apparently imply a boom in the creation of limited liability companies due to the ease of incorporation, there is still much to be done at the level of corporate law at the national level and collaboration between notaries of both countries.

    Spain is, with the entering into force of the Law Creation and Growth, considered among the most advanced countries in facilitating the creation of companies, reducing regulatory obstacles and favoring business restructuring and viability. The final decision will depend on the specific needs of the business, access to finance and tax regime, among others.

    Additionally, to the incorporation flexibilities, we must not forget a couple of important aspects for the shareholders and directors to be aware of:

    • a company needs to be managed as well and we need to be aware of the treasury, labor or other obligations of the companies already incorporated, even if they are non-active, they must continue to publish the annual accounts and complying with all governance requirements and formal public register notifications;
    • the responsibility of the shareholders is also important to consider. A shareholder who has direct involvement in the management, may face liability in case of bankruptcy, also in the country where the subsidiary is located. As mentioned above, in Spain, in the event of voluntary or forced liquidation of the company, if the company’s assets are insufficient to meet its obligations of payment, the partners will be jointly and severally liable for the difference between the subscribed capital and the figure of 3,000 euros;
    • the last important aspect when you are doing business mainly in Europe is to consider restructuring your business or consider other forms of incorporation of companies, depending of the business model that you have opted to, for instance the use of the Societas Europaea (SE) which has the possibility to set up a holding company or a joint subsidiary together and to transfer the seat of the company without winding up the entity. The disadvantage is that you need €120,000 starting capital to set up and to have a minimum of 2 companies governed by the laws of different Member States. Other forms of incorporation are the European Cooperative Society (SCE) and the European Economic Interest Grouping (EEIG).

    If you need additional information or you are planning to incorporate a limited liability company in Spain or in The Netherlands, get in touch to know more about your options and the right corporate advice for your business.

    Under what conditions can company officers be dismissed in France?

    This depends on the form of the company.

    Let us take the most common forms of commercial companies in France.

    The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

    In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed «ad nutum», i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

    In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed «ad nutum», but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

    A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

    It concerns simplified joint stock companies («SAS»), the most successful company form in France: one in two newly created companies is an SAS.

    In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

    The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

    In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

    A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

    A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

    The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

    Our recommendation

    One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

    What do the mythical Vega Sicilia wines, El Cid Campeador and the abuse of rights have in common? If you read on, you will find out.

    The Vega Sicilia Único was for many years considered the best, the most prestigious and the most expensive Spanish wine.

    The abuse of rights is a legal institute that allows the defense of situations in which the opponent acts with (apparent and formal) subjection to the law, but making a spurious use of the law with the intention of harming the injured party.

    Last October, the Supreme Court handed down a judgment declaring certain agreements adopted by Bodegas Vega Sicilia S.A., producer of Vega Sicilia Único wine, to be null and void based on the principle of abuse of rights.

    The judgment in question is doubly interesting.

    Firstly, because it highlights the endemic evil of Spanish justice: it declares the nullity of resolutions adopted at a meeting held in March 2013, which were the subject of a lawsuit in February 2014, with a first instance ruling that same year, appealed to the Provincial Court of Valladolid who issued its judgement on 2019  and  four years later the Supreme Court has put an end to the lawsuit: nine years after the shareholders meeting whose resolutions were the subject of the challenge.

    As the Constitutional Court very recently reiterated in its ruling dated last October, «judicial slowness has no place in the Magna Carta». But, although it has no place, or should not have a place, our courts continue to insist that it does and, as an example, this case that we are commenting on is, unfortunately, no exception.

    Beyond the barbarity of a litigant having to wait for nine years to find a final solution to his claim, the judgment we are commenting on is of interest for other reasons.

    The plaintiffs sought the nullity of certain resolutions adopted at a shareholders’ meeting, basing their claim on the fact that these resolutions constituted an abuse of rights since, through them, the shareholders of Bodegas Vega Sicilia S.A. sought to take control of Bodegas Vega Sicilia away from the company of which the plaintiffs were in turn shareholders.

    The legislation in force at the time the meeting was held (prior to the 2014 reform) established that «resolutions that are contrary to the law, oppose the articles of association or harm the corporate interest to the benefit of one or more shareholders or third parties» could be challenged, adding that those contrary to the law would be null and void and the remaining resolutions could be annulled.

    Following the 2014 reform, article 204 considers that «corporate resolutions that are contrary to the law, are contrary to the articles of association or the regulations of the company meeting or harm the corporate interest to the benefit of one or more shareholders or third parties» can be challenged and no longer distinguishes between null and voidable resolutions; although it partially recovers the concept of radical nullity in the case of resolutions contrary to public order by establishing that in such cases the action does not have a statute of limitations or lapse.

    But both with the regulations prior to the reform and with those currently in force, the controversy resolved by the ruling we are commenting on is the same: when the legislator requires the agreement to be contrary to «law» in order to be able to challenge it, does he mean that it contravenes a precept of the Capital Companies Act (LSC), or can it be considered a requirement for challengeability if it contravenes any other positive precept of any other legal text? And finally, if the resolution in question is classified as constituting an «abuse of rights», can such a situation be considered as «contrary to law» for the purposes of the application of article 204 LSC?

    The Chamber reminds us of the requirements for the concurrence of abuse of rights in corporate matters:

    • formal or outwardly correct use of a right
    • causing damage to an interest not protected by a specific legal prerogative, and
    • the immorality or antisociality (sic) of that conduct manifested subjectively (intention to damage or absence of legitimate interest) or objectively (abnormal exercise of the right contrary to the economic and social purposes of the same).

    And it then refers to the numerous occasions on which its case law has reiterated that, although the regulation on challenging corporate resolutions does not expressly mention abuse of rights, this is no obstacle to annulling resolutions in such cases, since according to article 7 of the Civil Code (which prohibits abuse of rights), they must be deemed as contrary to the law.

    The interest and peculiarity of this case lies in the fact that the contested resolutions were neither adopted in the interests of the company nor did they cause any harm to it, since the alleged harm was caused to a third party formally outside the company.

    And on these premises, the Supreme Court reiterates and insists that the expression «contrary to the law» in article 204 LSC must be understood as «contrary to the legal system», which includes those agreements adopted in fraud of the law, in bad faith or with abuse of rights, all of which are included and regulated in the Preliminary Title of the Civil Code. For these reasons, the judgment of the Provincial Court upholds the claim and declares the nullity of the contested agreements.

    And what has El Cid got to do with all this? Is it a typo? No, not at all. Legend has it (invented, it seems, by a monk of the monastery of San Pedro de Cardeña to attract visitors) that Rodrigo Diaz de Vivar won a battle on the walls of Valencia against the Almoravids, after his death, saddling his corpse on his legendary horse Babieca.

    It turns out that his almost fellow countryman, David Alvarez, buyer of the winery in the 1980s, the latter from León, the former from Burgos, but both old Castilians, also won his last battle after his death; David Alvarez was, together with one of his daughters, a plaintiff against the agreements of Bodegas Vega Sicilia and died in 2015; seven years later the Supreme Court has given him the right against the Almogavars, in this case, his own children.

    And two lessons: first, justice is not justice if it is slow, a phrase apocryphally attributed to Seneca; it was not in this case for David Alvarez. Secondly, the abuse of rights is not only an «in extremis» recourse when one does not find frank legal support for one’s claims; on the contrary, it is, on many occasions, the solution.

    ¿Qué tiene que hacer un administrador para dimitir? ¿Basta con su renuncia comunicada fehacientemente a la sociedad? ¿O tiene que convocar Junta para que se nombre sustituto? ¿O incluso tiene que hacer algo más?

    Una reciente Sentencia del Tribunal Supremo de fecha 12 de julio de 2022 (STS 561/2022) ha resuelto un interesante caso relacionado con la dimisión de un administrador único de una SRL confirmando que dimitir no es tan sencillo como pudiera parecer.

    El TS establece que para que un administrador único pueda dimitir no solo debe acreditar que ha convocado Junta de Socios para que pueda nombrarse un sustituto (hasta ahí, doctrina pacífica) sino que debe hacer todo lo necesario en ese periodo de interinidad (entre la dimisión y la celebración de la Junta) para atender las necesidades de gestion y representación en evitación de daños a la sociedad en cuestión. Incluso, y este es el caso debatido en la STS, requerir la presencia de notario en la Junta si así se lo exigen socios que representen al menos un 5% del capital social.

    Se trataba de una sociedad con dos socios, el mayoritario con el 75% del capital y el minoritario (y administrador único) con el 25%. El minoritario y administrador único renuncia a su cargo de administrador y convoca Junta para nombramiento de sustituto. El socio mayoritario le exige que requiera la presencia de notario en la Junta; el administrador dimisionario responde que, habiendo dimitido, con la convocatoria de Junta se agotaban sus obligaciones por lo que no le correspondía requerir la exigida presencia de notario. El día previsto para la celebración de la Junta se personó el socio mayoritario, pero no el administrador dimisionario y socio minoritario ni el notario, por lo que no se celebró Junta.

    El administrador presentó en el Registro mercantil la escritura de renuncia y el socio mayoritario a su vez presentó un escrito denunciando el hecho de no haber solicitado la presencia notarial en la Junta el administrador dimisionario, pese a habérsele requerido para ello.

    A partir de ahí, se encadenaron resoluciones con contenidos bien diferentes. El Registrador mercantil, suspendió la inscripción de la renuncia al cargo; la DGRN revocó el criterio del Registrador y resolvió que la renuncia debía inscribirse; el Juzgado de lo Mercantil de Barcelona confirmó el criterio de la DGRN y también lo hizo la Audiencia Provincial. Pero el Tribunal Supremo ha dado finalmente la razón al Registrador Mercantil y se la ha quitado a todos los demás:  a la DGRN, al juzgado de lo mercantil y a la Audiencia Provincial.

    Las resoluciones favorables a la inscripción de la renuncia consideran, en primer lugar, que el administrador saliente agota sus responsabilidades convocando Junta y a partir de ahí nada más puede exigírsele; y en segundo lugar que el Registrador debe calificar examinando únicamente documentos con acceso al registro y no considerando la “realidad extra registral” como lo fue el escrito presentado por el socio mayoritario quejándose de la actuación del administrador.

    El Tribunal Supremo discrepa, y defiende que la ausencia de notario solicitada válidamente, vicia de ineficacia todos los acuerdos de Junta; y a partir de esa premisa, considera “lógico” que en un caso como el que era objeto de la sentencia, el administrador no solo debía convocar la Junta sino requerir la presencia de notario ya que, de lo contrario, los acuerdos de la Junta devendrían inválidos e ineficaces.

    Y respecto a la segunda cuestión controvertida, interpreta que el Registrador, aunque sea excepcional, puede tener en cuenta circunstancias o hechos ciertos de los que tenga “constancia registral” aunque no consten en virtud de documentos presentados para su inscripción, pero si estén relacionados con el documento “inscribible”.

    En suma, un caso interesante que pone de manifiesto que dimitir como Administrador no es ni mucho menos tan sencillo y que como regla general, aunque no haya ningún precepto que así lo exija expresamente, el administrador dimisionario debe no solo convocar la Junta sino mantenerse interinamente en el cargo y atender sus obligaciones hasta la celebración de la misma; a partir de ahí, si la Junta no se celebra por inasistencia de los socios o si los socios no nombran un administrador sustituto, ya nada más le es exigible al dimisionario.

    Yang Jun

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