NOTARIAL AND REGISTRY LEGAL CONTROL OF OPERATIONS WITH ESSENTIAL ASSETS
The Resolution of the General Directorate of Legal Security and Public Faith (hereinafter, “DGSJFP”) of November 6, 2024, addressed a case related to the denial of registration of a deed of sale in the Property Registry. The conflict arose from the refusal of the Property Registrar of Madrid No. 4 to register a deed, previously authorized by a notary, in which a limited liability company transferred a property to a natural person. The refusal was based on the absence of a statement regarding the non-essential nature of the transferred asset and the lack of an agreement from the general shareholders’ meeting of the transferring company in accordance with Article 160.f) of the Capital Companies Act (hereinafter, “LSC”).
In accordance with Article 160.f) of the LSC, it is the responsibility of the general meeting to deliberate and decide on the acquisition, disposal, or contribution of essential assets. This provision adds a presumption of the essential nature of assets whose value exceeds twenty-five percent of the total value of the assets on the company’s balance sheet. In this case, the registrar argued that insufficient data had been provided to determine the non-essential nature of the asset, considering that the transfer value is 198,000 euros compared to a share capital of 3,010 euros. However, the appealing notary argued that the transfer of the property is an act inherent to the corporate purpose of said company, dedicated to the buying and selling of real estate, and, therefore, the registration should not be denied as approval from the general meeting would not be required.
According to the DGSJFP, the essential nature of an asset is an indeterminate legal concept that must be analyzed in light of the specific circumstances of each case. To attempt to specify the term, the DGSJFP first turns to the Preamble of Law 31/2014, of December 3, which incorporated Article 160.f) into the LSC. In this Preamble, the legislator explains that the expansion of the general meeting’s powers originates from the intention to reserve for its approval those operations that could, due to their relevance, produce effects similar to structural modifications.
Furthermore, the DGSJFP refers to the Supreme Court Judgment 1045/2023, of June 27, to delve into the jurisprudential interpretation of the provision. The Supreme Court considers that to determine whether an agreement involves operations on essential assets, it must be analyzed whether the operation generates effects equivalent to those of the general meeting’s competencies and if it significantly affects the legal and economic position of the shareholders or the structure and activity of the company. In this way, Article 160.f) of the LSC would be positivizing the jurisprudential doctrine on the “implicit or unwritten competencies” of the general meeting, establishing that it must decide on operations that, although they can be managed by the administrators, generate effects equivalent to structural or statutory modifications, substantially affecting the legal or economic structure of the company or the position of the shareholders. In conclusion, acts that form part of the ordinary course of social activity should not require prior approval from the general meeting, unless these put the viability of the company at risk or could significantly modify its development.
Regarding notarial and registry control, the DGSJFP considers that the essential nature of assets escapes the appreciation of the notary or the registrar, except in manifest cases (e.g., the sale of an asset necessary to carry out the corporate purpose). However, it also points out that the notary must ensure the legality of the acts they authorize, deploying the utmost diligence in assessing the adequacy of the business to legality; and it is here where the requirement of a certification or statement from the company representative indicating that the operation is not carried out on essential assets of the company could make sense in those cases where the essentiality of the asset can be notoriously appreciated.
On the other hand, the Registry must guarantee legal certainty, providing protective effectiveness for the parties. This is why the titles that access the Property Registry must be valid and apparently perfect. In this sense, the registrar’s task is to prevent flawed acts from accessing the Registry, verifying that these are not contrary to law or public order. However, it is not required for the grantors to declare the non-existence of invalidating defects. The registrar must verify that the content of the documents does not contravene mandatory norms or public order, and only in cases where regulations require it can an additional declaration be requested.
Although Article 160.f) of the LSC considers that the transfer of essential assets exceeds the competence of the administrators, it does not establish as a requirement to carry out an operation involving essential assets the provision of a certificate related to the essentiality of said assets, as other precepts explicitly require (e.g., the requirement of justification of non-existence of lease of the sold property established in Articles 25.5 of the Urban Leases Law and 11.1 of the Rural Leases Law), given that third parties in good faith would ultimately be protected by Article 234.2 of the LSC, which protects those who have contracted with the company even when the company’s representative has exceeded their functions when entering into the contract.
Therefore, the Resolution subject to our analysis concludes by revoking the registrar’s negative qualification, considering that the sale of the property constitutes an act of ordinary management included in the corporate purpose of the selling company. This act does not transcend the scope of the administrative body’s competencies as it does not generate effects equivalent to a structural modification that requires the intervention of the general meeting. Likewise, the DGSJFP reminds us that both notaries and registrars must guarantee the effectiveness of titles and registry publicity, but without imposing additional requirements not legally foreseen. With this criterion, it seeks to avoid interpretations that hinder the agility of legal traffic and that may generate insecurity for economic operators.