Differences between abusive agreements, harmful agreements, and agreements contrary to law and public policy.

Abusive agreements

An abusive agreement is defined as one that breaks the corporate principle of community of purpose and solidarity in the risks. It implies the benefit of some partners or managers at the expense of other partners. A majority agreement that: i) does not benefit the company; ii) benefits only a few persons; and iii) is adopted for profit.

In any case, certain clarifications should be made:

The agreement must directly and effectively harm the other partners. Other legitimate stakeholders, such as creditors, employees, etc., are excluded.

• The condition of partner must be interpreted broadly.  The injured party must be the owner of some part of the capital.
• he profit motive must affect the economic and patrimonial rights of the partner, excluding political rights. These patrimonial rights can be the right to participate in the company’s profits, the liquidation quota, etc.

The active subjects are the administrators and the partners who have availed themselves of a majority situation. This majority situation can occur within the meeting or in the administrative body.

For a doctrinal sector, the abusive act is consummated when the imposition of the agreement is achieved. Others consider that it will occur when the prejudice to the shareholder is produced. This can happen when the agreement is imposed or with its execution.

Imposition or exploitation of harmful resolutions adopted by fictitious majorities (Article 292 of the Criminal Code).

Under this precept two criminal conducts are contemplated:

• The imposition of the harmful agreement for the company or for the partners.
• Taking advantage of the adoption of such agreement, which implies obtaining some advantage. Involving, in turn, a detriment to the company or the partner.

There must be a manipulation in the process of formation of the corporate will.

A fictitious majority means that which is constructed by ways not appropriate to the law or the bylaws. That is, it is improperly altered:

1. the composition of the corporate bodies; or
2. the free decision of its members.

It is an apparent or feigned majority.

Si te ha interesado este artículo no dudes en leer:

Abuse of rights in the Shareholders’ Meetings

First of all, it is necessary to briefly mention what an “abuse of rights” is. This concept implies the exercise of a right. Said exercise of this right goes beyond the normal limits of said right. And that, therefore, is used in an immoral or antisocial way, causing harm.

The Penal Code lists several ways in which the fictitious majority is formed:

• Abuse of blank signature. A document with the signature of a partner or administrator with voting rights is assumed to exist and is used against his intention/interest. This document is used to integrate it in a majority with the purpose of adopting a harmful agreement.
• Improper attribution of voting rights to those who do not have them. This is:

o   To partners without voting rights;

o   To partners in arrears in the payment of passive dividends; or

§  To those who do not have sufficient shares to attend the meeting.

• Unlawful denial of the right to vote to those who have it recognized by law.
• Any similar unlawful or irregular means or procedure that is pre-configured to generate a fictitious majority. For example, the use of treasury stock (whose voting rights are suspended).

The parties involved will depend on the modality of commission of the crime:

• If we are dealing with the imposition of a harmful agreement, only the partners or the administrators can be active subjects.
• If it is a case of taking advantage of the harmful agreement, the active subject may be any person.

Agreements contrary to the Law

The reference to the Law must be considered in a material sense, equivalent to the legal system. They may be:

• Laws emanating from the General Parliament and the Autonomous Communities;
• Royal Decree-Laws and Legislative Decrees; and even
• The regulatory power emanating from the government or resolutions of autonomous bodies.

Notwithstanding the foregoing, its scope is restricted to those provisions that are mandatory or prohibitive in nature.

In the corporate sphere, resolutions are contrary to the Law relating to:

• The constitution and operation of the General Shareholders’ Meeting and the exercise of political rights.
• The approval of the Accounts; and
• Those relating to the modification of the bylaws.

Again, it is important to clarify:

• In the formal requirements of the meeting, non-essential formal infractions are excluded.
• The agenda of the ordinary meeting must necessarily include the censure of the corporate management. Its omission in the notice of meeting determines the nullity of the other resolutions that make up the minimum content of the meeting.

Agreements contrary to public order

Within the agreements contrary to the Law, as a qualified category, are those contrary to public order.

The difference with the previous ones lies in the general one-year challenge period.

The concept of public order is based especially on fundamental rights. That is, those that are recognized in the Constitution and in the basic principles of the social and economic order. Public order is made up of principles:

• Legal;
• Public and private;
• Political;
• Economic;
• Moral; and even
• Religious.

These principles are mandatory to preserve the social order. They are those that reflect the values of each of the institutions contemplated in the system.

If this article has been of interest, we also suggest you to read the following article published on our website: Are omnilateral parasocial agreements enforceable against the company?