Majorities at general meetings of capital companies

Majorities at general meetings of capital companies

General meetings are fundamental bodies in the management and decision making of capital companies, such as limited liability companies (SL) and public limited companies (SA) in Spain. Through these meetings, the shareholders have the opportunity to decide on the management and direction of the company, approving key decisions that affect the future of the company. 

One of the most important aspects in this context is the majority regime that regulates how resolutions are adopted. 

General meetings are the main forum in which the members or shareholders of a capital company take important decisions. Among the matters dealt with at these meetings are the approval of the annual accounts, the distribution of profits, the amendment of the articles of association, the appointment and resignation of directors or even the dissolution and liquidation of the company.

Since the decisions taken at the meetings have a direct impact on the future of the company, it is essential that the decision-making process is conducted in a clear and transparent manner. To this end, the law and the articles of association establish different types of majorities that must be reached for resolutions to be valid.

The majority regime in capital companies

The majority regime establishes what percentage of the votes must be obtained at a meeting for a decision to be adopted. Depending on the nature of the resolution, majorities can be simple, qualified or absolute majorities. These types of majorities and how they are applied in capital companies are explained below.

1. Simple majority

A simple majority is the most common form of voting in capital companies. In this type of majority, the resolution is passed when the votes in favour outnumber the votes against. For a simple majority to be achieved, it is sufficient that more than half of the votes present at the meeting are in favour of the resolution. 

This type of majority is used for decisions that do not significantly change the structure of the company, e.g. approval of the annual accounts.

2. Qualified majority

The qualified majority, on the other hand, is more demanding. A higher percentage of votes in favour is required for a decision to be approved, which ensures that decisions that are important for the company have significant support from the shareholders. Under Spanish law, a qualified majority is generally set at two-thirds of the votes present or represented at the meeting, although the articles of association may set a higher threshold if the shareholders so decide.

This type of majority is necessary for decisions affecting the fundamental structure or functioning of the company, for example, the modification of the articles of association, or the merger or demerge of the company.

3. Absolute majority

An absolute majority is obtained when more than 50% of the total shares of the company vote in favour of the proposal, irrespective of the votes present at the meeting. This means that it must be supported by more than half of the share capital, not just the votes present at the meeting.

Although the law establishes certain majority thresholds for the adoption of resolutions, the articles of association of each limited liability company may specify different majorities for certain types of decisions. In fact, many shareholders choose to regulate their own majority rules in the articles of association in order to adapt them to the particularities of their partnership.

For example, the shareholders may decide that a 75% majority of the votes is required for the amendment of the articles of association instead of the 66% required by law. 

In capital companies, shareholders are entitled to vote according to the proportion of shares they hold in the company. In general, this vote is proportional to the share capital, although the articles of association may lay down special rules. In addition, companies may allow proxy voting by other shareholders, which can be useful in case a shareholder is unable to attend the meeting. In some situations, the articles of association may establish additional mechanisms, such as weighted voting, to give more weight to certain shareholders, or even create restrictions as to who is entitled to vote on certain decisions.

It is crucial that decisions taken at general meetings comply with the majority requirements established by law and the articles of association. Otherwise, resolutions adopted may be challenged by dissenting shareholders, which could lead to internal conflicts or even court proceedings affecting the stability of the company.

Understanding how simple, qualified and absolute majorities work, as well as the role of the Articles of Association in determining these majorities, is essential to ensure that decisions are taken in a valid and legal manner.