Calling of meeting of shareholders, abuse of rights, resistance test

Once again: despite compliance with the formal requirements of a calling of meeting of shareholders, company resolutions may be unenforceable if there is an abuse of rights in said call

In November 2017, a private limited company with three shareholders held, in a climate of confrontation, a general meeting at which, among other things, a capital increase with the creation of new shares was agreed. Two of the shareholders (together holding 60% of the capital) attended the meeting but not the third, who – moreover – did not acquire the shares he was entitled to in the increase, so that his shareholding shrunk to 13.79%.

This third shareholder contested all the resolutions passed at the above meeting. He argued that the meeting had been called in bad faith and engaging in abuse of rights (Art. 7 of the Civil Code) as the procedure for calling meetings provided for in the company’s articles of association (publication of notices in the Official Journal of the Registry of Companies [BORME] and in one of the most widely circulated newspapers in the province of the registered office address) had been used in this case, deviating unexpectedly from the course routinely followed beforehand (hitherto such calls had been made personally, on an informal basis, and then the meetings were held with all shareholders present).

The contest claim succeeded in the court of first instance and in the court of appeal. The defendant company then lodged an ‘extraordinary’ appeal for breach of procedure and a ‘cassation’ appeal, which were rejected by the Supreme Court in Judgment no. 282/2025 of 20 February (ECLI:ES:TS:2025:622). In particular, and with regard to the second appeal, the following thoughts of the Supreme Court are worth noting:

(a) In order to conclude that there has been an abuse of rights, “a factual basis that establishes the objective (abnormal conduct) and subjective (intention to harm or absence of legitimate interest) circumstances” must apply. In the case in question, there was a significant change in the way in which shareholders’ meetings had previously been called, as the contested meeting was called in strict accordance with the procedure provided for in the articles of association, which had never been used before. Thus, the company’s governing body abruptly modified the method previously used to call meetings of shareholders, without notifying the claimant minority shareholder. And it did so with the intention that the claimant would not find out about the meeting and would therefore be unable to attend the same. As a result, the contesting shareholder was unable to acquire the new shares created as a result of the capital-increase resolution and his stake in the company was considerably diluted.

(b) When the general meeting is not assembled with all shareholders present (in plenary session), it must be convened in the manner provided by law or the articles of association. In principle, therefore, a call in accordance with the company’s articles of association should be considered valid. However, the Supreme Court recalled (following what was already stated in its Judgment no. 510/2017 of 20 September [ECLI:ES:TS:2017:3356]) that, even if a formally correct call had been made, the resolutions passed at the meeting would be unenforceable if it could be proven that the intention of the caller was that the notice of the meeting should go unnoticed, which could be deduced, for example, from the break with what, until then, would have been the generally followed pattern in the calling of meetings of shareholders (personal communication, notice of meeting in a specific newspaper…).

(c) What is relevant is not the diligence of the minority shareholder in relation to the means by which he could have learned of the publication of the call in the BORME and in a newspaper, but the circumstances in which the call was made and the consideration of the actions of the governing body, in order to determine whether it befits a model of conduct that can be considered honest and adequate. And, in the opinion of the Supreme Court, in the case in question, it could not be considered that the governing body’s actions had been appropriate because the established practice throughout the life of the company was abandoned and the shareholders were not warned of said abandonment and of the adoption for the future of the system provided for in the law and the articles of association (cf. Supreme Court Judgment no. 510/2017 of 20 September [ECLI:ES:TS:2017:3356]).

(d) The loss of the affectio societatis and the claimant’s disagreements with the other shareholders do not justify the governing body acting in contravention of the rules of good faith. Nor could it be understood that the intra-company conflict had given rise to the duty for the claimant shareholder to foresee or anticipate a course of action (in terms of calling the meeting) aimed specifically at preventing him from knowing about the future meeting.

(e) The appeal argued that, in any case, given the claimant’s minority shareholding, his presence at the meeting would not have prevented the passage of the resolution in the same terms in which it was in fact passed. The Supreme Court rejected this argument (which seemed to call for the application of the so-called ‘resistance test’) recalling that, in its legal configuration, the ‘resistance test’ (Art. 204(3)(d) LSC) refers only to cases in which the attendance and vote of a person who does not have the right to attend or vote is improperly allowed. It does not, therefore, cover cases in which a person who did have such a right has been improperly denied attendance, because in this case the participation of the affected shareholder in the deliberation is prevented from exerting influence on the shaping of the corporate will, regardless of the irrelevance or otherwise of his vote in achieving the majority required by law (cf. Judgment of the Supreme Court no. 697/2013 of 15 January 2014 [ECLI:ES:TS:2014:136]).

(f) Finally, the aforementioned judgement pointed out that, in the case in question, the harm suffered by the claimant shareholder did not only derive from being deprived of his rights to attend, to receive information and to vote at the general meeting, but also from the fact that, as he was unaware that the capital increase had been agreed at the meeting, he was unable to acquire the new shares to which he was entitled in the operation and his stake in the company was significantly diluted.