We all know that members play a vital role in boards and meetings, not only because of the information they receive, but also because they usually take part in decision-making process. That is why the co-optation procedure is considered as particularly important (at least in Corporations): As per article 224 of the Spanish Law of Corporations, if there were vacancies in the Board of Directors, during the term for which the directors were appointed, without there being alternates, this Board would be able to designate among Shareholders the persons who shall occupy them, until the next General Meeting is held.
GENERAL MEETING OF SHAREHOLDERS
This procedure is an exception of the general rule – which states that directors shall be appointed by the shareholders at the General Meeting- and an open door for changing business strategy. Not only is this an opportunity to reduce the decision-making power of the majority shareholders for a while, but also enables directors to choose the new shareholder that will become part of the Board of Directors; a new member that might strive to win over other members and persuade them to agree to its proposals.
The main reason why this investment of decision power is allowed has to do with time: the convening of the General Meeting of Shareholders is a long proceeding, and can also be costly. Bearing in mind that the maximum term between those meetings is just one year, changing the method of appointing administrators, allowing directors to select the new members of the Board among the shareholders (for a reasonably short time), is effective.
In view of the above, what are the requirements of the appointment of the new directors by way of co-optation?
- The company shall be a Coorporation.
- A vacancy with no alternates must occur amongst the Board of Directors. It should be noted that vacancies produced by expiration of the term of office cannot be covered by co-optation.
- The Board of Directors shall be deemed quorate. If the Board of Directors is incomplete, that is, more than half of its members are missing, it cannot appoint a director by co-optation, nor take any other decision (for more information, consult the RDGRN 31-VII-2014).
- The new director shall also be a shareholder (with the sole exception of listed companies)
- The new director shall accept his new position.
- Duration is limited to the announcement of the first General Meeting of Shareholders, but this Meeting is able to confirm the appointment.
- Registration requirements:
- Identification of the appointed director.
- Identification of the previous director.
- Term for which the previous director had been appointed.
- Date of the appointment of the new director.
- Number of existing vacancies before the appointment.
- Reason of the vacancy.