• By Daniel ORGUÉ
• 08-09-2017

Avoid problems: Check your Company's Bylaw

The Spanish mercantile legislation establishes that the way to regulate the relations between the partners of a mercantile society is through the establishment of a series of norms of operation and organization that are agreed in a legal document denominated "The Company's Bylaw”. With this document, incorporated in the articles of incorporation of the company, what is intended is to establish what the rules of the game will govern relations between the partners and between them and the company itself, as well as who and in what way represent the company against third parties. 

Generally, when a society is formed between several friends or acquaintances - who get along well - the Statutes are not given too much importance, and in the end, many times, by good faith or initial will, one chooses to use the Statutes type (which even occasionally facilitates the notary's own) becoming the Statutes a mere bureaucratic procedure required by the Law and that without them, you can not register the same in the Mercantile Registry. The partners, far from having previously regulated how they are going to relate to each other, against third parties, and how the decisions of the company will be adopted, are the great ignorant of their own internal rules and that tomorrow may be important consequences.

The conflict.

Now, in the whole life of society there will be no unanimous understanding or consensus among all partners. At some point it is possible that there is a conflict between the partners: a proposal to move the company's domicile, an attempt to sell shares to a third party that we do not know, the professional disengagement of any of the Partners, the decision not to distribute dividends, capital increases with the intention of diluting the Minority Partners, etc ... and it will be at that moment when the law states that the answer must be found in the bylaws.

In these cases, the first thing that you will have to take into account in order to assess your options is the content of the Bylaws, and it is the first thing that your advisor will ask you when you explain your problem, and by experience, it's late.

It's late because you no longer get along well and the Statutes are the typical open text that offers all the possibilities of the world and you can not change and you are completely sold, and the only way to avoid unwanted consequences is confrontation.

Anticipate and revise your Statutes.

Therefore, we recommend that if you have not yet encountered any problems and you and your partners are still doing well, it is the ideal time to review the statutes of your company and introduce those essential rules of game that give you the peace of mind you are looking for and that be useful to avoid unnecessary conflicts.

Some examples of modifications that can help you avoid conflict in your society are:

- Establish a specific way of managing the company, alter the regime for the transfer of shareholdings
- Restrict changes in registered office
- Establish strengthened majorities according to what type of agreements of the General Meeting, etc. 

You are still in time to review and amend the bylaws, in a very economical way and, if done properly, will avoid not only costly lawsuits between partners, but more important if possible, personal wear and tear.

Pact of Members.

Notwithstanding this, if all these modifications that you intend to make you want to have confidentiality, or if any of these modifications you think that maybe they will not register them in the Mercantile Registry, or simply want to extend them in relation to the established in the Statutes, you always have the possibility to formalize a Pact of Partners.

Conclusion.

Having clear and consensual rules of the game between all Partners can mean the difference between the survival or the extinction of your business. Anticipate conflict and regulate how to avoid it.

Do you have any question? Contact with us