The Secretary to the Board and Directors’ duties in Spain – Gómez-Acebo & Pombo

The secretary plays a key role in the proper functioning of the Board. In principle, unless otherwise stated in the corporate by-laws or in the contract between the company and the secretary, the secretary’s main responsibility is the elementary task of faithfully drafting the board minutes. However, good corporate governance rules confer on him a more compromising role of advising the directors and providing them with the information necessary to correctly exercise their responsibilities as such.

Almudena Arpón de Mendí­vil, de Gómez-Acebo y Pombo, explica la manera en que el secretario del consejo ayuda y apoya a los directivos de una empresa en sus responsabilidades corporativas, hoy en dí­a detallados y englobados por el ‘Código Conthe’. No obstante, el secretario del consejo se encuentra habitualmente en situaciones complicadas, por ejemplo, las relaciones entre la casa matriz y sus filiales, la polí­tica de distribución de beneficios y los omnipresentes conflictos de interés. La autora opina que, en casos graves relacionados con la profesionalidad de un directivo, después de informar al consejero delegado, el secretario no tiene más remedio que proteger su prestigio profesional.

This is acknowledged in the Conthe Code, which advocates for the independence of secretaries, recommending that their appointment and dismissal should be notified by the Appointments and Remuneration Committee and be approved by the Board.

In short, the secretary lives in first person the directors fulfilment of their fiduciary duties in the preparatory phase of and during sessions and, if applicable, once resolutions have been passed should these have any corporate consequences.

The correct exercising of the secretary’s position can entail a great degree of difficulty for several reasons.

Firstly, the legal framework defining the scope of the repeated diligence and loyalty of directors duties, is ambiguous and incomplete.

The threshold of diligence is not described in a manner equivalent to the business judgement rule of the US doctrine which admits a iuris tantum presumption, that diligence has been adequate when procedures have been followed, the potential risks have been studied and reasonable precautions have been taken. The secretary should contribute to carrying out such process and to implementing protection requirements to safeguard the corporate interest. Thus, in the adoption of complex decisions, he should assess whether it is advisable to request fairness opinions, legal opinions and the like to provide the Board with an objective view of the matters to be decided.

Complex corporate structures do not help to ease this task: for instance, in the case of groups of companies, is the corporate interest of the company duly protected if the general strategy of the group is followed? It would appear that provided such strategy is appropriately balanced and allows the subsidiary to participate in the advantages of the decision or is adequately compensated, the answer should be affirmative. And if the parent company, through its proprietary directors, favours the distribution of dividends as opposed to the option of allocating further reserves to the company? There is no explicit answer, given that the dividendsreserves alternative presents two equally legitimate options which are both acceptable within the corporate interest, even though a conflict of interest could arise in borderline cases.

In particular, transactional conflicts of interest, that is, those arising for a specific project, as opposed to permanent conflicts, are those which may cause the secretary greater problems. Loyalty obliges directors to disclose the conflict as well as refrain from intervening in the operation to which the conflict refers. What happens in those cases where the conflict is suspected but the affected director fails to reveal it? Could the Board or its chairman dictate the existence of such a conflict with the aim of preserving the corporate interest when the director does not acknowledge it? Should information be provided to the suspect director? It should be remembered that the directors right to information, which is the basis of their general duty of diligence (the obligation to diligently keep up-to-date with the running of the company) appears without limits in our rules.

The main way to avoid the problems arising from these cases would be to have adequate provisions in the board regulations to allow the detection of potential conflicts and their settlement in advance.

Lastly, directors may be insufficiently informed about their duties and the secretary should provide them with the necessary information. In the most serious cases when directors lack the required capacity, professionalism or, if applicable, independence, once the secretary has alerted the chairman, there is little else he can do other than look after his own professional prestige.

Almudena Arpón de Mendí­vil is a partner at Gómez-Acebo & Pombo in Madrid. She can be reached via aam@gomezacebo-pombo.com.
The Secretary to the Board and Directors’ duties in Spain – Gómez-Acebo & Pombo

Garcia-Sicilia

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