As the doctrine has repeatedly made clear, there is no concept of a unified group of companies in Spanish law, and it is also complicated that such total unification will occur in the future, since the requirements to consider the existence of a group of companies for certain purposes (for example, corporate) are due to different reasons from those necessary to consider it for other purposes (for example, for tax purposes or for labor purposes), resulting – besides – that the existing definitions are not accompanied by internal regulation of the phenomenon, but they are mainly due to legislative protection purposes to third parties.
However, in general mercantile terms, the definition of a group (Article 42.1 of the Commercial Code) constitutes the fee to which the regulations that discipline specific sectors within the commercial sphere are remitted, such as the company (Article 18 of the Capital Companies Law), the bankruptcy (Additional Provision 6 of the Bankruptcy Law), or that of the securities market (art. 5 of the Securities Market Law). Such group definition is based on the concept of “control” – there is a group when one company has control of another or others – without the legislator being able to define, in turn, what this control consists of, although it establishes the presumption iuris tantum of existence of such control when the dominant company holds, directly or indirectly, the majority of the voting rights of the dominated company, or has the direct or indirect capacity to appoint the majority of the members of its management body. Although the precept literally states that there is a group when the dominant society “holds or can hold”, we have omitted this nuance, since all societies can potentially hold control of another or others (it is enough to acquire the necessary social participation), but obviously this potentiality can not be included in the definition of a group of companies.
The control criterion adopted by Article 42 CCo refers directly to the relationship of subordination or vertical between the companies that make up the group, with a dominant company and dominated companies; Therefore, it implicitly excludes the formation of groups in a coordination or horizontal relationship between the societies that make them up. Within the relationship of subordination, control seems to be appreciated through the criterion of majority participation in the capital of the dominated company. But this does not mean that the criterion of unit of decision has to be discarded; On the contrary, this criterion can support by its own means the qualification of a group of companies as a corporate group.
As mentioned above, article 42 CCo presumes iuris tantum that there is control – and therefore a corporate group – when the dominant company holds the majority of the voting rights of the controlled company. However, the presumptive nature of such a qualification necessarily implies that not all the relationships of majority participation, direct or indirect, should be classified as groups. In effect, the norm seems to require an additional component to the mere majority participation; said component being its control, or rectius, the decision unit between the dominant and the dominated. Consider that, if this additional component were different from the decision unit, it would not make sense for the group of companies to be required to consolidate annual accounts.
The criterion used by Article 42 CCo partially translates into Spanish law the notion of “related companies” included in article 3.3. of the Commission Recommendation of May 6, 2003, on the definition of micro, small and medium-sized enterprises, excluding the presumption of existence of a corporate group in the event of exercise of dominant influence of one company over another based on a contract or in a statutory clause; in which case, the burden of the procedural evidence (onus probandi) on the existence of control will fall on whoever alleges its existence.
hus, in the Spanish internal order will qualify as a corporate group, with all the legal consequences that this may entail, to the relationship between a majority owned by another, unless the interested party demonstrates that, although there is such majority participation – Objective and easily demonstrable element – there is not, on the contrary, a unit of decision, which turns out to be an element of more arduous and subjective demonstration for a third party litigant. Thus, it seems that the legislator, through such presumption iuris tantum, seeks to protect or defend such third party that alleges the existence of a corporate group to defend their interests, as it will estimate its existence provided that the majority participation is proved, either directly or indirect, in the dominated society. And if any of the companies of the group discusses such qualification, on it will fall the proof to demonstrate that the necessary unit of decision does not exist. Therefore, the nuclear concept of “unity of decision” resounds in silence – or is conspicuous by its absence – since, although Article 42 of the Commercial Code does not use this expression, or even suggest it, it seems that the straight line interpretation of the precept has to travel that motor axis, which imbues and is inherent to the whole notion of “group of companies”
In line with the foregoing, the existence of a corporate group (a) will be appreciated when the majority share of the parent company in the dominated company, and the decision unit between both; (b) when only the majority participation is present, if it is not possible to prove that there is no decision unit between the parent company and the parent company; and (c) when, in spite of the lack of majority participation, the interested party is able to prove the existence of a decision unit, no matter how small the assumptions in which this may occur may appear. In assumptions (a) and (b), the rule presumes that the majority participation entails the imposition of the business criterion of the majority shareholder – which is absolutely lawful as long as said criterion is not imposed abusively – while in the case (c) the unit of decision, in the absence of participation that supports it, can be based on statutory provisions, on parasocial agreements, or on the so-called “domination contracts” (unrelated to our legal system, but recognized in legal systems such as German or Brazilian), or in any other legitimate form of dominative control not based on a majority stake in the share capital.
Of course, they always plan on the vertical or control group relationship both (a) the external risk of derivation of responsibility towards a third party from a subsidiary to its majority partner or even to the head of the group, such as (b) the risk internal due to the legal remedies that the minority shareholders have against strategic decisions of the parent company that adversely affect the subsidiary in which they participate.
At least the doctrine of the lifting of the veil should be cited – if there is patrimonial confusion between the societies of the group or animus fraudandi of any of the societies of the group – of the doctrine of the administrator of fact, of the doctrine of the appearance, or even the doctrine of improper solidarity based on the community of interests, which would be available to third parties harmed by one of the group’s companies. However, the degree of involvement of the parent in the management of the subsidiary that could cement the identification of the former as a de facto administrator remains an open question. A reasonable position would be to consider that as long as the parent’s influence on the subsidiary is limited to designing the strategic coordination of the company with the rest of the group, without carrying out day-to-day management actions specific to its management body, there would be no basis to designate to the matrix as a de facto administrator.
Regarding internal risk, this naturally arises from the possible breach of fiduciary duties owed to the minority shareholders of any of the companies that make up the group, which have a dual aspect (a) the fiduciary duties of the parent company in the adoption of board agreements (article 204.1 LSC), and (b) the fiduciary duties of the administrators of the subsidiaries (article 227 LSC). The former will prevent the matrix from adopting decisions – even within the framework of strategic and organizational coordination – that are abusive because they clearly prejudice the interests of the members of a group company, who as third parties possessing legitimate interest will be entitled to to challenge the resolutions of the parent company that adversely affect their interests. The latter will prevent the administrators of the dominated society from breaking their obligation of loyalty and their duties of independence and acting in the best interest of society against the partners (our order, unlike the German, does not know any exception to this duty fundamental), so they can not execute orders imposed by the majority partner – the dominant company – that has appointed them to the position, if they contravene in the social interest; the partners were entitled to exercise the social actions of responsibility against the administrators that proceeded (articles 238 and 239 LSC).
In light of the above, and in the absence of substantive precepts that discipline intergroup relations between the dominant society and the dominated societies, it is questionable whether it will be possible in law to implement even a strategic and organizational coordination common to the group, established by its matrix, that responds to its legitimate economic interests and that inevitably produces a negative externality to one or more of the dominated companies; and that, at the same time, is opposable to a possible legal action of the injured partners.
The jurisprudence has addressed this question in the Supreme Court Judgment of December 11, 2015, noting that a balance could be found between the damage caused to the dominated company and the logical power of its parent company to establish guidelines for organizational coordination, through the receipt by the injured company of the so-called “compensatory advantages” that can be materialized in the aliquot part of the overall benefit received by the group of companies – the result of the action that in the first place has harmed the dominated society – or in another type of advantages and benefits that would not occur if the damaged company does not belong to the group of companies (ubi commoda ibi incommoda) so that such benefit compensates, at least, the damages derived from the decisions of the parent regarding the organization and objectives of the group of companies.
By reproducing the most significant expressions of the aforementioned Judgment, suffice it to say that although his text begins by severely recalling that
The right administrator of the subsidiary has its own area of autonomy of decision that can not be affected by a kind of “due obedience” to the instructions of the group administrator that unreasonably harms the interests of the society it administers, for which has to watch.
it then goes on to recognize a possible “justification” for the damage suffered by the dominated company, which would happen because the damage did not jeopardize the existence or viability of the dominated company, and that it would receive
(…) compensatory advantages that justify that some action, considered in isolation, could be a detriment to society (…)
The aim is to make a balance of the advantages provided or the benefits made in both directions (from the company to the group and from the group to the company) and to conclude whether or not there is a negative result for the subsidiary. (….)
In any case, they must have an economic value, and be proportionate to the damage suffered by the subsidiary in the action for which liability is required (…)
As a conclusion of these very brief lines on this complex and unknown subject for our positive law, it can be affirmed that (i) the content of the concept of “control” used by article 42 CCo is none other than the “management unit” understood as strategic and organizational coordination imposed by the parent company on the group’s subsidiaries, “management unit” that could be implemented by any means, even though the most common – by far – the majority shareholding, and that (ii) although the interest social prevails over the interest of the group, jurisprudence does not seem to sanction the damage suffered by a subsidiary if it receives an objective “compensatory advantage” and derived exclusively from the affiliation of the subsidiary company to the group.