Revised considerations on the approval process for Spanish financial deals involving physical possessions
News Article: Spanish Court Clarifies Legal Standing of Unauthorised Company Asset Disposals
In a recent ruling, the Provincial Court of Madrid has reaffirmed that the disposal of material assets by a company's management body without the prior approval of the general shareholders meeting does not automatically render the transaction null and void.
The court's decision, made in judgment 132/2025 on 4 April 2025, comes as a clarification on the impact of omitting the mandatory general shareholders meeting's resolution for the transfer of material assets. The ruling serves to maintain a practical approach that safeguards third-party reliance while upholding internal governance mechanisms.
The court's decision reiterates that the purpose of the rule is internal control and governance within the company. The rule aims to ensure oversight by the general shareholders meeting over management decisions related to significant asset disposals. However, the validity and effectiveness of the transaction vis-à-vis third parties are governed by general rules of contract law, not strictly by the article 160(f) of the Spanish Companies Act.
For example, the court noted that the exercise of pre-emptive subscription rights by shareholders remains valid even if the mandatory authorization by the shareholders meeting was omitted. This underscores that the infringement of article 160(f) of the Companies Act on disposal of material assets does not have an invalidating effect on the act of disposal in question.
However, the court clarified that the infringement of article 160(f) of the Companies Act alone is not sufficient to declare a disposal contract void and null. Instead, it requires additional elements, namely, a breach by the directors of their duty of loyalty ex article 232 of the Companies Act.
The court's ruling aligns with the most current authoritative judicial ruling on the matter as of July 2025. It is important to note that there is contradictory case law on this matter, and forthcoming judicial rulings by the Supreme Court are expected to clarify the rules to be followed.
The material asset in question, as analysed in the judgment, refers to cash contributed in a capital increase. The judgment emphasises that a breach of the general shareholders meeting's authorities due to directors' negligent or disloyal actions falls under the legal regime on liability for breach of directors' fiduciary duties.
The court's decision also confirms that article 160(f) of the Companies Act did not repeal article 234.2 of the same legal text, so the company remains obliged to third parties who acted in good faith and without gross negligence.
This interpretation reflects a balanced approach that prioritises the protection of third-party interests while maintaining internal governance mechanisms. The legislation imposes a mandatory authorization to control directors' powers but does not make failure to obtain that authorization automatically void the transaction.
The court's ruling reaffirms that the consequences of the material asset transaction not being approved by the general shareholders meeting remains a controversial issue in corporate law. The court's decision serves as a significant development in this ongoing debate, offering clarity on the legal standing of unauthorised company asset disposals in Spain.
[1] Referenced from the Provincial Court of Madrid's judgment 132/2025.
In this context, the court's decision on the unauthorized asset disposal by a company's management highlights the importance of corporate law in business, particularly finance, when making significant decisions such as disposing of material assets. The court's ruling underscores that while omitting the mandatory general shareholders meeting's resolution for the transfer of material assets can lead to a breach of internal governance mechanisms, the transaction's validity vis-à-vis third parties is governed by general rules of contract law.
