Right to examine the accounting of the limited company

One of the rights that the Law recognizes to the partners of a limited liability company is the right to information.

It is justified because every partner who has invested in the capital of a company has the right to know how it is being managed and thus be able to make the appropriate decisions (exercise of the vote in the general meeting general, exigency of responsibility to the administrators, sale of their participation, etc.); and with even greater reason this right is justified if the characteristics of the company make it difficult for it to sell its stake (SAP of Barcelona, Section 15ª, of 9/12/2013 ).

Within this right to information is the possibility of demanding a direct examination of accounting.

Examine limited partnership accounting

From the call of the general meeting and until the date it is held, all partners can request the immediate and free delivery of the documents that are going to be debate to approve in the general meeting; If the approval of the company accounts is included in the agenda, a copy of the corresponding annual accounts may be required (art. 272.2 Capital Companies Act).

When the partner has at least 5 percent of the capital, or several participants are grouped that together reach or exceed that percentage, they will have the right to examine the supporting documents for the preparation of the accounts (art. 272.3 LSC).

When exercising this right, the following points must be taken into account:

• Members have the right to directly access:
  1. To the final formulation of the annual accounts, that is, the balance sheet, the profit and loss account, the management report and the audit report, receiving a copy of all of this.
  2. Accounting books and computers or recordings containing accounting notes.
  3. To the background or supports with which the accounting is prepared (invoices, delivery notes, contracts, payroll, bank movements, list of stocks, tax declarations, etc.)
• The exam does not include the right to obtain photocopies or photographs of the documentation. The Law only refers to the “examination” and not to obtaining any type of reproduction.
• For said examination, the partners can be assisted by an accounting expert.
• The viewing of the documentation must be done at the company’s address.
• This documentary examination right is compatible:
  • With the power that partners who reach at least 5% of the capital have to request, within the first 3 months following the end of the financial year, the appointment by the Mercantile Registry of an auditor to review the accounting if the company did not have it designated (art. 265 LSC).
  • With the possibility of requesting reports or clarifications before the general meeting on the matters included in the agenda (art. 196 LSC).

The recognition of this right to examine the accounts is subject to it being exercised within the legal parameters; that ultimately meets the legitimacy requirements (STS of 09/19/2013), as it is required within the indicated period and is linked to the purpose of the general shareholders’ meeting.

The company’s administrative body may deny analysis of the commented documentation:

• If you understand that the interests of the company are harmed, an objection that cannot be raised if the request is made by one or more partners who jointly own at least 25 percent of the share capital.
• If you consider that it is an abusive exercise of rights by the partner. This allegation can be denied by the courts. The sentence of the A.P. of Madrid, sect. 28th, of 07/07/2017 declared that the abusive nature of this right must be considered on a case-by-case basis depending on the characteristics of the company, the distribution of its share capital, the volume and form of the information requested, weighing the concurrent circumstances. For example, this Court recognized that a high capital participation of the claimant partner in a company with a small number of partners reinforces the right to request an accounting examination. This is also reinforced by the concurrence of indications of irregularities in corporate management or that the auditors have not been able to issue their opinion due to not showing proof of investment.

The unjustified refusal to allow the accounting examination constitutes an infringement of the partner’s right to information. Which may be grounds for nullity of the agreements adopted at the General Meeting on approval of the annual accounts, approval of corporate management and application of the result.

6/08/2018