Amendment of Article 365.3 of the Capital Companies Act (LSC): Nine Months On

Executive summary

In January 2025, the Organic Law 1/2025 was introduced, which amended article 365.3 of Spain’s Companies Act (LSC). The reform grants company directors a special two-month period to convene a General Shareholders’ Meeting, which begins when the court is notified that the company has entered into creditor negotiations for a restructuring plan (article 585 TRLC). We will assess how this provision is being applied in practice and its impact on SMEs and corporate groups, since it came into effect nine months ago.

Legal framework and purpose of the Reform of the Capital Companies Act

Article 365 LSC sets out the directors’ duty to call a shareholders’ meeting when a cause of dissolution arises. Before the reform, the general rule was a two-month deadline from the date the cause became known. The new section 3 introduces a special rule for companies in pre-insolvency negotiations, granting an additional two months from the date of the court’s notification. The aim is to prevent automatic dissolution while the company is still negotiating a restructuring plan with its creditors.

Application in practice of Article 365.3 of the Capital Companies Act

The amendment of Article 365.3 of the Capital Companies Act (LSC) not only alters the legal deadlines for convening the General Meeting, but also introduces new challenges and opportunities in the day-to-day management of companies in pre-insolvency proceedings.

• Companies being restructured: increasingly used by mid-sized and family-owned companies to gain additional time to negotiate with creditors without exposing directors to immediate liability.
• Corporate insolvency: directors must coordinate closely with insolvency advisors, as the extension does not relieve them of pre-insolvency duties under the TRLC.
• Documentation: Thorough records of proceedings and internal communications are essential to shield directors from liability claims.
• Identifying Problems: uncertainties in calculating deadlines or overlaps with other obligations have created potential risks of litigation.

Practical Impacts for SMEs and Corporate Groups

While the reform was initially designed for large companies with complex restructuring plans, SMEs and family businesses also benefit from this flexibility. The key is anticipation: planning for potential pre-insolvency scenarios, strengthening governance documentation, and engaging with external advisors early.

Relevance of the Reform of Article 365.3 of the Capital Companies Act Today

The amendment of article 365.3 LSC lies at the crossroads of corporate and insolvency law. Nine months on, it has proven to be a useful but demanding tool for directors: it provides temporary relief but requires a high standard of diligence. Its impact is evident in the practice of shareholder meetings, directors’ liability, and the survival of struggling companies.