The disposal of essential assets without General Meeting approval has raised divergent interpretations in Spanish corporate practice for nearly a decade. Article 160.f) of the Spanish Companies Act (Ley de Sociedades de Capital, LSC), introduced by Act 31/2014, reserves to the General Meeting the competence over the disposal of essential assets. Likewise, it establishes a presumption rule: an asset is presumed essential when its value exceeds 25% of the assets shown in the last approved balance sheet. In fact, the provision handles the internal allocation of powers effectively, yet remains silent on external consequences. That is, when directors act without prior shareholder approval, doctrine has debated since 2014 the position of the third-party acquirer. In particular, Judgment No. 881/2026 of 9 June by the Plenary of the First Chamber of the Spanish Supreme Court closes the controversy for the first time. Specifically, its response is articulated around the good faith of the purchaser.
The Two Doctrinal Positions Splitting Spanish Provincial Courts
The interpretative divergence affected a sensitive point of Spanish transactional practice. In transactions completed without formal General Meeting resolution, the validity of the essential asset disposal vis-à-vis the third-party acquirer was at stake.
Firstly, one line of case law led the nullity position. Judgment No. 559/2022 of 6 September of the Provincial Court of Salamanca (ECLI:ES:APSA:2022:699) served as visible reference. Likewise, the Provincial Court of Asturias delivered rulings in the same direction. Under this reading, breach of article 160.f) LSC affected the effectiveness of the transaction against the third party. In fact, the corporate defect operated as an inherent defect of the transaction, opposable to the purchaser regardless of due diligence. Specifically, the selling company could unwind the transfer by invoking its own internal irregularity.
Secondly, the opposing line proposed analogical reasoning. Judgment No. 1140/2022 of 27 May of the Provincial Court of Madrid, Section 28 (ECLI:ES:APM:2022:8039) led this position. Similarly, the Provincial Court of Ourense and subsequent rulings by Section 28 of Madrid in Judgment No. 132/2025 of 4 April (ECLI:ES:APM:2025:5137) followed the same direction. These rulings applied article 234.2 LSC by analogy. Their logic followed the system: if the company is bound vis-à-vis the good-faith third party without gross negligence in acts performed by directors outside the corporate purpose, the same protection must extend to acts exceeding internal competence by affecting an essential asset.
The Spanish Supreme Court Response in STS 881/2026
The Plenary of the First Chamber adopts the second position. In particular, in STS 881/2026 it transfers the rule of article 234.2 LSC to the scope of article 160.f) LSC. Breach of the shareholder approval duty does not by itself determine ineffectiveness against the third-party acquirer acting in good faith and without gross negligence. Certainly, the same protection that the LSC grants to acts performed outside the corporate purpose extends to the disposal of essential assets carried out without the required approval.
The regime does not operate automatically. Its effectiveness vis-à-vis the purchaser is conditional upon the acquirer proving good faith and absence of gross negligence. These are assessed case by case, based on the specific circumstances of the transaction. Specifically, in the case resolved by STS 881/2026, the third-party acquirer did not meet those requirements. It fell outside the scope of protection. In sum, the doctrine protects the diligent purchaser and requires real evidence of that diligence. The shareholder approval duty remains fully in force. What changes is its external projection. It ceases to operate as an automatic cause of ineffectiveness. Finally, it becomes assessed according to the acquirer’s diligence in each transaction.
Implications for M&A Transactions Involving Essential Assets
At the transactional negotiation table, the doctrine translates into a redistribution of the evidentiary burden. In transactions where the target asset exceeds 25% of the last approved balance sheet, the seller’s corporate documentation ceases to be a formal step. Certainly, it becomes the material that sustains the effectiveness of the transaction vis-à-vis the third party.
For the purchaser, legal review changes in nature. Corporate minutes, valid General Meeting notice, and certificates of the specific resolution on the target asset now operate as a legal line of defence. Likewise, pre-signing due diligence is documented with evidentiary purpose. The criterion set by STS 881/2026 requires the acquirer to demonstrate reasonable knowledge of the seller’s corporate situation. Similarly, it requires the absence of indications that would raise doubts about the regularity of the internal process. In sum, the quality of the documentary support built in the pre-closing phase determines the purchaser’s position if the transaction is later challenged.
For the seller, the doctrine imposes a less discussed but substantive consequence. Lack of internal General Meeting resolution ceases to serve as a lever to unwind completed transactions against diligent purchasers. In fact, the party responsible for the formal defect cannot invalidate a transfer accepted in good faith by the third party. Specifically, this equilibrium closes a route previously used to renegotiate economic terms through the corporate defect argument.
Three Checks That Gain Operational Weight
Three specific points gain operational weight in legal review of transactions where the target asset exceeds the 25% threshold.
Firstly, valid General Meeting notice with specific resolution on the target asset. A generic resolution or a diffuse authorization does not fulfil the function required by the doctrine. Specifically, the resolution must identify the asset and the essential terms of the transaction with precision.
Secondly, calculation of the 25% threshold referring to the last approved balance sheet. Certainly, not to the projected balance sheet or to internal management estimates. The calculation basis triggers the obligation under article 160.f) LSC and defines asset essentiality with external projection.
Thirdly, complete and updated Meeting minutes and certificates. With coherent signature regimes, notice periods complied with, and traceability of shareholder representation. Finally, the documentary chain is the primary evidence supporting the good faith of the purchaser who relied on it.
Conclusion
In sum, STS 881/2026 restores legal certainty to Spanish M&A traffic after a period of fragmented doctrine among Provincial Courts. The article 160.f) LSC criterion ceases to project automatically upon the good-faith third party. In its place, transaction effectiveness depends on the acquirer’s demonstrated diligence. Certainly, pre-signing legal review becomes, in transactions involving essential assets, the instrument that determines the purchaser’s position against subsequent corporate challenges.
At RLD, we monitor jurisprudential rulings with impact on the corporate and M&A transactions we advise from our Corporate Department.
