When a bank manager or investment fund analyses an SME before granting financing or taking a stake, the first thing they look at — before EBITDA — is whether the company has its corporate governance in order: who is in charge, how decisions are made, what is documented and what mechanisms exist to prevent conflicts of interest. What is a legal obligation for a listed company is increasingly a de facto market requirement for SMEs. This article explains what corporate governance is, which bodies your company needs, how minutes work and what distinguishes a well-governed company from one that improvises.
What is corporate governance?
Corporate governance is the set of rules, practices and structures that determine how a company is directed and controlled. It regulates the relationships between owners (partners or shareholders), the management bodies and external stakeholders (creditors, employees, customers, public administration). It is not about red tape: it is about making clear who decides what, with what information and with what consequences.
In Spain, the reference framework for capital companies — S.L. and S.A. — is established by Royal Legislative Decree 1/2010, of 2 July, approving the revised text of the Capital Companies Act (LSC). Listed companies are also subject to the CNMV Code of Good Governance (revised in 2020, with annual follow-up in the Annual Corporate Governance Report). SMEs are not required to follow that Code, but its principles are the benchmark that investors, financial institutions and major clients use as a measuring stick.
Why does corporate governance matter to an SME?
Three concrete reasons that are already playing out in the Spanish market:
- Access to bank and alternative financing. Since 2023, financial institutions operating under the EBA's ESG risk framework have been incorporating corporate governance criteria into their credit-risk analysis of SMEs. A company with out-of-date minutes, no conflict-of-interest policy and no separation of functions between owner and manager will score worse in that analysis.
- Corporate transactions. In due diligence processes for mergers, acquisitions or the entry of financial partners, the absence of an up-to-date record of corporate resolutions, a clean shareholder register or documented related-party contracts is a red flag that can derail the deal or drastically reduce the valuation.
- Supply-chain requirements. Large companies are passing on their non-financial reporting obligations (CSRD Directive, currently being transposed into Spanish law through the Draft Law on Corporate Sustainability Information approved in October 2024 and under parliamentary consideration) to their SME suppliers. Part of that non-financial information relates to governance: composition of the management body, anti-corruption policies and whistleblowing channels.
The SME's governing bodies: what they are and how they work
The LSC distinguishes two main bodies in a capital company:
The General Meeting
This is the sovereign body: partners or shareholders meet to make the decisions that the law or the articles of association reserve for them. In an S.L., matters exclusively within the General Meeting's remit include the approval of annual accounts, the distribution of profit, the appointment and removal of directors, amendments to the articles of association and structural transactions (mergers, spin-offs, conversions). The ordinary General Meeting must be held within the first six months of the financial year; extraordinary meetings may be called whenever circumstances require.
A common mistake in family SMEs is to confuse an informal gathering of partners with the General Meeting. For resolutions to be valid and enforceable against third parties, the notice must follow the statutory (or default legal) procedure, the quorum must be evidenced and the minutes must be properly drawn up. Articles 97 et seq. of the LSC set out the minimum requirements for minutes.
The Management Body
This body manages and represents the company. It can take various forms:
| Form | Composition | When it works best | Risk if poorly configured |
|---|---|---|---|
| Sole director | One natural or legal person | Single-owner SME or company with a clearly dominant active shareholder | Risk of mixing personal and corporate assets; unlimited liability for mismanagement |
| Joint and several directors | Two or more, each able to act independently | Partners of similar weight who want operational agility | Risk of acts contrary to the corporate will if coordination is lacking |
| Joint directors | Two or more, who must act jointly | SMEs whose partners want mutual oversight | Operational slowness; deadlock in the event of conflict |
| Board of Directors | Minimum three members (LSC, art. 242) | Mid-size company with investors, multiple family branches or the need for professionalised governance | Higher cost and formality; ineffective without genuinely independent directors |
The choice of management structure is not merely a statutory formality: it has direct consequences for director liability (arts. 225–241 bis LSC), for the company's ability to operate with agility and for how third parties perceive it.
The Board of Directors in the mid-size SME
When a company grows beyond a certain size — in turnover, number of partners or structural complexity — the Board of Directors ceases to be an expensive, unnecessary body and becomes a genuine governance tool. A well-designed board for a mid-size SME includes:
- Executive directors (the company's management team).
- Proprietary directors (representing significant shareholders).
- At least one independent director: someone with no ties to the ownership or management who brings an external perspective and acts as an arbiter in conflict situations.
The independent director is the element that most clearly distinguishes professional corporate governance from improvised family governance. Their presence is specifically valued in financing processes and in the ESG assessment of supply chains.
Minutes: the mandatory record of corporate resolutions
Minutes are the document that certifies what has been agreed at the General Meeting or Board. They are not optional: Article 202 of the LSC requires that resolutions of the general meeting be recorded in minutes, which may be notarised (when requested by the management body or by shareholders representing at least 1% of the share capital) or non-notarised. Minutes must be signed by the chairman and the secretary and transcribed into the Book of Minutes legalised at the Companies Registry.
What valid minutes must contain
In accordance with Articles 97 to 99 of the Companies Registry Regulations, the minutes of a General Meeting must record:
- Date, time and venue of the meeting.
- Form of notice (ordinary or universal meeting) and evidence of quorum.
- Agenda.
- Summary of contributions and proposals.
- Voting results (votes in favour, against and abstentions).
- Resolutions adopted, in their exact wording.
- Reservations or objections lodged by dissenting partners (if requested).
- Signature of the chairman and the secretary; and, where applicable, of the scrutineer.
Incomplete minutes or minutes that do not reflect what was actually agreed can be challenged (arts. 204–208 LSC). The consequences range from the nullity of the resolution to the personal liability of the director who implemented it knowing it was invalid.
Good governance: going beyond legal compliance
Good corporate governance does not end with holding the General Meeting on time and drafting correct minutes. It means adopting policies and practices that go one step beyond the minimum legal requirement:
Conflict-of-interest policy
In a family SME, a director who is also the owner of a supplier or who leases a property they own to the company is in a situation of conflict of interest. The LSC (arts. 190 and 229) requires abstention from voting on those matters and disclosure of the conflict. An internal conflict-of-interest policy formalises that procedure, makes it visible and prevents an omission from being challengeable.
Director remuneration
Director remuneration must be provided for in the articles of association and, if there is a Board, approved by the General Meeting. The 2014 reform (Law 31/2014) introduced transparency requirements that apply to listed S.A. companies, but its principles are applicable to any company that wants to avoid claims from minority partners. Documenting the remuneration policy and submitting it for approval is a good-governance practice with a direct impact on the director's tax treatment and on the deductibility of the expense.
Family protocol in family businesses
When the company is family-owned, the family protocol is the governance instrument that regulates the relationship between the family and the business: conditions for family members joining management, mechanisms for partners to exit, dividend policy, succession in leadership. It is not legally required, but its absence is the main cause of corporate disputes that end in forced dissolution or costly litigation. The protocol is structured through shareholder agreements, amendments to the articles of association and, where appropriate, holding structures (family holding companies).
Whistleblowing channel and regulatory compliance
Since the entry into force of Law 2/2023, of 20 February, regulating the protection of persons who report regulatory infringements (transposing the Whistleblowing Directive 2019/1937), companies with 50 or more employees are required to have an internal whistleblowing channel. This channel is, in practice, a corporate governance component: it requires an alert-management policy, a person responsible for handling reports and a documented procedure. Its absence can result in fines of up to one million euros for the legal entity.
If you would like to explore this requirement in depth, you can consult our corporate governance for SMEs service, where we support the full design of the governance structure and the associated regulatory compliance.
How to implement corporate governance in an SME: a practical roadmap
The goal is not to install every component of a large listed group overnight. The process is gradual and must be calibrated to the company's size and situation:
- Diagnosis of the current situation. Review of the book of minutes, the articles of association, the shareholder register, related-party contracts and current notarial powers of attorney. The aim is to identify the most urgent gaps.
- Amendment of the articles of association. Amend the articles to align the management structure, remuneration policy and voting quorums with the company's reality and best practices.
- Regularisation of minutes and registers. Bring the book of minutes up to date (including legalisation at the Companies Registry if there are outstanding financial years) and update the shareholder register.
- Design of the management body. Decide whether to maintain the current structure or move towards a Board, define the number of directors and, where appropriate, bring in an independent director.
- Governance policies. Draft and formally approve the conflict-of-interest policy, the remuneration policy and, where applicable, the whistleblowing channel and the family protocol.
- Annual maintenance. Hold the ordinary General Meeting on time, file accounts at the Companies Registry, review the composition of the management body and update policies when circumstances change.
Corporate governance and financing: the direct connection
Since the European Central Bank published its Guide on climate-related and environmental risks (2020) and the EBA developed ESG due-diligence requirements under the CRR3 framework (being phased in from 2025), Spanish financial institutions have been integrating governance indicators into their internal rating models for SMEs. This means that a company with documented corporate governance has, all else being financially equal, a better perceived risk profile than one that does not.
Specifically, the elements that risk analysts value are: the existence and up-to-date status of the book of minutes, separation between the owner and the manager, a remuneration policy approved by the General Meeting, the existence of an external audit (even if not legally required) and a documented conflict-of-interest policy.
For SMEs seeking financing through debt or equity instruments — COFIDES subordinated loans, ESG-tranche ICO credit lines, regional private equity or venture capital funds — having a solid governance structure is a de facto requirement even before submitting the proposal. Our team at Summum Consultoría has supported governance-readiness processes for companies undertaking financing rounds or mergers-and-acquisitions transactions.
Frequently asked questions
Is my SME required to have corporate governance?
It depends on the size and legal form. The LSC imposes minimum obligations on all capital companies (holding an annual General Meeting, drawing up minutes, maintaining corporate registers). The CNMV Code of Good Governance applies directly only to listed companies, but its principles have become the benchmark for any company operating with institutional counterparties. Companies with 50 or more employees also have the specific obligation of a whistleblowing channel (Law 2/2023). Beyond a certain volume (criteria of the Audit Directive and the CSRD), non-financial reporting obligations also encompass governance elements.
What happens if the General Meeting is not held or minutes are not drawn up?
The consequences are multiple. In legal terms, undocumented resolutions may be invalid or challengeable by any partner. Directors may incur personal liability if they have acted without the cover of a valid resolution. In registry terms, failure to file accounts (which presupposes approval at the General Meeting) results in the closure of the registry entry, which prevents the registration of any subsequent act (powers of attorney, amendments to the articles, changes to the management body). In practical terms, the company is exposed in any due diligence or audit process.
Do I need a notary for any type of minutes?
No. The general rule is that General Meeting minutes do not require notarial intervention. A notarial record (attendance record) is only required if requested by the management body or by shareholders representing at least 1% of the share capital in an S.A. (art. 203 LSC). However, certain resolutions — amendment of the articles of association, merger, spin-off, issuance of bonds — must be elevated to a public deed and registered at the Companies Registry to be enforceable against third parties. The notary certifies the adoption of the resolution; registry entry makes it effective against third parties.
What is an independent director and when does it make sense to appoint one?
An independent director is a Board member who has no significant ties to the ownership or the executive management: they are not a significant shareholder, have no contractual relationship with the company beyond their position as director and do not represent the interests of any specific group of shareholders. Their role is to bring external judgment, mediate in disputes between partners and reinforce the credibility of the governance structure in the eyes of third parties. It makes sense to appoint one when the company begins to have minority shareholders with real weight, when a financing round or corporate transaction is being planned, or when a family business wants to professionalise its governance in a credible way.