07 Apr Extreme care for the next General Meeting, the right of separation for not sharing dividends is finally in force

It is a common situation in Spanish companies the coexistence of majority and minority shareholders, with different participation not only in the company but also in the linkage and functions that are performed in the same, organs of administration, etc. This situation causes the different interests between minority and majority shareholders to generate a series of relations of a certain tension that usually become apparent on the occasion of the General Meeting of the company, which in addition to approving the Annual Accounts must decide on the destination of the result between keeping it in reserves or distributing it as a dividend among the owners of the company, provided that this result is a benefit, of course.

It is quite common within Spanish corporations and is a fundamental consequence of the drafting of the Capital Companies Act (LSC), since within the rights of the partner is collected as one of them, and the most important one is , the right to allow them to get the benefit of the company. However, it was an empty right of content, because no protection mechanism was articulated so that the partner could demand this right to the dividend or to the share in the company’s result.

In these cases, the legislator introduced a new article in the LSC, art. 348 bis which allowed the member to leave the company for lack of distribution of benefits, provided that certain requirements were met. Despite its introduction in the legal body, this article has been extending its suspension almost since its publication in 2011, having not been in force for more than five years. Light-828547_640 (1) This article 348 bis re-entered into force on January 1, 2017, being in the imminent Ordinary General Meetings or approval of the CCAA of the year 2016 where presumably we will see to develop all its effects.

Let us analyze the requirements for the shareholder to exercise his right of separation:

• There has to be a general meeting in which there had been a vote on the possibility of distribution of social benefits, in which the minority partner has voted in favor.
• If said board does not agree to the distribution of a third of the benefits inherent to the exploitation of the corporate purpose obtained during the previous fiscal year, which are legally distributable, a right of separation is created for this shareholder.
• The right of separation must be exercised within a period of 1 month from the date of the general meeting of partners in which the distribution has not been agreed.
• It is imperative that the company has been registered for 5 years in the Mercantile Register.
• This right of separation will not take place in listed companies.

The article is clear and configures the right of separation with an automatic nature, practically without exceptions and that has been worth several criticisms to him. Some understand that so abusive can be that the majority who does not distribute dividends and also the minority can be abusive because the right configured could lead to a prejudice for the society.

Precisely one of the reasons that has justified the suspension of the article all these years has been the situation of economic crisis, recognizing the right of separation would have endangered many mercantile companies.

Recall that in these cases of separation of partners or shareholders, the exercise of this right implies the payment of shares or shares by the partner at its fair value, that will be determined in the absence of agreement by an independent expert Designated by the Mercantile Registrar. It will be the company itself that acquires the shares or shares to the minority, so in view of this value, it may imply the obligation for the company to make important disbursements that may imply the decapitalization of the same or lead to a liquidity problem.

It is true that from another point of view it must be admitted that the end of society is the development of its social object in order to obtain a benefit and that this benefit must revert to the owners of society, and therefore the meaning and The purpose of Article 348 bis, but the lack of consideration of this legal regulation can produce a multitude of unexpected problems.

However, from another point of view it is admitted that the purpose of society is to develop its social object in order to obtain a profit in order to reverts it to the shareholders, finding fully justified the meaning and the Purpose of Article 348a.

There is unanimous practice that this article 348 bis LCS will not be in force in its current wording for a long time, being the most predictable or a new suspension or its modification by another wording not so beneficial to the minority partner, so at least in The present exercise should be extremely careful and properly prepare the strategy to follow according to our interests.

Héctor González – Jaime J. Navarro Llima

Attorneys at Law