Rights of minority partners

In the post of this week we are going to analyze the figure of the minority partner and the rights that correspond to him.

While it is true that capital companies are generally governed by majority principles in terms of their organization and performance, this does not mean that we shall interpret the figure of minority shareholders as mere secondary actors with partial rights subject to the will of the majority.

To deal with this situation, positive corporate law provide the minority shareholder certain mechanisms that, well-articulated, enable them to protect its percentage within the company, being able to play a role of greater relevance

Some of these tools can be used by any partner, regardless of the share they have in the share capital, while others vary depending on the percentage of participation.

Below we are going to list some of the most relevant:

  • The right to attend and participate in a General Meeting

Every member has the right to attend a General Meeting in the limited company. Special care must be taken in the so called “sociedades anonimas”, wherein, the bylaws may require a minimum number of shares, not being possible under any case to deprive the shareholders who control at least 1/1000 of the share capital

  • Right to information and obtain documentation

The partners of a limited company have the right to request in writing, prior to the meeting of the general meeting or orally during the meeting, the reports or clarifications they deem necessary about the matters included in the meeting agenda.

  • Right of separation

The corporate Companies Law includes specific cases wherein the shareholders can force the company to acquire their shares. They will be able to exercise this action in the followings cases: when they object to resolutions of the General Meeting that modify substantially the corporate purpose, modify or terminate ancillary obligations, vote against the modification of the right to transfer, or for the non-distribution of dividends, in the latter case provided that a series of requirements expressly set forth in article 348 bis of the Capital Companies Act

  • Challenging of company resolutions

They will be able to challenge social resolutions which are contrary to law, bylaws, or to the board company regulation, or harm the corporate interest for the benefit of one or more partners or third parties, the partners that have acquired such status before of the adoption of the agreement, provided they represent, individually or jointly, at least one percent of the capital.

Along with these tools provided by law, we could add those susceptible to be included in the so-called para-corporate agreement. The most common in these cases is the so-called “Tag Along clause”, which gives the minority partner the possibility of selling their shares when the majority shareholder sells their own, with the same conditions of sale.

In short, they are a series of tools that minority partners can use in the face of the abuse of the holders of the social majority.

At Navarro Llima Abogados, we have a team of lawyers specialized in company law, willing to offer you the corporate advice you need in order to guarantee the rights that correspond to you as a business partner

Javier Navarro


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