05 Apr Transfer of shares in a Limited Company.

Nowadays, the limited company is the most successful form of company in the small and medium-sized enterprise sector. It is a societal modality with a marked family character wherein the partners tend to have an important role within the company, being able to limit with it the entry of third parties outside the company.

When one undertakes a business activity through a limited company, it is usually done with an idea of ​​lasting over time. However, external factors such as a good offer, discrepancies between the partners or the current economic situation can lead to a sale of the shares and their subsequent exit from the company.

Once the partner has decided to proceed with the sale, the questions arise.Do we have complete freedom to sell our shares? Which are the steps to follow?

In response to the first question, it is appropriate to clarify that, unlike what happens with the sale of shares of “Sociedades Anonimas” which is free in the case of limited company the partners which have the desire to sell their shareholdings shall take into account a series of conditions and limitations before proceeding with their transfer.

The first limit can be found in the company’s own bylaws. The capital company law grants certain freedom to the partners when it comes to regulating the transfer of shareholdings in the bylaws. However, under no circumstances is it an absolute freedom but is limited by the rules and conditions indicated in the law itself.

It is therefore important to know this possibility that the capital company law provide us in order to establish our own regime for transferring shares in our own bylaws, but always without forgetting the constraints and limitations contained therein.

  What happens if there is no regulation in the bylaws?

In this case, the provisions of the capital Company Law operate by default. This provides that the shares can be freely transmitted between the partners, as well as the transmissions made in favor of the spouse, ascendant or descendant of the partner, and in favor of companies of the same group as the transferor.

In principle, they are the only situations wherein the transmission of shares of limited company will be able to be free, since in the rest of the cases, said transmission will be subject to a series of rules and limits.

What are the steps to proceed to follow with the transmission?

In the absence of bylaw regulation, the partner that wishes to transmit shall proceed to:

• First, communicate in writing the transfer of the shares to the company’s directors, specifying the conditions of the sale.
• Secondly, to submit to the explicit consent of the company, which is to be agreed upon in a general meeting.
• Third, communicate the identity of the acquirer of the participations to the company, the payment method and other conditions of the operation.
• Fourth, materialize the agreement in a purchase and sale shares agreement and document the execution of the transfer in a public deed.

In Navarro Llima Abogados we have highly qualified lawyers specialized in corporate law with experience in these situations. If you have any questions thereon, please do not hesitate to contact us

Javier Navarro

Corporate lawyer