The suspension of article 348bis of the Spanish Capital Companies Act (Ley de Sociedades de Capital – LSC)[1], which provides for the exit right of a shareholder due to a lack of distribution of dividends finalised on 31st December 2016.

Thus, said grounds are added to the other legal grounds for the exit of a shareholder (article 346 of the LSC), as well as any grounds that may be established in the company by laws with the consent of all of the shareholders (article 347 LSC).

Legal grounds for exit

  • Substantial substitution or modification of the corporate object.
  • Extension of the duration of the company.
  • Reactivation of the company.
  • Creation, modification or early termination of the obligation to carry out accessory services, except where otherwise indicated in the by laws.
  • Modification to the participations transfer system (in limited liability companies)
  • Transformation of the company, which has the effect of the assumption of personal responsibility for company debt (article 15 of Act 3/2009 of 3rd April, regarding structural modifications of companies).
  • Transfer of the registered address of the company to another member State as a consequence of an intra EU cross-border merger or to another foreign country by resolution of the shareholders’ meeting (articles 62 and 99 of Law 3/2009, of 3rd April regarding structural modifications of companies).

Thus, as from 1st January 2017, where non-listed companies are concerned, in the fifth fiscal year as from the moment of registration of the company with the Commercial Registry, if the general meeting does not agree the distribution as dividend of at least a third of the operating profit obtained during the previous fiscal year, which are legally distributable, the shareholder (partner) who votes in favour of the distribution of company profits shall have the right to exit the company, via a share capital reduction (article 358 of the LSC) or the acquisition of the shares or participations of the affected shareholder or partner by the company (article 359 of LSC).

As it may be seen, in this case the legal grounds for the right to exit of the shareholder (partner) are no longer a matter of majority resolutions which essentially modify the company purpose (as is the case of the cause for exit of article 346 of the LSC), but the protection of the minority shareholder (partner) in the face of a general meeting resolution which withholds the shareholder’s (partner’s) participation in profit, understood to be non-fulfilment on the part of the majority of the company purpose and of the legitimate expectations of the minority shareholder (partner) for obtaining a profit.

As from 1st January 2017, minority shareholders who find themselves in this situation shall have a term of one month as from the date of the ordinary general shareholders’ (partners’) meeting to exercise their exit right (article 348bis LSC).

The evaluation of the participations or shares of the shareholder (partner) may be carried out:

1) By way of an agreement between the company and the shareholder (partner) on the reasonable value of the participations or shares, or on the person or persons who must evaluate them and the procedure to be followed for their evaluation.

2) In the absence of agreement, they shall be evaluated by an independent expert, designated by the commercial registrar corresponding to the company’s registered address at the request of the company or any of the holders of the shares or participations object of the evaluation (article 353 of the LSC), the retribution of which must be assumed by the company (article 355 of the LSC).

Nevertheless, the partners of limited liability companies to whom the value of redeemed participations may have been reimbursed (against a share capital reduction with funds returned to partners) should be aware that they are jointly and severally liable before third parties for company debts prior to the publication of their exit up to the limit of the amount that they may have received (article 357, in relation to articles 331 and 332 of the LSC).

 

Carla Villavicencio

Vilá Abogados

 

For more information, please contact:

va@vila.es

 

13th of January 2017

 

 

 

[1]Note regarding enforcement: this article was introduced by Act 25/2011, of 1st August, partially reforming the Spanish Capital Companies Act and incorporating Directive 2007/36/CE of the European Parliament and Council, of 11th July, on the exercise of determined rights of shareholders of listed companies, although the application thereof was suspended until 31st December 2016 pursuant to Act 9/2015, of 25th May, regarding urgent insolvency measures and the Royal Decree law 11/2014, of 5th September, regarding urgent insolvency measures (previously it had been suspended until 31st December 2014 by Act 1/2012, of 22nd June, regarding the simplification of the obligations of information and documentation of mergers and split-offs of capital companies).