Please refer to:
DISTRIBUTION OF DIVIDENDS AND EXIT RIGHTS FOR COMPANY PARTNERS (II)
Article 348 of the Spanish Capital Companies Act (“SCC”) was introduced in 2011, thus establishing the separation right of partners whenever dividends amounting to at least one third of the profits derived from carrying out the corporate purpose of the company of the previous financial year are not distributed, from the fifth financial year following the registration of the company at the Commercial Registry.
In spite of the controversy generated by said article, whereby some considered that in some way it caused an imbalance in the financial sustainability of companies and the legitimate aspiration of shareholders to share in profits, the article entered into force on 1st February 2017, which caused many conflicts.
Following the publication in the Official Congress Gazette of the reformation project of article 348 bis in 2017, the purpose of which was to re-establish balance, Law 11/2018, which modifies the SCC, was finally published on 28th December 2018. The following table summarises the main changes in the article:
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After the modification |
Before the modification |
| 1. The bylaws of the company may contain a provision contrary to this article. |
1. This possibility is not mentioned. |
| 2. The dividends must amount to at least 25% of legally distributable profits obtained during the previous financial year, provided that profits have been obtained in the three previous financial years. |
2. Profits must amount to at least 1/3 of the profits inherent to carrying out the corporate purpose obtained in the previous financial year, which are legally distributable. |
| 3. The separation right does not arise if the total of the dividends distributed in the previous 5 years is equal to at least 25% of the legally distributable profits in this period.
That set forth in this paragraph shall be understood without prejudice to any actions to challenge any agreements and liability that may be applicable. |
3. This possibility is not mentioned. |
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4. For the elimination or modification of the grounds for separation contained in article 348.1 bis, the consent of all partners shall be necessary, unless the separation right of the partner who has not voted in favour of said agreement is recognised.
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4. This possibility is not mentioned. |
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5. The conditions of the separation right of the parent company are established in the event that both are obliged to formulate consolidated accounts.
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5. This possibility is not mentioned. |
| 6. That set forth in this article shall not be applicable in the case of:
(1) listed companies or companies whose shares are admitted to trading in a multilateral trading system, (2) when the company is in insolvency proceedings or negotiations for reaching a refinancing agreement or obtaining acceptance of an early agreement proposal, or negotiations for reaching an out of court payment agreement have commenced, (3) when the company has reached a refinancing agreement which satisfies the conditions of non-forfeitability laid down in insolvency law (4) in the case of joint-stock sports companies.
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6. That set forth in this article is not applicable in the case of listed companies.
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Pedro Blanco
Vilá Abogados
For more information, please contact:
11th January 2019
