The resolution of the General Directorate of Legal Security and Public Trust – GDLSPT (Dirección General de Seguridad Jurídica y Fe Pública-DGSJFP) of 28th July 2021 regarding the refusal of the Registrar XVII of the Commercial Registry of Madrid to register a public deed of modification of bylaws of a limited liability company was published in the Official Gazette on 6th August 2021. In the case in question, the company proposes the modification of the articles relative to the system of majority of the General Meeting as well as the system for partner exclusion. In this article, we shall analyse the question of the partner exclusion.

Article 35 of the bylaws of said company establishes the following:

  • “1.- The following will be grounds for partner exclusion:”
  • c) “refusal or non-fulfilment of the obligation to transfer membership interests due to the exercise of a right of acquisition by another partner or partners…”
  • “4.- In the specific case of exclusion of a partner on the grounds established in section 1.c) due to the omission of the obligation to transfer membership interests, the amount to be reimbursed to the excluded partner as reimbursement for their redeemed membership interests may be paid to said partner at the discretion of the company in: (i) cash and/or in kind; and (ii) on a deferred basis within the calendar year following the resolution to redeem their membership interests”.

With regard to the obligatory transfer, article 10 of the bylaws provides as follows:

  • “1.- When a partner,”… “acquires a participation in the capital of the company of 50% or more, they shall be entitled to acquire the remaining membership interests in the company in their entirety”.
  • If the other partners do not transfer their membership interests, the provisions on the exclusion of partners apply.
  • The price of the acquisition of the membership interests shall be “the reasonable value thereof, reasonable value being deemed to be the book value from the most recent balance sheet approved by the General Meeting. Likewise, the acquisition price must be paid in full in cash, unless otherwise agreed by the parties, although it may be deferred for a maximum of one year as from the date of granting the public deed documenting the transfer, under the terms and conditions freely determined by the acquiring party”.

The registrar suspended the registration for the following reasoning:

It is not possible for the “payment of the price of acquisition of the membership interests in the event of obligatory transfer to be deferred for a maximum of one year as from the date of granting the public deed of transfer” and neither is it possible to defer reimbursement for one year in the event of exclusion “because given the analogy of the obligatory transfer with the exclusion of the partner, and this being a consequence of the non-fulfilment of the obligation to transfer the exclusion of the partner, the deferral of the payment for one year of the price of the membership interests is incompatible with the term established in article 356.1 of the Spanish Companies Act (Ley de Sociedades de Capital – LSC) for reimbursing the excluded partner with the value of their membership interests, without the bylaws being able to impose delays upon the partner in realising the equity value of their membership interests as indicated in the resolution of the General Directorate of Legal Security and Public Trust of 23rd November 2020”.

An appeal was filed against the registrar’s decision.

The Directorate General recognised that the Directorate General itself “has emphasised that even if, as a matter of principle, no delays can be imposed on the partners when it comes to realising the equity value of their membership interests (cf., with regard to the reimbursement of the value of the participation of the excluded partner and of the partner exercising the right of separation, article 356 of the LSC), it is equally true that an excessively rigorous application of this principle can leave unfulfilled the corporate interest served by the legal and statutory limitation on the transferability of the membership interests”. Likewise, it stated: “and, therefore, provided that there is no legal rule imposing payment in cash (cf., for “mortis causa” transfers, article 110 of the LSC), those deferral clauses that do not contradict the principles configuring the limited liability company and which are compatible with the reasonable structure of both interests should not be rejected.”

And with regard to the case at issue, it considered that “the clause under discussion establishes an obligation to transfer company membership interests, which, in reality, is a consequence of the preferential acquisition right over all of the remaining company membership interests attributed to the partner who becomes the holder of a certain percentage of the company capital, so that it falls within the scope of voluntary transfers by “inter vivos” acts and not within the field of compulsory transfers”. “And precisely because of this particular structure of the preferential acquisition right of membership interests, the consequences that would derive from the indiscriminate application of the exclusion of partners cannot be transferred”. Thus, without needing to prejudge the scope of article 356.1 of the LSC, “it is justified that in the event of non-fulfilment of the obligation to transfer their membership interests (under conditions of deferral of payment of the price that must be considered lawful according to the aforementioned doctrine of this Directorate General), the exclusion of the defaulting partner is imposed, in accordance with the bylaws and with the consent of all the partners, as a penalty under the same conditions as when reimbursing the value of the membership interests that would have been transferred if the obligation had been complied with”.

It concludes that for these reasons it must be considered that the specific clause now being examined, which requires the defaulting partner to defer payment for one year, does not exceed the general limits to free will and establishes a system that does not disrupt the realisation of the equity value of the membership interests with an objective difficulty that is practically insurmountable. On the other hand, if, due to the circumstances of the specific case, the deferral in the payment or reimbursement of the value of such shares could imply an excessive or abusive obligation for the shareholder, or a prejudice to third parties, the possible judicial control of this point will be left open, taking into account such circumstances.

Finally, the Directorate General upheld the appeal relating to the deferral of the payment of the transferred shares.

 

Vilá Abogados

 

For more information, please contact:

va@vila.es

 

17th September 2021