Article 353 of the Spanish Companies Act (“SCA”) provides for a system of evaluation of the membership interests of a partner subject to exclusion, when no agreement exists between the company and the partner as to how to evaluate membership interests or shares and who should do so. In such cases, this would be an independent expert appointed by the Registrar of the Commercial Registry.
As for the costs entailed, article 355 of the SCA stipulates that “the remuneration of the expert shall be borne by the company” and adds: “Nevertheless, in the event of exclusion, the company may deduct from the amount to be paid to the excluded partner the amount resulting from applying the percentage that such partner holds in the share capital to the fees paid to the expert”.
It is undisputed that the bylaws of limited companies may provide for a membership interest evaluation mechanism in various situations, including the exclusion of partners. In said mechanism it may be envisaged that a fair value of the membership interest is the book value, that is to say that which is taken from the most recent balance sheet passed by the general partners’ meeting; and furthermore, if the affected partner considers that the book value is not appropriate, the partner is entitled to request the intervention of an accounting expert (not necessarily appointed by the Registrar), whose opinion will constitute the final value of the outgoing partner’s membership interests.
The question posed is whether it is legally possible to state in the bylaws that when a partner requests the intervention of an expert, the corresponding costs shall be borne by the partner, and not by the company.
The problem was addressed in a resolution issued by the Directorate General of Legal Security and Public Trust (DG) of 28th August 2023. The Commercial Registrar refused the registration of a part of one of the clauses of the bylaws such as that described above, in which the expenses of the expert valuer were imposed upon the partner who requested the intervention of the valuer, in the event of exclusion of a partner, based upon the provisions of article 355 of the SCA.
The DG revoked the resolution of the Registrar, and allowed the registration of the disputed statutory provision. The reasoning was based on a number of premises:
- The DG has established that the fair value of the shares is the “market value”, (resolution of the DG of 6thFebruary 2020), which must be determined by an estimate, as a market for membership interests does not exist per se. And for such purposes, dynamic and flexible evaluation methods must be allowed. Previously, the resolution of the DG of 9th May 2019 already made clear the possibility of establishing in the company bylaws that in the case of the exclusion or separation of a partner, the value of the membership interests may be the book value resulting from the balance sheet.
- On the other hand, and based upon the principle of free will, the registration of clauses in the bylaws for the valuation of membership interests in the case of voluntary transfer is being admitted, even if the value does not coincide with the value determined by an auditor.
- The bylaw evaluation system is only subject to the limits imposed by usage, good faith and the prohibition of the abuse of rights.
- And finally, it is necessary to consider that article 175.2.b) provides for legal protection for the establishment of evaluation mechanisms in the company bylaws.
The DG considers that the statutory provision refused by the Commercial Registry Registrar is valid and does not contravene the regulation, for the following reasons:
1) Article 355 of the SCA is dispositive, and not imperative, which allows the partners to agree upon something different from what is set forth in said article.
2) The provision of the bylaws does not violate the limits of the autonomy of the parties provided for in Article 28 of the SCA.
In addition to these arguments, it seems reasonable that the cost of the expert is born by the partner who requests it, given that the bylaws (agreed to by the partner) clearly provide for what the value of the membership interests must be in the event of exclusion, (the book value), so that the request by the partner for a revision of this value, considering it to be inadequate, means submitting to a new judgment something which is already initially determined. Even in the event that the expert were to conclude that the book value is greater than the real value, the requesting partner must also bear the expense, in so far as it is the partner who instigates the revision of the amount resulting from the application of the bylaws, and assumes the risk of the result.
We are not of the opinion that the evaluation mechanism provided for in the bylaws is set by the company, as it may be concluded at a glance, but rather that this arises from the will of the partners themselves which is reflected in the bylaws. The will of the partner object of exclusion is also in this initial agreement; and even if the excluded partner was not one of the constituting partners, the same reasoning would apply, given that whoever acquires the membership interest subsequent to the incorporation positively acquires the rights and obligations stemming from the company bylaws, which constitutes among other things an act of affirmation and conformity with the system provided for therein. This opinion is without prejudice to the fact that in some cases the DG has determined the possibility that the partners may go to court to object to the evaluation system of the membership interest provided for in the company bylaws, but this possibility does not detract from the above and it is natural, given that we have already seen how the evaluation provisions of the bylaws are subject to the legal limits of the principle of free will of the parties and the prohibition of the abuse of rights.
Eduardo Vilá
Vilá Abogados
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17th November 2023
