The Concept and Contents of Partnership Agreements in Spain
Partnership agreements can be defined as those agreements or contracts between some or all the partners of a commercial company – corporate or limited– and whose main purpose is to establish a series of internal rules and principles that govern the relationship of the partners amongst themselves and with the company, as well as to establish the mode of organization and functioning of the company.
In the end, a partnership agreement is an extremely effective instrument for privately governing the life of a commercial company, aside from its by-laws or legal regulations. Accordingly, it must be kept in mind that commercial legislation is, in some aspects, quite rigid and limited. For this reason, partnership agreements help to complement, solidify, amplify, and even avoid, the legal rules and statutory provisions applicable to a company and its partners.
It must be added that partnership agreements benefit from their private and confidential nature, such that their content does not have to be advertised or known by third parties, unlike a company´s by-laws.
The validity of these agreements is widely accepted by the Spanish legal system. Furthermore, they are not subject to any specific regulation so that, in theory, the parties are free to establish the clauses and agreements that they deem convenient, whenever they are not in direct contradiction to the law, or the moral or public order (article 1.255 of the Spanish Civil Code).
Content of the Partnership Agreements
Within the partnership agreement there are multiple agreements and clauses that the contracting parties can include: the casuistry is practically unlimited. That being said, the different types of clauses and agreements can be grouped into three main categories:
These are agreements that specifically regulate reciprocal relationships between partners, so that, in principle, they do not directly affect the company. The common examples in this category are those related to the preferential acquisition rights of the partners´ over shareholdings or shares, joint-selling rights with other partners (drag along or tag along rights), lock-up obligations (consisting of establishing a minimum period for tenure for certain partners in the company), dividend redistribution clauses on a basis different from those provided for in the by-laws, clauses for the valuation of shares, etc.
These agreements are those in which the partners assume specific commitments to the company, granting it certain advantages or rights. Some illustrative examples include additional financial obligations of the partner (loans, additional capital contributions, reintegration of social equity in the case of loses, etc.), the commitment to abstain from competing with the company, the granting of exclusive sale or brokering rights with respect to the products of the partners, or the lending of services from the partners to the company.
These agreements are of the greatest importance to a company since they focus mainly on regulating its day-to-day operations and decision-making, although, precisely for this reason, they are at the same time the most conflicting agreements from a juridical standpoint. The typology is vast and include: agreements regarding the composition of the board of directors, agreements regarding quorums and necessary majorities for the valid adoption of company agreements (especially with respect to any statutory modification), agreements regarding the company’s development policies (business plans, future financing, policies for the distribution of benefits), arbitration agreements for resolving dead-lock situations, agreements regarding information that should be provided to the partners, agreements regarding the dissolution of the company and causes for urging such dissolution, etc.
This article is not considered as legal advice