Article 348 bis of the Law of Capital Companies, which grants the right of separation of the partners due to lack of distribution of dividends, went into effect in Spain on the 1st of January of 2017.
We briefly note that this article recognizes the right of the partners to separate from the company when it does not agree to distribute dividends in at least a third of the profits. This article arises as an attempt to protect the minority shareholders who are not in agreement with the distribution below that of the legal minimum.
Article 348 bis, which already was suspended, returns, however, as it had initially left: charged with controversy. Its wording is vague and unclear and obliges that judges make extensive and continuous interpretations that are beyond the literality of the article’s content.
One of the doubts that arise with article 348 bis is if it is necessary that the partner, in the vote on the corresponding dividend distribution, shows their position explicitly in order to subsequently exercise the right of separation. A priori, we could state that yes, it is necessary; however, the drafting of the article is not clear and can give way to interpretive errors.
We hereby analyze a hypothetical:
The partner of a Limited Company goes to the general meeting where the distribution of dividends will be decided. A distribution of 20% of the profit obtained in the previous year is proposed. As we can observe, this percentage is less than the legal minimum, a third of it in fact. The shareholder simply votes “NO,” without adding any additional comment and, after fifteen days, they inform the company that they are exercising their right of separation.
Would the exercising of the right of separation by the shareholder be legitimate in this case?
The juridical logic seems to lead to the conclusion that the partner should not be able to enjoy the right of separation in this case. This is due to the legal uncertainty that the absence of an express declaration by the partner, demanding a distribution equal to or greater than one third of the profits, would imply. A mere vote against an agreement, without justification, commentary or explanation, should not be sufficient to exercise the right of separation from the company.
The Provincial Court of Barcelona’s ruling on March 26, 2015 (La Sentencia de la Audiencia Provincial de Barcelona de 26 de marzo de 2015) seems to be expressed along these lines, according to which:
We understand that the right of separation requires that the partner attending the meeting show their position in favor of a dividend distribution in excess of one third of the profits, on one side, and that the Board agree to a different distribution (lower), on the other.
It follows from this decision that, in order for a partner to exercise the right of separation, they must not only position themselves explicitly with respect to the decision of the meeting but must also do so by demanding the legal minimum.
Iñaki Mendiluce & José María Mesa
This article is not considered as legal advice