Right Of Separation Due To Lack Of Dividend Distribution

Right of separation due to lack of dividend distribution

Introduction

The Capital Societies Law (hereinafter, LSC) introduces, after the 2011 partial reform, the 2007/36/EC of the European Parliament and the Council in the Spanish legal system. Through it, article 348 bis is incorporated into the LSC and, therefore, the shareholder’s right to separate from the company if dividends are not distributed, under a series of conditions that will be in detail reviewed later. The right of separation due to the lack of dividend distribution is born in order to avoid the abuse of law that derives from the systematic treasurement of benefits, via increased reserves, by the social majority, which will seek to perceive such remuneration forother ways other than the distribution of dividends such as mere belonging to the administrator body. 

With such behavior an obvious detour of the heritage mass of society is achieved, to the detriment of the social minority. This concludes, therefore, the protective nature of the art. 348 bis LSC against abuse at the time of distribution of revenue by those who, within a company, hold the majority capital. In this work, Chapter I of Title IX of the Capital Companies Law will be analyzed, and more specifically the right of separation of the partner/shareholder due to the lack of dividend separation.

Developing

The dividend is configured as the main source of remuneration of shareholders or partners, and it is these who must approve the distribution of them.

Most frequent, there are benefits, the administrator or administrator body proposes the distribution of dividends, as well as the amount to be distributed. However, a series of assumptions that prevent the distribution of dividends can be given.

On the one hand, there may be the case in which there are benefits from the past exercise, but there are negative results of previous years. Given such circumstances, the surplus value generated in the present must serve to compensate for such past losses, in accordance with article 273 LSC, since there can be no distribution of dividends if the company’s net is negative.

However, even having benefits and there are no losses of past years, it must, however, be partially or totally assigned to reservations, depending on a series of limitations to the distribution of revenues. First, article 326 of the Capital Companies Law states that for the company to distribute dividends once the capital is reduced, it will be necessary for the legal reserve to reach ten percent of the new capital. Therefore, a minimum of 10 % of the benefits destined for the reservations for legal requirements are required. On the other hand, the statutes can set, without contravening the legal norm, a percentage of the benefits that must be used to increase their own funds, so that as much as that figure is exceeded, the excess amount can be distributed in the form of dividends. In addition, partners can agree on the stipulation of a certain amount of these benefits as a voluntary reserve, already exceeded the compulsory 10% threshold and the statutory percentage, if any.

Finally, it should be noted that, by virtue of what is stipulated in article 278 of the LSC, any distribution of dividends that contravene what is established in the text of said standard must be restored by the partners who perceived it, with the corresponding legal interest,When society can prove that they knew the irregularity of the distribution or that, given the circumstances, they could not ignore it.

The right of separation in the Capital Societies Law.

The Capital Societies Law provides, in its title IX Chapter I, the possibility that a partner requests the return of its shares or participations to the company. That is, the right to make the partner his shares or shares, being the company who acquires them in exchange for the corresponding economic value. This right corresponds to the so -called separation right, it is collected in articles 346 LSC and following, and operates only under certain circumstances that said norm meets and will be developed below.

Separation by legal causes.

Article 346 LSC includes the power or right of the partner to abandon its participant status when the administration bodies carry out a decision that entails a significant impact on the future of their activity. States the precept mentioned that the different cases of separation will be applicable for those partners who had not voted in favor of the corresponding agreement, including the members without vote. Therefore, it is legal requirement that the position of the partner who wants the separation is consistent with his prior vote. To meet this requirement, the partner may carry out the separation in the following cases, which operate both in corporations and limited liability:

1. In case of substitution or substantial modification of the corporate purpose.
2. Extension of society.
3. Society reactivation.
4. Creation, modification or anticipated extinction of making accessory benefits, unless contrary disposition of the statutes.

There are, however, within the article 346 LSC, a series of nuances to the newly exposed cases.

In the first place, the separation can be exercised, within a limited liability company, by that partner who has not voted in favor of the Agreement for the Modification of the Transmission Regime of Social Participations. This assumption is deduced as a concretion of the generic statement, since the condition of not having voted in favor of the corresponding agreement is specified, in this case that the subject subject to vote is, specifically, the modification of the transmission regime of the transmission of the transmission of the transmission of the transmission of thesocial participation.

On the other hand, article 346 LSC also allows the exercise of the right of separation in the case of transformation of the company and transfer of the registered office abroad, although Law 3/2009 of April 3, on structural modifications ofCommercial companies, concrete that may exercise it in accordance with the provisions of limited liability companies.

Separation by statutory causes.

The principle of autonomy of the will is reflected, also in matters of separation, in article 347 of the Capital Companies Law, stipulating that the Statutes may establish other causes of separation other than those collected in said law. This precept also grants broad freedom when defining the conditions for separation in these cases, by leaving the arbitration of the partners, through the statutes, the way in which the existence of the cause must be accredited, theway to exercise the right of separation and the term of its exercise.

Finally, article 347 LSC states, in a new manifestation of the principle of autonomy of the will, that the incorporation into the bylaws, as well as the modification or suppression of these statutory causes of separation, the consent of the totality of the totality of the totality of thepartners. Finally, clarify that in no case none of the causes of separation legally established by article 346 LSC may be suppressed.

To the legal and statutory causes of separation, it is added, after the partial reform of the Law of Capital Societies through Law 25/2011 of August 1, a new cause: the non -distribution of dividends, as an assumption enabler for separationof the company by the minority partner.

The right of separation due to the lack of dividend distribution.

The lack of dividend distribution is configured, by virtue of article 348 LSC BIS, as another budget that enable the partner, under certain conditions, to exercise their right to separation from the company. The precept was introduced to the order through Law 25/2011, of August 1, on the partial reform of the Law of Capital Societies and the incorporation of the 2007/26/CE Directive, of the European Parliament and the Council, ofJuly 11, on the exercise of certain rights of the shareholders of traded companies.

In essence, article 348 LSC allows the partners of a non -quoted company, constituted more than 5 years ago, separate from it if the general meeting does not agree on the distribution of at least the third of the legally distributable benefits,generated by the exploitation of the company’s corporate purpose, in the form of dividends.

Nature.

From a formal point of view, the right to obtaining revenues via dividends is an abstract right, both as long as it is not intended to suppress the competence of decision making about how and to what extent the result of the result of theexercise, which corresponds to the General Meeting. The Board is free to exercise such competence, but it must take into account that the decision you decide to carry out may be triggered from consequences such as the separation of one or more partners. What does, therefore, this article 348 LSC is to limit the discretion of the Board when deciding how the result of the fiscal year will be applied. 

That is, that the Board, and, specifically, the majority partners take into account the scenario that could cause not distributing dividends, and society has been perfectly sanitized and once the legal and statutory reserves have been treated,Being this lack of distribution, then, an abusive action with the sole objective of oppressing the social minority. Therefore, it is possible to affirm that the purpose of this precept is not the granting of a right to the minimum dividend, but to provide the partner of a defense mechanism against the abuse of law derived from the non -distribution of revenues in the absence of legitimate cause.

The right of separation due to lack of dividend distribution is inderogable, as well as the right of generic separation, and that is, being a method of defense of the minority against the power and weight of the social majority, it would be meaningless to grantTo this majority the possibility of suppressing this right, since this would entail the total defenseless. It cannot, therefore, be repealed or omitted by majority by means of the corresponding agreement.

However, it must also be analyzed if, through the statutes or the parasocial pact, it is possible to suppress this right, as well as if the minority partner can renounce the same. In the statutory case, the answer to the issue does not vary: the right of separation due to lack of distribution of revenues cannot be omitted or suppressed, or difficult to exercise through the corresponding modification of the statutes, since in this way it would be violated,Once again, the ultimate goal of the same: serve as a counterweight to the majority.

Regarding the resignation by the partner himself, certain nuances can be made. The a priori resignation is not considered valid, since the partner can only give up what is the holder, as indicated in article 6.2 of the Civil Code. There could be, therefore, a generic resignation to exercise the right included in article 348 bis LSC. Based on this precept, instead, the renunciation has been given afterof separation for a specific case.

Finally, in relation to the collective resignation of all partners through a parasocial pact, it should be noted that this is valid, attending not to the right of companies, but to the right of contracts and the autonomy of the will. In this way, everything that the partners agree will link them so that, if they breach their word, their action will constitute abuse of law to go against their own acts and good faith. However, it is necessary to refer to article 29 of the Capital Companies Law, which refers to the so -called reserved pacts. This precept declares that the pacts that are remained reserved among the partners will not be opposable to society. Reference is made, as can be seen, at the beginning of contractual relativity, so that the agreements carried out by two parts will link only to those parties, and in no case third parties external to the relationship, such as society.

The right of separation in the LSC. 2011 until today.

 Conditions for recognition.

Article 348 bis LSC establishes a series of requirements from which the right of separation is recognized and recognized due to lack of dividend distribution: at least five years have passed from the registration of the company in the commercial registry (RM onwards);That the distribution of at least 33 % of the legally distributable benefits derived from the company’s activity;And finally, that the partner in question has voted favorably to the distribution of revenue. Next, these three requirements will be analyzed in depth.

Course of five financial years from registration in the Mercantile Registry.

The first consideration to take into account for the consideration of this right of separation is the personal horizon established by the art. 348 bis LSC when conditioning the exercise of this right to have at least five economic years since the registration of society in the RM. The expression from that the precept uses, presents a great lack of clarity. However, it is understood that the right of separation arises from the fifth exercise, including it, so it can be exercised whenever benefits have been obtained in the previous year, it will be during the fifth when the application of the result obtained will be decidedThe fourth exercise.

Not agreed distribution of at least one third of the legally distributable benefits.

This postulate establishes a quantitative border for the recognition of the right of separation, that is, that in Board it is not agreed to distribute in the form of dividends, at least, a third of the benefits obtained by society through the exploitation of itshabitual activity that are legally distributable. It is reference, therefore, to the benefits obtained exclusively in an ordinary way. There are no take into account, therefore, those benefits whose origin is extraordinary, that come from sources other than the usual activity of the company.

With legally distributable benefits, article 348 bis LSC refers to the net benefits of society, or what is the same, the benefits resulting from the tax deduction and the exclusion of the amount corresponding to the reserves, both legal and statutory,If there were.

conclusion

Finally, as the last of the conditions imposed by article 348 bis of the Capital Societies Law to obtain legitimation to exercise this right, the partner must have voted in favor of the distribution of social benefits. Although the normative precept refers to active conduct (the partner who had stated in his act (…) will have the right of separation in the event that the General Meeting did not agree on the distribution as a dividend …), it is oversizedthat the partner may also exercise this right if he has voted against the application of the benefit decided by the majority of the Board, it is not necessary that a specific vote be made to the payment of dividends. 

What the article in question seeks, in particular, is that it is recorded by the position of the partner in favor of the distribution of dividends, either through a vote favorable to the distribution, or through a vote against the application of the application of thelegally distributable benefit to items other than the distribution of dividends. In the latter case, it is highly recommended that the partner demands that the disagreement of the same is recorded with the destination given to the result, as well as his favorable position regarding the distribution of dividends.

There is, regarding this requirement, a special problem: the one referring to the partners without vote. The art. 348 bis LSC does not pronounce about this type of partners, although the art does so. 346 LSC, which grants, in effect, the right of separation to those partners who have not voted in favor of the corresponding agreement, including the members without a vote. Likewise, it is understood that, by analogy, that members without vote can also exercise separation due to lack of dividend distribution.