Law 25/2011 of August 1, partially reforming the Spanish Capital Company Act and incorporating Directive 2007/36/EC of the European Parliament and of the Council of July 11 on the exercise of certain rights of shareholders in listed companies, which became effective on October 2, 2011, introduces the Article 348 bis into the Capital Company Act, thus recognizing the shareholder’s right to dissociate in case of non-distribution of dividends.

The novelty introduced by the abovementioned article is that, from the fifth financial year since the incorporation of the company on, the shareholder who has voted in favour of the distribution of the profits will have the right to dissociate if the general meeting does not agree with the distribution as dividend of at least one third of the legally distributable ordinary profits from the running of the corporate purpose obtained during the previous financial year.

The deadline to exercise the right to dissociate shall be one month starting from the holding date of the annual ordinary general shareholders’ meeting.
As an exception, the Law states that this right will not be applicable to shareholders of listed companies.

It is worth remembering that, if no agreement is reached between the company and the shareholder on the reasonable value of the stocks or the shares, or on the person(s) who will assess them and on the procedure to follow for their assessment, the stocks or shares will be assessed by an account auditor different from the company’s, designated by the trade registrar of the registered office at the request of the Company or of any of the holders of the participations or of the shares subject to assessment.

Definitively, this novelty in legislation is a step forward in the defense of the minority shareholder’s rights, which are frequently unprotected vs. abusive and/or bad faith actions by majority shareholders. To date, it was usual that, in the event of a conflict between the shareholders, the one who held the majority refused to reach an agreement regarding the distribution of dividends in order to weaken the minority shareholder, the majority shareholder receiving some profit through the salary or through related-party transactions. Consequently, the minority shareholder is forced to sell and / or to stop exercising his political and economic rights in order to recover at least part of the value of his investment. Notwithstanding the above, it is true that in these cases the minority shareholder could already claim his dividend right before the law courts, and that many verdicts recognize this right.

With this change, the faculty of decision regarding the distribution of the dividends still goes to the majority of the share capital, but the minority shareholder could exercise the right to dissociate in those cases in which the company / majority shareholders refuse systematically and without motive to distribute at least part of the profit.

Álvaro Marco