Amendment of Article 348a on the right to separate members in the event of failure to distribute dividends

On 29 December 2018, Law 11/2018 of 28 December was published in the Official State Gazette, amending the Companies Act, the Commercial Code and the Audit Act.

This article focuses on the change in Article 348 bis of the Law on Corporations regarding the right to separation of shareholders, leaving the various amendments to the Laws indicated for later articles.

Therefore, by virtue of the introduction of Law 11/2018, the new Article 348 bis of the Law on Corporations represents the following:

• It clarifies that the rule is dispositive, i.e. the law allows the company’s statutes to suppress or modify the shareholder’s right of separation for lack of distribution of dividends. For companies already in existence prior to the amendment, the consent of all shareholders will be required, unless the right to separate from the company is recognised for a shareholder who has not voted in favour of the agreement.
• Only the shareholder who had recorded his protest against the insufficiency of the recognised dividends in the minutes of the general meeting shall have the right to withdraw.
• The period for exercising the right of withdrawal shall be one month from the date on which the Ordinary General Meeting was held.
• Both ordinary and extraordinary profits shall be computed.
• A right of separation will also be recognised for the parent company. This avoids that the dominant shareholder does not agree to distribute dividends in the subsidiaries.
• In order to avoid the compulsory purchase of the shares of the minority shareholder who wishes to separate, at least 25% of the legally distributable profits of the previous year must be distributed, and not one third as previously stipulated, provided that profits were obtained during the previous three financial years. In other words, apart from reducing the minimum percentage of profits, it makes it conditional on profits having been obtained during the three previous financial years.
• Even if the two requirements of the previous section are met, the minority partner cannot exercise the right to separation if the total of the dividends distributed during the last 5 years is equivalent to at least 25% of the legally distributable profits registered during those years.
• Specific rules are established for the parent companies of a corporate group regarding the consolidated profits attributed to the parent company.
• They exclude from their application not only listed companies, but also companies whose shares are admitted to trading in a multilateral trading system, certain bankruptcy situations and sports corporations. With regard to the latter, the exemption is justified because the members of these entities do not acquire the shares in the expectation of dividends, but do so for reasons related to the sustainability of the club, both at the economic and sporting level.

The reform improves regulation by allowing the agreement to be reversed and by averaging the dividends distributed over the last five years. The Commercial Department of AddVANTE is at your disposal to advise you on the convenience of regulating the possibility of suppressing or regulating the right to separation of the partner in the Articles of Association.