Abogados y Economistas


Spanish companies obliged to pay dividends to the minority shareholders

Grupo Gispert - Bosco de Gispert Segura

The right of separation of the shareholders under article 348 bis of spanish law on corporations. (1)

The reform of the Spanish Law on Corporations carried out by the Law 25/2011, Agust 1st developed the Directive 2007/36/EC, of the European Parliament and the Council, July 11th and introduced a right of separation in favor of the shareholders in the event of a lack of distribution of dividends. Such right was included in the new article 348 bis. However, from 24 June 2012 to 31 December 2016 the application of the reform was suspended by the government. So far, the legislator has not passed a new suspension of the application of the reform, therefore in 2017 such new article 348 bis and the right contained therein, are in force again.

The aim of this new law is to avoid the infringement of the minority shareholder’s right to perceive the earnings of the company and avoid situations of unfairness by the majority group of shareholders. Such situation takes place when the Shareholders Meeting, despite the existence of profits, decides not to distribute dividends among the shareholders against the opinion of the minority shareholders.

Due to the fact that article 348 bis, before its suspension, was in force from 2 October 2011 to 23 June 2012, there was enough time for courts to issue rulings (2) about the application of the article. Those rulings may be useful now that the article is in force again.

According to those judgments, the following requirements will have to take place so that the shareholder is entitled to exercise the right of separation:

  1. 5 business years need to have elapsed since the registration of the company at the Commercial Registry.

Such requirement shall affect to all non-listed companies that were already incorporated at the time of the entry into force of the article 348 bis. Based on a grammatical interpretation, the judicial rulings establish that the decision of distributing the dividends must be taken on the sixth year.

  1. The shareholder must have voted in favor of the distribution of dividends.

Only the shareholders who vote in favor of the distribution of dividends, those who vote against its retention or those shareholders who have been illegally deprived of the right to vote, are entitled to exercise the right of separation. In the event that the distribution of dividends is not included on the agenda of the meeting, but the destination of the profits to the reserve account does, in order to be entitled to exercise the separation right, the shareholder must have voted against such destination of the profits to the reserves account. Also, such circumstance must be reflected at the shareholders meeting minutes.

Furthermore, the judgments establish that the following shareholders are not entitled to exercise the right of separation of the article 348 bis:

  1. Those who do not attend to the meeting in which the decision on the destination of the profits is taken.
  1. Those who are defaulting any kind of payments regarding the shareholder condition.
  1. Those who decide not to vote and those who vote in blank.
  1. Those who have shares without vote.
  1. That the shareholders meeting does not distribute dividends of at least a third of the profits arising of the business exploitation on the previous year.

In accordance with the interpretation of the courts, the lawmaker refers to the profits arising of the ordinary activity of the company, therefore excluding extraordinary profits and capital gains that may be reflected in the accounting records.

  1. The profits need to be legally distributable

In the event that there is a legal limitation on the company, like for instance the need of covering losses or funding legal or statutory reserves, it is allowed not to distribute profits.

On the other hand, regarding the formal issues of the exercise of the right of separation, the rulings establish the following:

  1. The term for the exercise of the separation right shall be counted as from the date of the holding of the the shareholders meeting in which the decision has been taken.
  2. The right shall be exercised by means of a written communication. The shareholder is free to choose any of the means valid to submit communications to the company: either a letter or by electronic means. Such communication will have to be sent to the company and will be effective from the moment of its reception, without being necessary any acceptance by the company.
  1. The effects of the exercise of the right of separation shall be those established for the common separation procedure of the Spanish Corporations Law. According to which, firstly, shares are valued by the company and the shareholder by mutual consent. If they do not reach an agreement, the valuation of the shares is carried out by an auditor (external to the company) named by the Commercial Registry, upon the request of any of the parties.

The importance of the new article 348 bis lies in the effects that it may have in situations of conflict between majority and minority shareholders. The majority shareholders will not be able to stop distributing dividends without the risk of triggering the separation of the minority shareholders, who will sell their shares at a market price. Such market price is usually higher than the price that the majority shareholders are willing to pay in a negotiation. Thus, this means that the law is providing an extra protection for the minority shareholders.


(1) “Real Decreto Legislativo 1/2010, de 2 de julio, por el que se aprueba el texto refundido de la Ley de Sociedades de Capital.”

(2) Among others, Judgement of Commercial Court No. 1, Donostia/San Sebastián, S 30-3-2015, No. 97/2015, No. 187/2014; Judgement of Commercial Court No. 9, Barcelona, S 25-9-2013, No. 704/2012; Judgement of Commercial Court No. 12, Madrid, S 15-12-2014, nº 212/2014, No. 429/2013 y Judgement of Commercial Court No. 1, Barcelona, S 21-6-2013, No. 63/2013.

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