Article 348bis of the LSC protects the right to receive dividends, not the shareholder's right to withdraw.

The right of separation of the shareholder in the event of non-distribution of dividends, provided for in Article 348 bis of the Capital Companies Act, has given rise to numerous controversies in its application since its entry into force.

The aforementioned article establishes the right of shareholders to withdraw when the following circumstances apply: (i) the company has been registered in the Mercantile Register for five years; (ii) the General Meeting has not resolved to distribute dividends of at least twenty-five per cent of the profits obtained in the previous year, provided that profits have been obtained during the three previous years; (iii) the shareholder who wishes to exercise his right has stated in the minutes his protest at the failure to distribute dividends and; (iv) the right of withdrawal is exercised within one month of the date of the ordinary general meeting.

However, although the circumstances for its application are legally established, one of the main problems that has arisen has been the use of this means as a mechanism by shareholders to orchestrate their exit from the company.

As a result of this and the abuse by the partners to pressure a possible exit from the company, even to the detriment of the company itself, the Supreme Court in its Judgment of 25 January 2022, in which it states:

"Like any other right, the partner's right to withdraw from the partnership must be exercised in accordance with the requirements of good faith art. 7.1 CC) and without abuse of rightsart. 7.2 CC).

The purpose from Art. 348a LSC is to enable the exit of the minority shareholder harmed by an abusive strategy of the majority not to distribute dividends. This does not cover the reverse situation, where it is the minority shareholder who, under the guise of a failure to distribute the profit, seeks to circumvent his duties of good faith towards the company to which he is bound by the company contract".

Therefore, the purpose of the provision is not to protect the shareholder's right of withdrawal, but to protect the right to a dividendIt is necessary for its application that the exercise by the partner is made in good faith.

On the other hand, the Judgment ruled on another issue that may arise from the application of the aforementioned provision and that is the possibility of subsequently agreeing on the distribution of dividends at the General Meeting, revoking what was previously agreed and, in this way, annulling the possibility of the shareholder exercising the right of separation.

In this regard, the Supreme Court states that there is no objection to a general meeting overruling what has previously been agreed by another general meetingThe company, however, points out that "the subsequent agreement is only effective from the moment it is adopted and does not eliminate the effects already produced by the previous one, especially when it has generated rights in favour of bona fide third parties.". Therefore, it again refers to the good faith on the part of the shareholder in the exercise of this right in order to determine the validity of its application.  

In summary, it could be concluded that, although all the legally established requirements are met for the right of separation to be exercised in the event of non-distribution of dividends, each case must be analysed on the basis of good faith and the lack of abuse of rights by the exercising shareholder, as this cannot be used as a simple mechanism for exiting the company.

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February 10, 2024
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