In 2011, a right of separation of the shareholder in the event of non-distribution of dividends was introduced in the LSC (except in listed companies), in order to protect the minority shareholder from the reiterated agreement of the majority not to distribute profits, but to transfer them to reserves or leave them pending application.
Its purpose is to prevent the minority shareholder from being trapped in a company that systematically refuses to distribute dividends.
However, this right was temporarily suspended, so that it has been applied in leaps and bounds (from 2-10-2011 to 23-6-2012, and again from 1-1-2017), being suspended again as a consequence of the state of alarm declared by COVID-19, from 14-3-2020 to 31-12-2020 (RDL 8/2020 art.40.8 redacc RDL 25/2020).
For general meetings held as from 30-12-2018 (date of entry into force of the amendment made to LSC art.348 bis by L 11/2018 art.2.six - trans.disp.and final.disp.7ª), and unless otherwise provided in the bylaws, the right of separation is governed by the following terms:
- The fifth fiscal year must have elapsed since the registration of the company in the RM;
- the shareholder must have recorded in the minutes his protest against the insufficiency of the recognized dividends;
- the general meeting did not have to resolve to distribute as a dividend at least 25% of the profits obtained during the previous year that are legally distributable.
- Profits must have been obtained during the 3 previous fiscal years; and
- the total dividends distributed during the last 5 years must not be equal to at least 25% of the legally distributable profits recorded during that period.
As a special feature, when the company is obliged to prepare consolidated accounts, then, unless otherwise provided for in the bylaws (clarification added by RDL 7/2021), the same right of separation must be recognized for the shareholder of the controlling company when these two requirements are met:
- The general meeting of the aforementioned parent company does not resolve to distribute as a dividend at least 25% of the consolidated profits attributed to such parent company for the previous year, provided that they are legally distributable; and
- consolidated profits attributed to the parent company had been obtained during the previous three fiscal years.
In any case (i.e., whether or not the company consolidates accounts), the period for exercising the right of separation for this reason is one month from the date of the date of the corresponding ordinary general meeting of shareholders.
It must be exercised in writing (LSC art.348.2). For purposes of proof, it is convenient to leave a record of the sending of the corresponding communication to the company (e.g., by means of a bureaufax or notification through a notary).
The right of separation culminates after a process of valuation of the shares or holdings (in the absence of agreement, by an independent expert), and the effective payment to the separate shareholder of the value of its participation, which may imply for the company the reduction of capital or the acquisition of its own shares or holdings (treasury stock) (LSC art.353 s.).
