You're a shareholder in a Spanish company. The company has been making profits for years, but the shareholders’ meeting never agrees to distribute dividends. Instead of receiving your share of the profits, you see them consistently allocated to voluntary reserves or other purposes. Do you simply have to accept this situation? The answer is no.
Article 348 bis of the Spanish Companies Act (Ley de Sociedades de Capital (LSC)) grants shareholders a right of withdrawal/separation in certain circumstances. If minimum dividends are not distributed, you may be entitled to leave the company and recover the value of your shares or participations. That said, the process demands certain formalities and is subject to strict deadlines. Let’s take a closer look at how it works.
Written by Abigail Sked
Legal Advisor
Abigail Sked, Legal Advisor (Subtitles available in English and Spanish)
Article 348 bis sets out four key substantive requirements:
Five financial years since incorporation: the right cannot be exercised until five years have passed since the company was registered at the Commercial Registry.
Profits in the previous three financial years: the company must have reported profits in each of the last three financial years.
Failure to distribute a minimum of 25%: if the general meeting does not approve the distribution of at least 25% of the legally distributable profits from the previous year, the shareholder may withdraw.
No average distribution of 25% over the last five years: if, over the previous five years, the company has distributed an average of at least 25% of distributable profits, the right does not arise.
Your limited company is ten years old, has generated profits in the last three financial years, and at the most recent general meeting it was decided not to distribute any dividends, allocating all profits to reserves. If the company has not distributed at least 25% on average over the previous five years, you may exercise your right of withdrawal.
If the company fails to comply, you may take legal action to claim reimbursement.
Spanish courts have clarified several important points:
The right does not apply only to shareholders who vote in favour of dividend distribution, but also to those who oppose allocating profits to reserves and expressly request dividends (Supreme Court Judgment 663/2020).
Shareholder status is retained until the reimbursement amount has been paid or deposited (Supreme Court Judgment 64/2021).
Case law and legal doctrine also stress the requirement of good faith. The right cannot be exercised abusively. For example, if the company convenes another meeting before you notify your withdrawal and proposes a dividend distribution, you would not be entitled to withdraw on the basis of a lack of dividends (Supreme Court Judgment 38/2022).
The right of withdrawal does not apply in certain cases, including:
Listed companies.
Companies in insolvency proceedings.
Certain financial institutions.
Statutory exclusion: the company’s articles of association may exclude this right, provided the legal procedure is followed and dissenting shareholders are given the opportunity to withdraw at the time of the amendment.
A shareholder who disagrees with the lack of dividend distribution may also challenge the resolution adopted by the general meeting. These are two different routes:
Challenging the resolution seeks to have the decision not to distribute dividends declared null and void.
Withdrawal allows the shareholder to exit the company and recover their investment.
Both options are compatible, although they serve different purposes.
The right of withdrawal due to a lack of dividends is a powerful tool to protect minority shareholders. However, it requires precision: objecting at the general meeting, serving notice correctly and on time, and acting in good faith.
For companies, it represents a potential financial risk if dividend policy is not properly planned. For shareholders, it can be the way out when profit distribution is systematically blocked.
At Conesa Legal, we can assist you whether you are a shareholder looking to exercise this right or a company needing to manage the process correctly.
Have you been going years without receiving dividends from your company? Don’t let it slide. The right of withdrawal is a valuable but highly procedural mechanism. Get in touch with us and we’ll help you protect your interests.