Limited Liability Companies (Sociedades de Responsabilidad Limitada (S.L.s) in Spanish) are one of the most common forms of business in Spain. These entities offer a number of advantages, such as limited liability for the partners and flexibility in business management. In an S.L., as in any type of company, it is essential to protect the rights of all partners, including minority shareholders.
Written by Abigail Sked
Paralegal
In this post we provide you with a list of the minimum rights that must be respected for minority shareholders in a Limited Liability Company in Spain, along with other relevant information such as who exactly these rights belong to and possible exceptions.
Right to request that a General Meeting be called:
- One or more shareholders representing at least 5% of the share capital may compel the directors to convene a General Meeting.
Right to attend the General Meeting.
Right to have the minutes of the General Meeting notarised:
- Shareholders representing at least 5% of the share capital may demand the presence of a notary to draw up the minutes of the General Meeting.
Right to obtain certification of corporate resolutions and minutes of shareholders' meetings.
Right to information and to obtain documentation:
- All shareholders may request such reports or clarifications as they deem appropriate regarding the matters included on the agenda.
- The directors shall be obliged to provide the information requested of them, unless, in the opinion of the board, disclosure of such information would be detrimental to the corporate interest. If the request for information is supported by shareholders representing at least 25 % of the share capital, the directors may not refuse to provide the information requested.
Right to examine accounts:
- Shareholders representing at least 5% of the share capital may, unless otherwise stated in the company’s articles of association, examine at the head office, either on their own or together with a qualified accountant, the documents that serve as supporting and background information for the annual accounts.
Right to request the appointment of an auditor:
In the case of companies which are obliged to be audited:
- Any shareholder may request the Commercial Registrar (Registro Mercantil) of the head office of the company to appoint an auditor in the following cases:
- When the General Meeting has not proceeded to appoint him/her before the end of the financial year to be audited.
- When the person appointed does not accept the post or is unable to perform his or her duties.
In the case of companies which are not obliged to be audited:
- Shareholders representing at least 5% of the share capital may request the Commercial Registrar (Registro Mercantil) of the head office of the company to appoint, at the company's expense, an auditor to audit the annual accounts for a given financial year, provided that three months have not elapsed since the end of that financial year.
Right to withdraw from the company
Any shareholder who does not vote in favour of a resolution may exercise the right to withdraw in the following cases:
- Replacement or substantial alteration of the activities of the company.
- Extension of the company.
- Reactivation of the company
- Creation or early termination of the obligation to provide ancillary services, unless otherwise provided for in the articles of association.
- Non-distribution of dividends when there are distributable ordinary profits.
- Transformation of the company and transfer of the registered office abroad.
- Modification of the system for transferring shares in the company.
Right to challenge corporate resolutions:
- Right of shareholders representing individually or jointly at least 1% of the share capital.
Right to bring a corporate action for liability against the administrators:
- Right of the shareholder(s) who individually or jointly hold(s) at least 5% of the share capital.
Right to transfer their shareholdings:
- Limitations to this right may be agreed upon.
Right to distribution of dividends:
- Unless otherwise stated in the articles of association. Dividends shall be paid in proportion to their share in the share capital.
Right to share in the assets resulting from liquidation:
- Unless otherwise stated in the articles of association. This shall be in proportion to their share in the share capital.
Pre-emption rights regarding the creation of new shares in the event of a capital increase.
Voting rights at General Meetings:
- It is possible to create shares without voting rights for a nominal amount not exceeding half of the capital, but they will be subject to a special legal regime (including a privileged dividend).
In summary, minority shareholders in a Limited Liability Company in Spain are entitled to a number of minimum rights that must be respected in order to foster an equitable business environment. These rights include access to information, participation in decision-making, challenging corporate resolutions and the distribution of dividends. These rights provide minority shareholders with the security and protection necessary to participate in the management and profits of the company in a fair and transparent manner.
At Conesa Legal we have a team of employment and commercial lawyers who are experts in the incorporation of companies, in resolving the day-to-day legal queries of companies and in the management of conflicts within companies.
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