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It is increasingly common to hear figures such as, for example, Shareholders’ agreements, parasocial agreements, extra-statutory agreements, joint ventures, investment agreements, among others. All of them are the most relevant document in commercial transactions of incorporation of companies, investments or acquisitions in which the relations between the shareholders and with the company will be regulated. The shareholders’ agreement (we will call it as referred from now on) is postulated as the most flexible legal tool against the rigour of the articles of association and its compulsory registration in the commercial register and, in addition, it allows maintaining confidentiality.

Firstly, this type of agreement is defined as a consensual contract between the shareholders of a company. Basically, it focuses on regulating how the company and its governance are going to be organised, decision making, the future sale of shares, as well as the alternative solutions to possible future conflicts between the parties, making it a useful instrument for regulating coexistence within the company. The shareholders’ agreement differs from the articles of association in that it is more flexible. The articles of association, the content of which is imperative and regulated, rule the most important aspects of the company’s operation. The articles of association are conditional on the autonomy of will since they must be registered in the commercial register with the limitations that this entails.

In contrast to the articles of association, the nature of the shareholders’ agreement is contractual, allows to agree issues not included in the articles of association because of a matter of confidentiality or because they are not registrable in the commercial register. The shareholders’ agreement is not enforceable against non-signatory third parties, nor against the company (unless it also signs the agreement), being valid and enforceable only between those who sign it, including before the courts, as long as the limits of the autonomy of will are respected, it means that they are not contrary to law, morality or public order. In any case, however, they must regulate their relationship with the aforementioned articles of association, as well as include commitments to modify them and adapt them in accordance with the wording of the shareholders’ agreement to the extent permitted by law. In the event of a discrepancy between the shareholders’ agreement and the articles of association, it is usually agreed that the first one shall prevail over the latter between the parties whose sign the agreement. Likewise, for this type of shareholders’ agreement there is no standard model to follow, given the flexibility of its content, the adaptability to the specific interest of the parties and the type of business to be developed. In this sense, we must delimit its content from two main perspectives: on the one hand, taking into account the rules that regulate obligations and contracts in civil law, and on the other, the limits imposed by corporate law. In addition, at the time of drafting, the parties should not lose sight of the intention or purpose of the various agreements and seek coherence in the contractual structure by stipulating the prevalence of the shareholders’ agreement as a base agreement over the rest of the agreements that will depend on it. Among the most common agreements included in the shareholders’ agreement are the following:

1.- Relationship agreements: These are those that regulate the relations between the parties, without affecting the company or third parties, binding only the signatories. For example, agreements relating to the distribution of dividends (how much and when); or agreements relating to pre-emption rights, drag along and tag along.

2.- Attribution agreements: In this type of agreement, the parties assume present or future obligations in favour of the company. For example, the commitment to make additional contributions to the company. If it is envisaged as an agreement in favour of a third party, it will be understood to have effect as soon as the company becomes aware of it and accepts it, and can force it. Another example would be the obligation on a shareholder to provide services to the company. However, it is important to bear in mind that if there is a breach by that shareholder, the affected parties may not invoke such breach or set in motion the legal mechanisms for excluding the shareholder who is in breach. In order to achieve this effectiveness, it must be included in the articles of association as an ancillary obligation.

3.- Organizational Agreements: This type of agreement tends to regulate the behaviour of the shareholders within the corporate bodies, the general meeting and the administrative body. It is customary to establish the need for reinforced majorities for the adoption of certain resolutions within the general meeting, with the aim of requiring the vote of one or more minority shareholders in order to reach such an agreement. With regard to the governing body, it is customary to agree in the shareholders’ agreement on the composition and distribution of the members of the body as well as the majorities required for the adoption of resolutions on relevant matters.

For all these reasons, we conclude by highlighting the need to sign a shareholders’ agreement when starting a business project or when new investors join it. It is advisable for the company to sign in order that the clauses within the shareholders’ agreement are enforceable against it. It is also advisable to adapt the articles of association as much as possible to what is contained in the shareholders’ agreement in order to avoid discrepancies, prevalence and conflict within the company or between shareholders.

On 29 December 2018 a new wording of article 348.bis of the Spanish Companies Act (RD 1/2010 of 2 July 2010) came into force, initially introduced by law 25/2011 of 1 August 2011. This provision empowers the minority shareholder of a company to exercise the right of separation in case of failure of distribution of dividends or insufficient distribution of the same.

Requirements for exercising the right of separation

1.- No express waiver on the side of the shareholders to the exercise of this right of separation in the bylaws,

2.- The right of separation can only be exercised after the fifth year since the registration of the company in the Commercial Register,

3.- It will be necessary for the minority shareholder to have formally recorded in the minutes of the meeting his/her protest in relation to the insufficiency of approved dividends,

4.- When the general meeting does not approve the distribution of at least 25% of the profits obtained during the previous financial year, as long as they are legally distributable, that means, that during the three previous years the result for the financial year has been positive.

In this sense, previously a higher distribution percentage was contemplated in the law, more specifically, a third of the operating profits. Currently, however, although the percentage of distribution has been reduced, it is applied to the distributable profits in their entirety, and not on the basis of the profits inherent to the exploitation of the corporate purpose.

We must stress here that the concept of the previous wording of the article has been qualified by the Provincial Court of Barcelona in Judgement 81/2015 of 26 March, under which it was interpreted that the proper result of the exploitation of the corporate object, concept not defined in the General Accounting Plan, encompasses the profit that a company obtain with its ordinary or functional activity, which is what constitutes its corporate purpose. Therefore, extraordinary profits (not derived from ordinary activity) and capital gains are excluded.

In contrast, legally distributable profits include a broader interpretation of the term, in the sense that it includes the maximum that can be allocated and distributed as dividends to the shareholders. Therefore, the result of the financial year includes the operating result but also the financial result, so that in this concept, extraordinary results and capital gains are included (ICAC Resolution of 5 March 2019).

It must be pointed out that this article will also apply to groups of companies, taking into account the result that is included in the consolidated annual accounts.

Relevant aspects

The affected shareholder may exercise the right of separation within one month from the date of the General Meeting by means of a written communication addressed to the company.

The effects that the exercise of the right of separation has in cases of non-distribution of dividends are the general effects established in the Spanish Companies Act. Firstly, the shareholder and the company carry out a consensual valuation of the shares and, secondly, in the absence of an agreement on the value of the shares. In addition, an auditor of accounts, a different one from the company’s is appointed by the Commercial Register at the request of any of the shareholders, in order to value the shares.

Exceptions

The right of separation may not be exercised by the minority shareholder when the dividends distributed during the previous 5 years are more than 25% of the profits of the last 3 financial years.

Conclusion

This new amendment is more flexible than the previous one since it allows for the removal or modification of the right of separation through the bylaws. On the other hand, it extends the rights of the minority shareholder in the sense that, even reducing the percentage of profits to be distributed (from one third provided for in the previous wording to one quarter at present), this percentage is applied to the final result net of taxes and not to the profits derived from the ordinary activity of the company, being, eventually, a higher result.

The purpose of this provision is to protect the minority shareholder’s right to the dividend against possible abuse by the majority of the shareholders. In this sense, it is not allowed to exercise the right of separation in case of not distributing dividends in a single fiscal year, but this right is excluded if the distributed dividends do meet a minimum established during a particular period of time.

In this article, we have highlighted the main features of the new wording of article 348.bis of the Spanish Companies Act. If you have any doubts, you can use the contact area of our website to consult with our Commercial-Corporate department. We will be delighted to assist you.

 

The purpose of this article is to provide information about the main provisions introduced by the recent reform of the Urban Leases Act (LAU).

On March 1^st, 2019, the Government approved the Royal Decree-law 7/2019 on urgent measures in housing and rent, which came into force on March 6^th.

As expressed in the explanatory memorandum of the aforementioned Royal Decree-law, the spirit of this new legal text is to achieve greater legal certainty in leasing legislation and to balance between the lessor and the lessee.

All urban property leases that are signed on or after 6^th March 2019 (inclusive) are subject to the new LAU regime, whose main developments are the following:

1) Duration: This is a key change of this Royal Decree-law; the minimum duration of housing leases is 5 years (previously 3 years), unless the lessor is a legal entity, in which case the minimum duration shall be 7 years.

2) Rent: The parties can freely agree on the rent. However, it is expected that the aforementioned Royal Decree-law will establish reference indices of the price of housing rental that will have to be ready by November 2019. In this respect, it is important to analyse in detail the regulations that could be developed in each autonomous community, because some, as the Catalan, plan to limit the price of rental. For instance, in Catalonia plan give the option to the Barcelona City Hall to do the same in general or in the neighbourhoods considered a “tense market area”.

3) Updating: It is only possible if it has been expressly agreed in the contract and will be subject to limitations, due to the fact that it will not be possible to increase the rent more than annual variation of Consumer Price Index (IPC).

4) Additional guarantee (apart from the legal guarantee so-called “fianza”): For contracts of up to 5 years’ duration, or up to 7 years if the lessor is a legal entity, the value of the additional guarantee may not exceed 2 monthly income payments. This is also a key change of this Royal Decree-law as it is the first time there is a limit for such additional guarantee.

5) Expenses: Real estate management costs and contract formalisation costs will be assumed by the lessor when the lessor is a legal entity.

6) Tax exemption: Leases of housing for stable and permanent use of the tenant are exempted from the payment of the Transfer Tax and Stamp Duty (“Impuesto sobre Transmisiones y Actos Jurídicos Documentados”).

In this article we have highlighted the main provisions introduced by the recent LAU reform. If you have any questions, you can use the contact area on our website to ask our team of specialist lawyers. We will be delighted to assist you.

The new regulation of rescisory remedies in sales contracts, in the new regulation of the Book VI of the Civil Code of Catalonia.

Since the 1st of January 2018, we have a new regulation of two legal figures of the Catalan tradition that is based on the principle of maintenance of balance between the services, in onerous operations with the purpose of transferring goods.

They are the termination due to injury and the unfair advantage that they have, in addition of the unrenounceable character at the moment of conclusions of the contract and that they expire at the head of four years of this conclusion, the following regulation:

Termination due to injury becomes generalist, since all omitted exchange contracts are preached, not only of the purchase and sale of real estate (as until now), and is extended because it is not only a right of the alienator but also of the acquirer.

Essentially, it is defined as the imbalance, at the time of the conclusion of the contract, which confirms that the market value of such service performed is less than half the market value of the service being provided.

The unfair advantage is defined as the imbalance that occurs as a result of a particular situation occurring at the time of the conclusion of the contract, from which derives the inequality between the parties and which affects the performance. These are cases of dependence, spatial relationship of trust, economic vulnerability, imperative need, excessive profit or a manifestly unfair advantage.

The damaged party may request the adaptation of the content of the contract to the contracting practice prevailing at the time of its conclusion and to the requirements of good faith and honesty of dealings in order to avoid termination.

The Government is considering new actions in relation to the rental market.

The most significant proposals are:

1. Extend the term of the mandatory extension of contracts for home rental from 3 to 5 years and the tacit extension from 1 to 3 years, by natural person owners. For legal persons, 7 years of compulsory extension and 3 years of tacit extension.

2. If the property does not give 6 months’ notice before the end of the contract its decision to renew, the contract will necessarily be extended for 3 more years.

3. No additional guarantees can be agreed to the legal deposit of two months of rent.

4. The legal persons owners will have to pay the expenses of the Real Estate management and the formalization of the rental contract.

5. Measures are thought of so that the Town Halls and the Autonomous Communities regulate and limit the “abusive” increases of the prices of the rents in zones declared “very demanded”.

We are looking forward to the results of this study.