Following latest law developments, Spanish regulation on minimum dividend distribution obligation becomes in force again. Under certain circumstances, if shareholders do not resolve to distribute at least 1/3 of the legally distributable operating profit of the preceding financial year, any shareholder having requested for dividend shall be entitled to claim the right of separation.

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Spanish Companies Act Development- Dec 2016
Minimum Dividend Distribution
Following latest law developments, article 348-bis of Capital Companies Act (CCA) on
minimum dividend distribution obligation becomes in force again.
This provision was passed in 2011 and was in force for a few months, until suspended
through various Decrees until 31st December 2016, when suspension was not renewed,
thus becoming effective again as from 1st January 2017.
Article 348-bis CCA establishes that in non-listed companies with 5 years or more from
registration, if the shareholders do not resolve to distribute, at least 1/3 of the legally
distributable operating profit of the preceding financial year, any shareholder having
requested for dividend shall be entitled to claim the right of separation within 1 month.
Right of separation means that the shareholder is entitled to receive, in exchange for
the shares, an amount equal to the fair market value of that shareholder’s
participation in the Company’s capital. In the absence of agreement on shares value,
valuation must be performed by independent expert appointed by the Companies
Registrar. Separation right implies capital reduction in the Company. This provision was
enacted to stop abuses (“oppression”) of majority groups as shown in jurisprudence.
Needless to say, this shareholder right has important implications in companies with
various shareholders, family-owned companies, companies with Private Equity or
Venture Capital investors, not always well aligned while the matter has not been
addressed properly (e.g. through special shareholder agreements).
Cashflow, investment projects, and even Company continuity are affected, especially
nowadays as raising finance, e.g. from banks, is not always an easy task. It may also
trigger conflicts with minority shareholders; law abuse issues and potential litigation are
likely to arise. This matter must be given due consideration, on or before preparing the
financial statements and proposing the application of year result.
January 2017
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