Curso de Español en Ingles

LESSON 9: PARTNERS´LEGAL STATUS

1. - Partners’ rights

Shares and equity participations contain the rights and obligations.

a) Political rights:

1.-Right to attend the general meeting (art. 179.2 LSC). The articles of association of a public LLC may require the ownership of a minimum number of shares (cannot exceed one per thousand of the share capital).

2.-Voting rights: granted by each share or equity participation must be proportional to its par value (each share or equity participation grants one vote). May be modified in the articles of association.

• The articles of association of a public LLC may establish the minimum number of shares that a shareholder must own in order to exercise the voting right and the maximum number of voting rights which one shareholder can have.

• The articles of association of a private LLC can break the proportionality between the par value of each equity participation and the voting right. They can also limit the number of voting rights which one partner can have.
• Public and private LLCs can issue shares or equity participations without voting rights (arts. 98 to 103 LSC).

Shares and equity participations without voting rights grant their owners some economic privileges:

1.-The right to receive an extra dividend (fixed or variable), together with the dividend which corresponds to ordinary shares or equity participations.

2.-The right to receive the liquidation dividend before the partners owning ordinary shares or equity participations.

3.-In the case of capital decreases due losses, shares and equity participations without voting rights are not affected unless the reduction exceeds the par value of the ordinary ones.

3. - Right to information:

Necessary for exercising the voting right.

• In public LLCs, shareholders can request any kind of information. During the general meeting, the shareholders are entitled to verbally request any information or explanation related to the items on the agenda. If the administrative body cannot provide the required explanation or information at that moment, it will have to be provided within the following seven days after the general meeting (art. 197 LC).
• In private LLCs, partners are allowed to request in writing before the general meeting, or to request verbally during the meeting, any information or explanation related to any item on the agenda (art. 196 LSC).

The administrative body is entitled to refuse the request when it can damage the company’s interests. In any case, the information cannot be refused when it has been requested by partners who represent 25% of share capital.

4. - Right to challenge resolutions of the general meeting.

In order to protect all the stakeholders’ interest, the art 236 to 241 of the LSC set out a specific procedure to render resolutions:

 - null and void (those which go against the law or public order): The legal action to challenge them should be taken within a year after the date of the resolution

- annullable (those which go against the company’s articles of association or affect the company interests for the benefit of one or more partners or third parties): the deadline for challenging is 40 days and can only be made by partners attending the general meeting who have stated for the record their opposition to the resolution.

b) Economic rights:

5.- Right to receive the dividend:

Partners are entitled to receive an annual dividend, unless otherwise provided in the articles of association (art. 275 LSC). This depends on different circumstances: there must be earnings at the end of the fiscal year and the general meeting has to decide whether to distribute these earnings or reinvest them in the business. Unless there is a resolution of the general meeting deciding the distribution of earnings, partners do not have the right to obtain a dividend.

Each partner receives a dividend in proportion to their contribution to share capital and the general meeting must set out the method and moment of payment, or the dividend is payable at the company’s registered address the day after the resolution of the general meeting deciding the distribution of the dividend. The right to receive the dividend agreed in the general meeting will expire after five years from the date of the resolution

6.- Right to receive the liquidation dividend:

The liquidation dividend is distributed in proportion to each shareholder’s contribution to share capital, unless otherwise provided by the articles of association (art. 392 LSC).

c) Mixed rights

7.- Preferential subscription rights of new shares or preferential assumption rights of new equity participations: existing partners must exercise the preferential subscription right of new shares or preferential assumption right of new equity participations within 15 days from the publication of the announcement of the capital increase in the BORME in the case of listed companies, and within one month among the other companies (arts. 304 to 308 LSC).

d) Minority partners’ rights

The following rights are granted to partners owning shares or equity participations which represent 5% of share capital:

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