A basic requirement to exclude a shareholder from a company in Spain is the resolution of the General Meeting. Except in the case of the conviction of a managing shareholder to indemnify the company, the exclusion of a shareholder holding 25% or more of the shared capital, in addition to the resolution of the general meeting, requires a final judgement, when the shareholder acts contrary to the agreed expulsion.
Legal and statutory causes of the exclusion of a shareholder
The Corporation Act in Spain states that limited liability companies may exclude shareholders who voluntarily fail to comply with the obligation to perform additional services. The law also outlines the possibility of expelling a managing shareholder who violates the prohibition on competition or has been condemned by final judgement to indemnify the company for damages caused by acts contrary to law, the bylaws of the company or that were made without due diligence.
These legal grounds under the Corporations Act are only applicable in the field of limited companies. Therefore, in the context of a corporation, the bylaws of the corporation must expressly provide the legal cause for exclusion.
Moreover, the bylaws of a limited or capital company can establish certain grounds for exclusion. As long as all the shareholders consent, the shareholders may incorporate causes of exclusion into the bylaws, as well as modify or eliminate any causes that already exist.
Standing to exclude a shareholder
Any shareholder who voted for the exclusion resolution is entitled to initiate an exclusion action on behalf of the company, when the shareholder has not been excluded within one month from the date of the adoption of the exclusion resolution.
It is worth noting that when a shareholder is excluded, the shareholder must be paid the value of their shares (in the absence of a resolution, the value is fixed by an auditor appointed by the commercial registry). The company can claim compensation if the shareholder has caused damages to the company.
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