The minority partner can only have a “partners’ agreement” to protect him. Or a set of Bylaws (less frequent). Their position in the company is usually irrelevant, undervalued and often vilified. However, the law (LSC), on some occasions, contemplates rights according to the percentage of participation.
The following are the rights of the minority shareholder.
1.- What can I do with one (1%) percent of a company’s capital?
|In corporations (In Spanish “Sociedades Anonimas”, SA), the shareholders may request the presence of a notary public at the general meeting.||Art. 203 Capital Companies Law (CCL)|
|To challenge corporate resolutions adopted at the general shareholders’ meeting||Art. 206 CCL|
|To challenge corporate resolutions adopted by the administrative body.||Art. 251 CCL|
|In listed companies, shareholders’ associations that have been formed in the issuing company may request information on the identity of the shareholders, including the addresses and means of contact available to them.||Art. 497 CCL|
2.- What can I do with five percent (5%) of the capital of a company?
In addition to the previous rights, I can also:
|In SA, at the time of incorporation or capital increases, I can request the commercial registrar of the company’s registered office to appoint an expert, at the company’s expense, to value the assets contributed as consideration.||Art. 69 CCL|
|Bringing liability action||Art. 74 CCL|
|To oppose the refusal of the company not to bring a corporate action for liability.||Art. 238 CCL|
|Request the administrators to convene the General Meeting of Shareholders.||Art. 168 CCL|
|In SA, request that a new agenda point to complement the one appearing in the notice of the General Meeting be included.||Art. 172 CCL|
|In Limited Companies (In SpanishSociedades Limitadas, “SL”), request the presence of a Notary public at the General Shareholders’ Meeting to draw up notarial minutes.||Art. 203 CCL|
|Request to the Commercial Registry of the registered office of the entity to appoint an Auditor, in those companies that are not obliged to audit accounts.||Art. 265 CCL|
|In SLs, examine at the registered office the documents that serve as support and precedent for the annual accounts.||Art. 272 CCL|
|In the European Company, to challenge the resolutions adopted by the Administrative Body.||Art. 491 CCL|
|In the European Company, request the convocation of the General Shareholders’ Meeting in Dual System||Art. 492 CCL|
In listed companies, the rights granted to shareholders with a 5% shareholding in SA will be acquired when the shareholders represent 3%.
3.- What can I do with ten percent (10%) of the capital stock of a company?
All the rights of the person who has five percent of the capital stock, and in addition the following…
|The rights of a company that has holdings in another company that exceed 10% of its capital stock are suspended until the company is notified.||Art. 155 CCL|
|In listed companies, the limit for treasury stock is 10% of subscribed capital.||Art. 509 CCL|
4.- What can I do with twenty-five (25%) of the capital stock of a company?
All of the above rights and in addition the following…
|In SA, 25% of capital stock constitutes the quorum limit for the constitution of the General Shareholders’ Meeting.||Art. 193 CCL|
In SA, 25% of the share capital constitutes the quorum limit for the constitution of the General Meeting, in second call, when it is intended to agree on the adoption of certain matters such as:
Increase or reduction of capital and any other amendment to the Articles of Association.
Issuance of bonds.
The suppression or limitation of the pre-emptive right of acquisition of new shares.
Transformation, merger, spin-off or global transfer of assets or liabilities.
The transfer of the registered office abroad.
|Art. 194 CCL|
|In SL there is a right to information (to request the reports or clarifications they deem necessary regarding the matters included in the agenda) without the Administrative Body being able to oppose such request.||Art. 196 CCL|
|In SA there is a right to information (reports or clarifications that they consider convenient about the matters included in the agenda) without the Administrative Body being able to oppose such request.||Art. 197 CCL|
|In SA, 25% of the capital stock constitutes the limit for the adoption of the corporate resolutions referred to in art. 194 CCL. In this sense, the favorable vote of two thirds of the capital present or represented at the meeting will be required when, at second call, shareholders representing twenty-five percent or more of the subscribed capital with voting rights are present without reaching fifty percent.||Art. 201 CCL|
|For the exclusion of a shareholder owning 25% of the capital stock, the agreement of the General Meeting shall not be sufficient when the shareholder is not present.||Art. 352 CCL|
As a general rule, the majority of shareholders who hold less than 51% of the capital stock are unaware of the rights granted to them by law. However, the minority shareholder also has a list of rights that allow him to act in certain situations. If you have any doubts about your rights as a minority shareholder and what you can do, do not hesitate to contact a lawyer.
If this article has been of interest, we also suggest you to read the following article published on our website: What is meant by negligent performance of the directorship?