Co-ownership of Participations in Spain: Status as Member and The Individual Exercise of Rights

Published on 2 March 2021

When dealing with co-ownership of corporate participations in Spain, in practice there are doubts about whether the co-owners are individually considered members (socios), as well as regarding the way in which to exercise rights inherent to the participations. The ruling handed down by the Spanish Supreme Court on 12 November 2020 clarifies these issues.

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The claimant, his mother and his brother are the owners of 170 participations in an indivisible regime. That is, they are the owners of a group of participations. The claimant requested to receive the dividends for himself, where the distribution of said dividends had previously been approved by the general shareholders’ meeting. The Court of First Instance dismissed the complaint, arguing the ownership of the participations belonged to a “community of assets” (comunidad de bienes) comprised by the three co-owners; this meant that the claimant lacked standing to file the complaint. The Regional Court (Audencia Provincial), in contrast, recognised the consideration of the claimant as an individual member, upholding the appeal.

The Supreme Court confirms in its ruling the interpretation of the Regional Court and recognises that status of member for each of the co-owners. In its reasoning, the Supreme Court indicates that the community existing in the present case is that of “assets” (bienes), which allows for the determination of ownership based on the quota corresponding to each participant and, as such, grants status as a member to each co-owner. This community of assets must be distinguished from the inheritance communities, in which there is an estate with a temporary, indeterminate owner, where the quotas of each co-owner are assigned to the total estate. In this case, it would indeed be the inheritance community which would be the member and not the co-heirs.

In terms of exercising the member rights granted by a co-ownership regime, it should be noted that article 126 of the law establishes that the co-owners must appoint one as representative in order to exercise the member rights. The Supreme Court clarifies that the precept is not intended to govern the co-ownership regime, but to configure the exercising of the rights arising from said status as co-ownerships for the purposes of simplifying the “internal day-to-day of a company.” However, the fact of having to appoint a “spokesperson” to streamline company business does not mean unifying the ownership of the participation. Thus, for the defence of the rights of one of the co-owners it shall perfectly valid that he/she may act individually as a member. This is all the more reason why doing so in claiming the dividends agreed upon and not distributed and, consequently, due to the members, since as established by the Supreme Court, the member would act as a third party in defence of a subjective, financial right independent from the corporate relationship itself, where said member is not obliged to act through a representative.