Withdrawal and exclusion of members in a Spanish SL: grounds, procedure and valuation of shares

The Spanish Companies Act (Ley de Sociedades de Capital, LSC) offers two ways for a member to leave a Spanish limited company (sociedad limitada, SL) without selling the shares to a third party: the withdrawal right (derecho de separación), exercised by the member, and exclusion (exclusión), resolved by the company. In both cases the departing member is entitled to the fair value of the shares, set by agreement or, failing that, by an independent expert appointed by the Commercial Registrar.

Withdrawal and exclusion of members: what is the difference?

The withdrawal right allows a member to leave the company when a statutory or articles-based ground arises, usually a shareholders' resolution that changes the terms on which the member joined. Exclusion is the company's decision to remove a member for conduct specified in the law or in the articles. Both share the valuation, repayment and capital reduction rules of articles 353 to 359 LSC. Outside these two routes, a member who wants to leave an SL must transfer the shares under the articles or article 107 LSC.

What are the statutory and articles-based grounds for withdrawal?

Article 346.1 LSC gives the withdrawal right to members who did not vote in favour of the resolution, including non-voting members, in four cases: replacement or substantial change of the corporate purpose; extension of the company's term; revival of the company; and creation, amendment or early termination of ancillary obligations (prestaciones accesorias), unless the articles provide otherwise. In an SL, a change to the rules on transfer of shares is added under article 346.2 LSC. For structural changes, article 346.3 refers to Royal Decree-law 5/2023 of 28 June.

The articles may add further grounds. Article 347 LSC requires them to state how the ground is proved, how and within what period the right is exercised, and requires the consent of all members to add, amend or remove them.

When does a failure to pay dividends give a right to withdraw?

Article 348 bis LSC, as currently worded after Law 11/2018 of 28 December and Royal Decree-law 7/2021 of 27 April, grants this right if four cumulative conditions are met:

• The fifth financial year since the company's registration with the Commercial Registry has ended.
• The member has recorded in the minutes a protest that the dividends declared are insufficient.
• The general meeting does not resolve to distribute at least 25% of the previous year's legally distributable profits.
• The company has made profits in each of the three previous financial years.

The right does not arise if the dividends paid over the last five years amount to at least 25% of the legally distributable profits for that period. The member has one month from the annual general meeting to exercise it, under article 348 bis.3 LSC.

The rule applies unless the articles provide otherwise, and removing or amending it later requires the consent of all members, unless those who do not vote in favour are given a right to withdraw, under article 348 bis.2. Paragraph 5 excludes, among others, listed companies and companies in insolvency proceedings.

How is the withdrawal right exercised?

Article 348 LSC requires resolutions that trigger the withdrawal right to be published in the Official Gazette of the Commercial Registry (BORME). In an SL, the directors may instead send a written notice to each member who did not vote in favour. The member must exercise the right in writing within one month of publication or receipt of the notice.

On what grounds and by what procedure can a member be excluded?

Article 350 LSC allows an SL to exclude a member who wilfully fails to perform ancillary obligations, and a member-director who breaches the non-compete prohibition or has been ordered by a final judgment to compensate the company for acts contrary to the law or the articles or carried out without due diligence. Under article 351 LSC, the articles may add other specific grounds with the consent of all members.

Exclusion requires a resolution of the general meeting, and the minutes must identify the members who voted in favour, under article 352.1 LSC. In an SL, article 199(b) LSC requires at least two thirds of the votes attached to the shares into which the capital is divided. The affected member cannot vote and his or her shares are disregarded, under article 190 LSC.

If the member holds 25% or more of the capital and does not accept the exclusion, a final court judgment is also needed, except for a member-director ordered to compensate the company, under article 352.2 LSC. If the company does not bring the claim within one month of the resolution, any member who voted in favour may bring it on the company's behalf, under article 352.3.

How are the departing member's shares valued?

Article 353.1 LSC sets the standard of fair value (valor razonable): the real economic value of the shares, which does not necessarily match their nominal or book value. The company and the member may agree that value, or the person and procedure to set it. Failing agreement, the shares are valued by an independent expert appointed by the Commercial Registrar of the registered office, at the request of the company or the affected member.

The expert issues the report within two months of appointment at the latest, serves it through a notary and files a copy with the Commercial Registry, under article 354 LSC. The expert's fee is borne by the company, although in an exclusion the company may deduct from the repayment a share proportional to the excluded member's stake, under article 355 LSC.

How is the member paid and how are creditors protected?

The member is entitled to payment at the registered office within two months of receiving the report. After that period, the directors deposit the amount in the member's name with a credit institution in the municipality of the registered office, under article 356 LSC.

The company may acquire the shares, with shareholder approval and funding from profits or freely distributable reserves, under article 140.1(d) LSC, or cancel them by reducing capital. Once payment or deposit is made, the directors execute the deed of capital reduction or acquisition without a further shareholders' resolution and without the departing member's participation, under articles 358 and 359 LSC.

Where capital is reduced, article 357 LSC applies the regime for return of contributions: under article 331 LSC, the repaid member is jointly and severally liable for company debts incurred before the reduction became enforceable against third parties, up to the amount received and for five years. That liability does not arise if the company sets up an undistributable reserve of the same amount, under article 332.

When should this be addressed in the articles or the shareholders' agreement?

Articles-based grounds for withdrawal and exclusion require the consent of all members, under articles 347.2 and 351 LSC. They are best agreed on incorporation or when an investor comes in, while all members are negotiating together, along with the decision on article 348 bis.

The shareholders' agreement may supplement the articles with call options and valuation procedures, but article 29 LSC prevents private agreements among members from being enforced against the company. We discuss these clauses in our guide to the shareholders' agreement, and exit through the winding up of the company in our guide to dissolution and liquidation.

Frequently asked questions

Can a member leave a Spanish SL without cause? Not as a general rule. Outside the withdrawal grounds, the member must transfer the shares under the applicable rules, unless the articles prohibit transfers and therefore grant a right to withdraw at any time, as article 108.3 LSC requires.

Is voting against the dividend enough to withdraw for failure to pay dividends? No. Article 348 bis LSC requires the member to record in the minutes a protest that the dividends are insufficient and to exercise the right within one month of the annual general meeting.

How RCM Legal helps with member withdrawal and exclusion

These exits usually become difficult at three points: a 348 bis protest that is not recorded in the minutes, the exclusion of a member holding 25% or more of the capital, which requires going to court if the member does not accept it, and the valuation of the shares, where the economic dispute is concentrated. A missed one-month deadline closes the route and leaves the member with nothing but negotiation.

At RCM Legal, our corporate lawyers in Murcia advise members who want to withdraw and companies that need to exclude a member, from the general meeting through to repayment, for companies in the Region of Murcia and across Spain, through our commercial law practice and our lawyers in Murcia. Tell us about your case.