During 2023, jurisprudence was established regarding the shareholder’s right to dividends, which we find it convenient to review, considering the current dates and the proximity of the approval of the natural exercise by many companies.

The shareholder’s right to dividends is nothing more than the right to participate in the profits of the company, and the Supreme Court Judgment dated January 11, 2023, has been relevant insofar as it determined that, along with the request for the annulment of the social agreement regarding the allocation of profits, it is also possible to additionally request the condemnation of the company to a certain distribution among the shareholders.

Thus, the Judgment focuses primarily on the behavior of the majority in adopting the agreement regarding profit distribution, that is, whether the non-distribution responds to a reasonable need to accumulate profit by the company imposed abusively by the majority to the detriment of the minority shareholder.

Therefore, since the reasonable need for non-distribution of dividends has not been proven, the criterion set forth by the Supreme Court in the Judgment is that “the annulment of the social agreement must be followed by the condemnation of the company to distribute the unjustifiably retained profits since otherwise the persistence in abuse could not be effectively prevented,” thus appealing to the effective judicial protection of the minority shareholder.

However, it is also true that it is not structured as a generalized possibility to exercise in the face of any lack of distribution, as in the cases that have set precedent, the factual conditions are very similar in order to determine:

  1. If there is a reasonable need to accumulate profits, that is, if it is an agreement that does not respond to a reasonable need of the company that hoards funds excessively and without justification (results of which, in that specific case, it was not necessary to retain since the Company itself had more than enough own funds to be able to face any type of obligation it might be subject to);
  2. if the lack of distribution agreement really responds to an interest of the majority shareholder and, therefore, to a personal interest and not to a social interest (in the factual case, the company financed the majority shareholder, whose remunerated administrative body benefited from that financing, and who, consequently, was interested in retaining the profit); and
  3. if unjustified harm is caused to the other shareholders, depriving them of any economic return (in the specific case, the minority shareholder had been dismissed as an administrator, whose position was remunerated, therefore, having ceased to receive any amount both as remuneration and dividends, while the majority shareholder always benefited from that financing).

For all these reasons, in order to determine how to proceed in the closing of exercises and distribution of results, a case-by-case analysis must be carried out, and a detailed study conducted.

At addwill, we are at your disposal if you need more information or wish to receive advice on mercantile matters. Do not hesitate to contact our experts from the department via phone at 934 875 200, email at comunicacio@addwill.eu, or by clicking here.