The disengagement of a partner from a business corporation implies their definitive separation from the company. However, there are various opinions about the exact moment when the separation of partners occurs, and the Supreme Court, in various judgments from the year 2021, defines this issue. In this post, we analyze what the right of partners’ separation is, the causes that trigger it, and when it takes effect.
What is the right of partners’ separation?
The right to separation is a way to protect minority partners of a business corporation and guarantees the right to voluntarily terminate their relationship with the company due to certain causes established by law or by the company’s bylaws.
The right of partners’ separation is regulated in Article 346 of the Capital Companies Law. The causes that trigger the right of separation of partners are as follows:
- Substitution or substantial modification of the corporate purpose.
- Extension of the company beyond its expiration.
- Reactivation of the company.
- Creation, modification, or early extinction of the obligation to provide ancillary benefits, unless the bylaws provide otherwise.
- In limited liability companies, there will also be the right of separation for partners who did not vote in favor of the agreement to modify the transfer regime of social shares.
- In cases of transformation of the company and relocation of the registered office abroad, partners will have the right of separation as established in Law 3/2009, of April 3, on structural modifications of business corporations.
- Other causes established in the company’s bylaws.
When does one lose the status of a partner after exercising the right of separation?
The problem arising from the exercise of the right of separation of partners lies in determining the moment from which that separation becomes effective. In this regard, the Capital Companies Law does not specify anything about it. This moment has been determined by various judgments of the Supreme Court in the year 2021. Specifically, the judgments of the Supreme Court 4/2021 of January 15, 46/2021 of February 2, 64/2021 of February 9, and 102/2021 of February 24.
We must start from the fact that when a partner decides to exercise their right of separation regulated in the Capital Companies Law, that right could be effective at three moments:
- When the partner communicates to the company their willingness to exercise the right of separation.
- When the company receives the communication from the partner.
- When the reimbursement of the partner’s share is paid or deposited, that is, when the partner receives the settlement. This is known as the reimbursement theory. When a partner separates from a company, they have the right to receive a reimbursement of their shares. If the partner and the company do not agree on the value of the shares, they must be valued by an expert designated by the Commercial Registry at the request of the company or any of the partners.
The Supreme Court judgments we have mentioned analyze similar cases and apply this latter criterion (the reimbursement theory) to determine the moment when a person ceases to be a partner in a business corporation.
The Supreme Court considers that the communication from the partner and its receipt by the company are part of the partner’s separation process and that it is only with the payment to the partner of the value of their share when their relationship with the company is terminated. Until this payment occurs, the partner retains all their rights and obligations.
In the Supreme Court judgments we have cited, there is a dissenting opinion from a magistrate who expresses their viewpoint. This magistrate argues that the moment of the loss of the partner status should be the date on which the partner’s communication of their willingness to exercise their right of separation is received by the company or on the date of the judgment that declares the exercise of separation and condemns the company to pay the credit.
In conclusion, if a partner of a business corporation wants to exercise the right of separation regulated in the Capital Companies Law or if a partner wants to sell their share, it is necessary to seek the assistance of a law firm with an expert team in commercial law that analyzes the case, determines if any of the separation causes regulated in the law or bylaws apply, and proceeds to process the separation.