Press Room

March 06, 2017

From Spain: Shareholder’s Right to Separation Due to a Failure to Distribute Dividends

Jordi Rius - Andersen Tax & Legal, the Spanish member firm of Andersen Global 

Article 348 bis of the Law on Corporations establishing the right of separation for shareholders in the event of a lack of distribution in the form of dividends has finally come into force on January 1, 2017, after more than four and a half years in suspension.

  • The companies affected by this recent amendment are all non-listed capital companies that have existed for at least five years.
  • The minimum dividend to be distributed consists of a third of the company’s operating profit derived from the corporate object from the preceding financial year.
  • The company may refuse to distribute the dividend, but the shareholder affected by this lack of distribution will be entitled to exercise its right of separation at a reasonable value.

Reimbursement of Charges Derived from the Floor Clause

The European Court of Justice (ECJ) ruled on December 21, 2016 that the floor clause is null and void. This ruling is final and cannot be appealed.

Basically, this clause only came into effect when the Euribor (which is the financial benchmark most Spanish lenders take to set variable mortgage interest rates) dropped sharply in 2009. It was only then that consumers began noticing that despite the huge drops in interest rates their savings did not pass onto them.

Spain’s Supreme Court in 2013, in a very controversial and much-criticized ruling, only partially ruled against the floor clause limiting its effects as of May 9, 2013 onward. From a practical point of view, the majority of these clauses had been signed in the boom times (until 2007). Therefore, this ruling made no sense in limiting their effects from 2013 onward.

The ECJ's ruling corrects the mentioned ruling and sets its effects retroactively.

Hence, the Spanish lenders must reimburse charges to all of its mortgage holders affected by the floor clause.

Limitation on the Deductibility of Net Finance Costs

Instead of the traditional thin capitalization rule, there is currently a general limitation on the deductibility of net finance costs (regardless of whether or not the debt is with related parties) that exceed the limit of 30% of operating income (EBITDA) of the year. However, in any case, net finance costs of the tax period of up to €1,000,000 will be deductible. The amount exceeding the 30% limit of operating income can be deducted in the following years, without a deadline, up to the overall limit of 30% of the operating income of the period.

Please contact Jordi Rius at Andersen Tax & Legal in Spain for additional information.