Can shareholders alter the proportion between the nominal value of shares and voting rights in Spain?
Published on 28th Jun 2022
The general rule is that there is one vote for each share, however, there are certain mechanisms to alter the proportionality between the nominal value and the voting rights.
In Spain, mechanisms to achieve the alteration of the proportionality between the nominal value and the voting rights of shares in companies are different, depending on whether the company is a private limited liability company or a public limited company.
Private limited liability companies
Article 188 of the Capital Companies Act (Ley de Sociedades de Capital) (the "LSC") provides that, unless otherwise provided in the company bylaws, each share grants its holder the right to cast one vote. Consequently, and in sensu contrario, the shareholders may amend the bylaws to regulate a different system.
The administrative jurisprudence is consistent in this sense, as the General Directorate of Legal Security (Dirección General de Seguridad Jurídica) (formerly known as the General Directorate of Registry and Notary Publics (Dirección General del Registro y Notariado)) has ruled on different occasions in favour of registering articles of incorporation that alter the proportionality between nominal value and voting rights.
Public limited companies
Article 96.2 LSC expressly prohibits the possibility of altering the proportionality between nominal value and voting rights, either directly or indirectly, except in the following cases:
- Limitation of the exercise of voting rights: article 188.3 LSC provides that the bylaws may determine the maximum number of votes that may be cast by a single shareholder (and companies related to it). Consequently, under the terms of this article, it would be possible to limit and reduce the number of votes that a shareholder (and the companies related to it) may exercise, without prejudice to the nominal value of its shares; and
- Double voting shares for loyalty: article 527 ter and following establishes that, in listed companies (only), the bylaws may establish that, for shareholders holding shares for a minimum period of two years, the exercisable voting right of such shares may be twice their nominal value.
The LSC sets out regulatory differences for each type of company. In limited liability companies it allows objectively the alteration between voting rights and nominal value, while in public limited companies it only allows an alteration subjectively (taking into account the shareholder and, if applicable, the length of time he/she has held such shares).