Modifications in the maximum term for the payment of dividends

The new wording of Article 276 of the Capital Companies Law

On the 29^th December, 2018, Law 11/2018, of the 28^th December, was published in the Official State Gazette, with entry into force on the day following its publication, which modifies, amongst other things, the Companies Law of Capital in the sense of modifying Article 276, relating to the time and manner in which the payment of the dividend must be made.

The new draft of article 276 of the LSC is transcribed below.

MODIFICATION OF THE NEW DRAFT OF ARTICLE 276

The modification consists in the addition of a third section by which the maximum term for the full payment to the partners of the agreed dividends is limited to twelve months, a term that is counted from the date of adoption of the agreement by the board.Although as indicated in the second section of the article in question, the dividend is payable from the day following the adoption of the agreement, the board for operational reasons and / or social interest can adopt the regulation on the payment procedure in the agreement of such dividends and even the deferral or postponement and even its division.

We see the this modification as reasonable, since from a legal perspective nothing can be hindered if the board agrees to a deferment of payment, but with a time limit that perhaps exceeding twelve months may be excessive.

RECOMMENDATION

Our recommendation, after the new wording of Article 276 LSC, is, not to exhaust that term as much as possible.

Nor do we see any legal inconvenience for the board to agree on a fractionation of the payment, although, as the new wording points out, it must have been paid in full (“full payment”) before twelve months.We consider that, for greater transparency, and to avoid suspicions and even risk of claims or challenges, said agreement must be based on objective reasons such as, among others, operational processes to materialize the effective payment, liquidity or treasury available in the Society, without this coming to suppose a situation of abuse of right.

Therefore, we recommend that said deferment or fractionation agreement be explained and justified adequately in the corresponding resolution of the Shareholders Meeting or Partners.It must be taken into account that this modification will be applicable for the fiscal years that begin as of January 1, 2018, as established by the transitory provision of the aforementioned Law 11/2018.

“Article 276. Moment and manner of payment of the dividend.

1. In the dividend distribution agreement, the general meeting will determine the time and manner of payment.
2. In the absence of a determination on these particulars, the dividend will be payable at the registered address as of the day following the agreement.
3. The maximum term for the full payment of the dividends will be twelve months from the date of the agreement of the general meeting for its distribution. “