Right of exclusion of a partner

Right of exclusion of a partner

In the context of commercial companies, disagreements between partners are relatively common and can generate conflicts that affect the management and operation of the business. In this context, the right to exclude a partner arises, which constitutes the company’s ability to terminate the corporate relationship with a specific partner.

Generally, in corporate decisions, the group holding the majority has the power to determine the management of the company. Consequently, to exercise the right of exclusion, it is necessary to obtain the agreement of the majority of partners, ensuring that the decision is made legitimately.

It is worth noting that the exclusion of a partner is specifically regulated by law. However, the law also allows, in general, the articles of association of capital companies to establish specific causes for exclusion, providing companies with some flexibility to define internal rules tailored to their structure and particular needs.

Right of exclusion: causes for partner exclusion

There are various specific legal situations that may justify the exclusion of a partner, thereby protecting the company’s interests.

Article 350 of Spain’s Ley de Sociedades de Capital (LSC) specifically identifies the following causes for partner exclusion: the voluntary failure to fulfill ancillary obligations, the breach of the non-compete prohibition by a partner who is also an administrator, and a final judgment requiring the partner to compensate the company for damages caused.

1. Regarding the first cause, failure to meet obligations, this occurs when a partner does not comply with the duties inherent to their status, whether by action or omission. This includes, for example, the failure to perform ancillary obligations established in the company’s statutes or internal agreements.
2. In other cases, a partner who serves as an administrator and violates the non-compete obligation may be subject to exclusion. This is because the law requires those managing the company to act with loyalty, avoiding any activity that could conflict with the company’s interests.
3. Finally, liability for damages constitutes another legal cause for partner exclusion. If a partner-administrator is condemned by a final judgment to compensate the company for damages caused by acts contrary to the law, the company’s statutes, or for failing to act with the required diligence, this constitutes a justified cause for exclusion.

Partner exclusion under the Spain’s Ley de Sociedades de Capital (LSC)

The Spain’s Ley de Sociedades de Capital (LSC) allows that, in addition to the legally established causes of exclusion, the company’s statutes may include, modify, or remove other specific causes of exclusion, as provided in Article 351. However, any such modification requires the unanimous agreement of all partners, ensuring that changes are made consensually.

Article 352 of the LSC regulates the exclusion procedure, establishing that, as a general rule, a resolution of the General Meeting of partners is required to carry it out. The meeting minutes, or an annexed document, must record the identity of the partners who voted in favor of the resolution.

Finally, the law also provides special conditions depending on the partner’s shareholding. When a partner holds 25% or more of the company’s share capital, their exclusion requires, in addition to the General Meeting’s agreement, a final judicial ruling, unless the partner voluntarily accepts the exclusion.

Lawyer for partner exclusion

Having a specialized lawyer is essential when handling a partner exclusion process, as their advice allows the company to identify and properly substantiate the legitimate causes for exclusion and ensures that the General Meeting’s resolution is correctly adopted, significantly reducing the risk of future challenges.

Additionally, the intervention of a professional ensures that the exclusion is executed in accordance with the law, protecting the company from potential internal conflicts and preventing decisions that could lead to legal disputes.