The usufruct of participations or social shares and their liquidation
The holder of a right to usufruct over any movable or immovable property has a real right of enjoyment or enjoyment over another’s property, that is, it holds the right to obtain its fruits or yields.
Art. 127 of the Ley de Sociedades de Capital (LSC) regulates the usufruct of participations or social shares, granting the usufructuary the right to dividends agreed by the company during the term of the usufruct.
However, the partner will have the quality of bare owner of the shares or shares subject to usufruct therefore, unless otherwise provided in the bylaws , will hold the rest of the rights inherent to its social participation. The usufructuary must facilitate the exercise of said rights.
For the constitution of a usufruct right over a certain share capital, the provisions of the LSC and the bylaws must be followed.
In the relations between the usufructuary and the bare owner, what is determined by the constitutive title of the usufruct will govern and, failing that, the provisions of the LSC and, additionally, the provisions of the Civil Code.
Regardless of the fact that in subsequent publications reference is made to the problems or special circumstances that may occur during the term of the usufruct of shares or social shares, in this publication I have decided to focus on the usufruct liquidation process. Well, as we are going to see, given the economic consequences of the process, it is a particularly sensitive moment for the parties involved.
Once the usufruct has ended, and unless its constitutive title provides otherwise, the liquidation of the usufruct is generally governed by the following rules (LSC art.128 and 131.2), depending of the time or cause of termination:
The usufruct ends in the term agreed between the parties
The usufructuary may demand from the bare owner the increase in value experienced by the usufruct shares as a result of the benefits obtained by the company during the usufruct period.
Only profits from the operation of the company must be taken into account (not extraordinary profits, regardless of their nature) and provided they appear in express reserve accounting items of the company (tacit reserves are excluded, which do not appear on the company’s balance sheet).
The company is dissolved while the usufruct is in force
The usufructuary may demand from the bare owner the part of the liquidation fee equivalent to the increase in value of the usufruct shares, extending the usufruct to the rest of the the settlement fee.
We must bear in mind that the usufructuary may only exercise this right against the bare owner, not against the company.
The rules of the Capital Companies Law applicable to the liquidation of the usufruct are very general and may be too imprecise. Reason why sometimes the parties do not agree on setting the increase in value of the usufruct shares.
What to do if there are discrepancies between the parties to determine the increase in the value of the beneficial interests?
The legal solution lies in entrusting its setting to an auditor other than that of the company, appointed for this purpose by the commercial registrar of the registered office , at the request of any of the interested parties and at the expense of both.
To avoid unnecessary conflicts, it is recommended that, analyzing the needs of the specific case, in the constitutive title of the right of usufruct, all aspects are foreseen and regulated, in relation to the validity or extinction of the right of usufruct, susceptible to generating controversies between the parties. In fact, it is general advice in our mercantile department.
Regarding corporate shares, we can ask ourselves what happens with the usufruct of shares that have not been fully released?
In the usufruct of shares whose full value has not been paid up (for this reason not released), the bare owner will be obligated to the company to make the payment of the part not disbursed. Once the payment has been made, you will have the right to demand from the usufructuary, up to the amount of the fruits, the legal interest on the amount invested.
If the owner knot fails to comply with its disbursement obligation, the usufructuary may do so, without prejudice to recurring against the owner knot at the end of the usufruct.