Usufruct of shares: rights of the bare owner and the usufructuary
In the corporate life of public limited companies, we often encounter the existence of a real right of usufruct over certain shares. This is usually, but not always, preceded by inheritance processes within family companies.
When there is a usufruct of shares, two profiles come into play: the bare owner and the usufructuary. In this regard, the following basic rules should be borne in mind with regard to the company:
- The status of shareholder resides in the bare owner for all legal purposes and, therefore, the bare owner has the right to vote in the corresponding General Shareholders’ Meetings to which he/she is called. However, it is important to follow the provisions of the Articles of Association, because they can alter this rule, establishing that the usufructuary is also the one who exercises the right to vote or to participate in the liquidation quota.
- Notwithstanding the above, the usufructuary’s right to “use and enjoy the share” means that he/she will be entitled to receive the dividends that the company decides to distribute during the period of usufruct. This right to receive the dividends by the usufructuary, unlike what is explained in the previous case, cannot be altered by the Articles of Association, and is therefore of a mandatory nature.
- A particularly interesting case with respect to the usufruct of shares that should be taken into account in M&A transactions is that the usufructuary has the right to demand compensation for undistributed ordinary profits from the bare owner upon termination of the usufruct. And, although this is an internal issue concerning the relationship between the bare owner and the beneficial owner, it may be the hidden cause of a greater reluctance to sell all or part of the company.
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