Control-Enhanced Mechanisms in Spain: Non-Voting Shares, Loyalty Shares, and the Implementation of the Directive on Multiple Voting Rights

Abstract

This article analyzes the legal framework governing control-enhanced mechanisms under the Spanish Companies Act (Ley de Sociedades de Capital [LSC]) and examines the practical experience of Spanish public companies. As a general rule, the governing principle is proportionality, meaning that the law presumes a correlation between risk, profit and power of each shareholder. Although the default rule concerning shareholders’ rights is equality, the law allows for the creation of shares with different economic rights, while remaining stringent with regard to the introduction of differentiated voting rights. Non-voting shares are permitted, but they remain uncommon; as for loyalty shares, just four companies have opted into the regime. Accordingly, in transposing the Directive, the Spanish legislator will face several obstacles and legislative amendments will be required. The LSC distinguishes between public companies (sociedades anónimas, S.A.) and private limited liability companies (sociedades de responsabilidad limitada, S.L.), adopting a differentiated approach to shares carrying different voting rights. Perhaps the time has come to abandon certain entrenched dogmas.