How to protect retail partners in commercial companies
Commercial companies offer an attractive business structure for entrepreneurs and businesspeople looking to partner up to achieve common business goals.
However, protecting retail partners in these types of entities is crucial to ensuring fairness and security in the partnership.
In this article, we will explore some key strategies for protecting retail partners in business partnerships.
Principle of majorities in commercial companies
Commercial companies are governed by a principle of majorities with which the partners or shareholders who have it control the decisions that are made.
For this reason, normally, minority partners believe that their interests and rights are unprotected in favor of those who do have the majority, due to the fact that they are not part of it.
The Capital Companies Law
However, the Capital Companies Act establishes certain actions to protect the rights of minority partners and shareholders based on their percentage of participation.
Attendance at the General Meeting
According to this Law, which governs companies in Spain, every partner has the right to attend a General Meeting of Partners in the Limited Company.
Likewise, anyone who controls at least 1/1000 of the share capital of the Public Limited Company may also attend ( 179 LSC ).
Furthermore, the partner has the right to request the presence of a notary at the meeting to draw up the minutes of the meeting ( art. 203 LSC ).
Access to information
The partner has the right to obtain documentation and information (if he holds at least 25% of the share capital).
You may also request an auditor (since you represent more than 5% of the share capital).
Challenge social agreements
The minority partner may also challenge corporate resolutions that harm the interests of the company in favor of other partners ( art. 204 LSC ).
Social participation
Along these lines, the minority shareholder can also force the company to acquire their shares:
- When they oppose resolutions of the Board that replace or substantially modify the corporate purpose.
- When a deadline established in the statutes.
- When they are created, modified or extinguished accessory benefits.
- When you vote against the modification of the transmission right or for the non-distribution of benefits.
Other strategies to protect retail partners in commercial companies
1. Clarity in association agreements
The first step in protecting retail partners is to establish clear and detailed partnership agreements from the beginning.
These agreements must address crucial aspects such as the distribution of profits and losses , the responsibilities of each partner, decision-making processes, and conflict resolution.
It is essential that these agreements be drafted by legal professionals with experience in commercial law to ensure their validity and clarity.
2. Equal participation in decision making
It is essential that retail partners have a say in important decisions that affect the company.
This can be achieved through the implementation of governance structures that ensure the equitable participation of all partners in strategic decision-making.
Likewise, mechanisms must be established to resolve any dispute related to business decisions in a fair and transparent manner.
3. Protection of financial interests
Retail partners should have adequate protection for their financial interests in the business partnership.
This may include provisions in partnership agreements regulating the distribution of dividends, the allocation of financial resources and procedures for the departure of partners.
Furthermore, it is essential to implement transparent accounting systems and regular audits to ensure the financial integrity of the company.
4. Transparency and open communication
Transparency and open communication are fundamental pillars for protecting retail partners in commercial companies.
All partners must have access to relevant information about the company's financial performance, business operations and strategic plans.
This helps build trust between partners and reduces the risk of conflict or misunderstanding.
5. Legal protection and Civil Liability Insurance
Retail partners should ensure they have adequate legal protection to mitigate the risk of personal liability for the actions of the business entity.
This may involve establishing the company as a separate legal entity, such as a limited liability company (LLC) or a public limited company (SA), which protects the personal assets of the partners in the event of litigation.
In addition, it is advisable to take out corporate liability insurance to cover possible legal claims.
In conclusion, protecting retail partners in commercial companies requires a comprehensive approach that encompasses legal, financial and corporate governance aspects.
By establishing clear agreements, ensuring equitable participation, protecting financial interests, encouraging transparency and ensuring legal protection, partners can work together effectively to achieve business success while protecting each other.
6. Shareholders' agreements
In addition to all of the above, the use of parasocial agreements may be made.
What are shareholders' agreements?
Expression that has been coined in our doctrine to designate the agreements made between some or all of the partners of a public or private limited company in order to complete, specify or modify , in their internal relations, the legal and statutory rules that govern it.
Parasocial agreements can be grouped into three main categories that authors such as Cándido Paz-Ares (2003) call “ relationship ”, “attribution ” and “ organization ”.
The organizational ones are the most legally conflictive and the ones that should be used in this case.
Shareholder organization agreements
They are called this because they express the will of the partners to regulate the organization, the operation and, ultimately, the decision-making system within the company.
The spectrum of this type of pact is very broad:
- Covenants interpretive of the statutory rules;
- Pacts on the composition of the organ of administration;
- Pacts on the policies to be developed by the company;
- Covenants restrictive of the powers of the administrators;
- Pacts on the modification regime statutory;
- Pacts of arbitration in deadlock situations;
- Pacts on the Information to be provided to partners; on quorums and majorities or to exercise minority rights (Paz-Ares, 2003).
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