The ancillary benefit of complying with a family protocol as grounds for exclusion of a partner

Is it possible to register a statutory clause that imposes on partners, as an ancillary obligation, compliance with the provisions agreed upon by them in a family protocol? Can non-compliance result in the exclusion of the non-compliant partner?

We have published many articles on this blog highlighting the importance of all business families at a certain point in time, have a family protocol that regulates, with the force of the binding link between them, aspects of the corporate legal relationship without using the channels specifically provided for in the law and the articles of association, agreements that are considered valid provided that they do not exceed the limits imposed on the autonomy of will (in this regard and among others, the Supreme Court ruling of 25 February 2016). 

However, compliance with the family protocol and the intention to transfer part of its content to the company's articles of association has been a controversial issue in the field of family businesses.

Let us remember that Article 29 of the Capital Companies Act (‘LSC’) provides that ‘agreements that remain confidential between the partners are not enforceable against the company.’ This means that the rights and obligations that the members of the business family agree upon in a family protocol will not be enforceable against the company if they are not also incorporated into the articles of association, thus guaranteeing corporate enforceability. In turn, when regulating the ancillary benefits of the partners, Article 86 LSC requires that the articles of association express the specific and determined content of such ancillary benefits.

On this issue and the correct coexistence of these two articles, the Directorate General for Legal Security and Public Trust (DGSJFP) already had the opportunity to rule in the well-known Resolution of 26 June 2018, regarding the registration of a statutory clause that consisted of the requirement that family members who were partners be bound to comply with the provisions agreed upon in a family protocol formalised in a public deed, the details of which were outlined in the articles of association via an ancillary benefit, such that failure to comply with the family protocol would constitute legal grounds for the exclusion of the offending member.

The registrar rejected the registration of the ancillary benefit on the grounds that it violated Article 86 of the LSC, on the grounds that the specific content of the provision and, therefore, the obligations assumed via the family protocol were not determined. In the registrar's opinion, the fact that the statutory clause referred to the public deed in which the protocol was formalised was not sufficient, as the partners would be committing themselves to a series of indeterminate agreements that were not included in the company's articles of association.

However, the DGSJFP ultimately rejected these reasons and proceeded to order the registration of the aforementioned clause, on the understanding that the requirement for the accessory benefit to be specified and determined in the statutes was perfectly fulfilled by simply referring to the public deed. It was understood that this requirement of specificity and determination should not oblige the articles of association to reproduce the content of the family protocol, since it would suffice for the partner to be aware of the need to be bound by the agreement, the specifications of which could be included in another document to which the articles of association referred in order for that statutory clause to become valid.

Despite the previous Resolution of the DGSJFP, the reality is that during this time we have still encountered some rulings by commercial registrars who have refused to register statutory clauses of this nature on the basis of requiring the family protocol to be made public  in accordance with the provisions of Royal Decree 171/2007, of 9 February, which regulates the publication of family protocols (‘RD 171/2007’), i.e. requiring them to be registered or deposited. 

It should be noted that Article 5 of this RD provided, among other formulas, for the possibility of publicising the family protocol by means of a mere reference in the register of the authorising notary, place, date and number of the notarial protocol in which the family protocol has been formalised.

Position in favour of registering an ancillary provision consisting of the obligation to comply with the family protocol

The DGSJFP has ruled in favour of the inclusion in the articles of association of an ancillary provision consisting of the obligation to comply with a family protocol formalised in a deed, the details of which are set out in the articles of association, without the need to publicise the protocol.

The DGSJFP has recently ruled on this issue again in its Resolution of 11 October 2024, admitting a clause in the statutes referring to an unpaid ancillary benefit, consisting of compliance with and observance of the provisions agreed by the partners in a family protocol recorded in a public deed, the details of which are outlined, thus reiterating the criteria of the resolution of 26 June 2018.

The registrar again justified his refusal to register the deed on the grounds that it concerned ancillary benefits whose specific and determined content was not set out in the statutory article itself but by reference to the content of a family protocol contained in a duly identified notarial deed that had not been registered or deposited in accordance with Royal Decree 171/2007. In addition, he added as justification for his decision that ‘a non-member who is in preliminary negotiations for the possible acquisition of shares does not have a direct right to access the content of the notarial deed, but must first prove to the notary that they have a “legitimate interest”’, concluding that "the requirement of determinability is not met for the decision to acquire or not to acquire the shares to be taken, as the disclosure of ancillary benefits will depend on the assessment of the notary holding the protocol regarding compliance with Article 224 of the Notarial Regulations and, therefore, their decision will determine whether or not future purchasers can know what such ancillary benefits consist of before becoming members."

Failure to comply with an ancillary obligation shall be grounds for exclusion of the offending member

The DGSJFP once again accepts the registration of this ancillary provision on the basis of the following arguments:

• a. The clause does not exceed the general limits of freedom of contract, insofar as it does not contravene the law or contradict the principles governing, in this case, public limited companies.
• b. The fact that the content of the ancillary provision is not published in any of the forms provided for in Royal Decree 171/2007 cannot constitute an obstacle to this conclusion. This is because, as provided for in Article 2.3 of the aforementioned Royal Decree, ‘the publication of the protocol is always voluntary for the company’, which, as the ruling emphasises, is a matter that ‘is consistent with the discretion that characterises such agreements’.
• c. Insofar as we consider that this is an ancillary provision whose content is perfectly understandable both to current partners (since they have all signed the deed formalizing the family protocol) and to those who may join in the future (subject to authorization by the company via Article 88 LSC), in such a way that we would in no way be dealing with a statutory clause which, in the case of a public limited company, would make the share practically non-transferable (Article 123.2 LSC) in the sense that, as the resolution emphasizes, it would “prevent the partner from becoming a ‘prisoner of his shares’”.
• d. And finally, because Articles 114.2.a) and 175.2.a) of the RRM already provide for the possibility that some of the agreements in a family protocol may become effective at the corporate level of capital companies through the registration of "penalty clauses guaranteeing agreed and registered obligations, especially if they are contained in a family protocol published in the manner established in Articles 6 and 7 of the Royal Decree regulating the publicity of family protocols." It goes on to point out that "in the doctrinal sphere, it is accepted that the effectiveness of shareholders' agreements and, specifically, family protocols, is ensured vis-à-vis the company and third parties, in the sphere of corporate law, by means of certain statutory remedies, one of which is precisely that used in the present appeal: the configuration of the obligation to comply with the family protocol as an ancillary obligation, so that failure to comply with it results in the loss of shareholder status."

In addition, the resolution analyzed also states that this criterion in favor of the validity of this statutory clause has been legally endorsed with the publication of Law 28/2022, of December 21, on the promotion of the ecosystem of emerging companies, by stating in its Article 11.2 that “(...) statutory clauses that include an ancillary provision to subscribe to the provisions of shareholders' agreements in emerging companies shall be registrable, provided that the content of the agreement is identified in such a way that it can be known not only by the shareholders who have signed it but also by future shareholders.”

Consequently, and leaving aside issues relating to legal certainty and the fact that it legitimizes and converts a non-statutory shareholders' agreement into a corporate agreement, the reality is that this mechanism, which is very useful for all business families, seems to be consolidating, allowing us to grant corporate enforceability to the exclusion of a shareholder who fails to comply with the content of a family protocol.

If you have any questions about family protocols, please do not hesitate to contact our lawyers who are experts in family businesses, who will be able to help you with the specifics of your case.

• More information about Family Business 

Miguel Ángel Márquez – Family Business Group

Director in the commercial area