Conflicts between shareholders are neither a recent phenomenon nor limited to newly incorporated or growing companies. On the contrary, they arise in companies of all sizes and across all sectors of activity, including organizations with decades of operational history and well-established corporate structures. In many cases, these conflicts originate from the gradual erosion of trust among shareholders, often aggravated by adverse economic conditions, strategic disagreements, or the perception of disloyal conduct.
In recent years, successive economic and financial crises have contributed to intensifying such disputes, resulting in a significant increase in judicial proceedings related to corporate conflicts. This trend is expected to continue, particularly in periods of economic uncertainty, when financial pressures and disagreements regarding the management and direction of the company become more frequent.
The breakdown of trust among shareholders is frequently associated with conduct considered disloyal, which may take various forms, including:
- The misappropriation of company assets or property;
- The use of corporate assets for personal benefit;
- The personal exploitation of business opportunities belonging to the company;
- The engagement in acts of unfair competition;
- The disclosure of trade secrets or confidential corporate information.
Such conduct may cause significant harm to the company, affecting not only the remaining shareholders but also employees, creditors, and commercial partners, thereby jeopardizing the stability, financial integrity, and viability of the business.
Legal mechanisms for the exclusion or limitation of a disloyal shareholder
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Exclusion of a shareholder
The exclusion of a shareholder constitutes one of the most severe remedies available under Portuguese law, particularly in private limited liability companies (sociedades por quotas). However, it is not sufficient to merely demonstrate improper conduct; it must be established that the disloyal behavior seriously disrupts the company’s operations and causes substantial harm.
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Redemption of shareholdings
Another available mechanism is the redemption of the disloyal shareholder’s participation, provided that the company’s bylaws expressly allow for such a measure. This mechanism enables the extinguishment of the shareholder’s interest in exchange for appropriate financial compensation, resulting in the definitive separation of the shareholder from the company.
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Acquisition of the shareholding
Alternatively, the disloyal shareholder’s interest may be acquired by the remaining shareholders or by the company itself. However, this solution generally depends on the cooperation of the shareholder concerned, which may not always be feasible in contentious situations.
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Capital increase with dilutive effect
A share capital increase may serve as an effective tool to dilute the participation of a disloyal shareholder, thereby reducing their influence within the company. This solution is particularly effective where the shareholder lacks the financial capacity to subscribe to the capital increase and maintain their proportional ownership.
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Judicial and legal remedies
Where there is an imminent risk of serious harm to the company, it is possible to seek interim relief from the courts to prevent the shareholder from continuing to engage in harmful conduct.
Furthermore, the company or the affected shareholders may initiate legal proceedings to claim compensation for damages suffered, including financial losses, loss of business opportunities, or reputational harm.
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Withdrawal of the affected shareholder
Under certain circumstances, Portuguese law allows an affected shareholder to withdraw from the company. However, this remedy is subject to strict legal requirements and requires careful legal assessment.
The company’s bylaws and, where applicable, shareholders’ agreements play a crucial role in preventing and managing such conflicts. These instruments may establish specific mechanisms governing the exclusion, redemption, or transfer of shareholdings, as well as defining rights and obligations among shareholders.
Conclusion: Shareholder conflicts represent a significant risk to the stability, continuity, and economic value of companies, potentially compromising their proper functioning and long-term sustainability. Portuguese law provides a range of legal mechanisms to address disloyal conduct; however, their effective implementation requires a thorough legal analysis and the development of a carefully structured strategy, considering the specific circumstances of each case.
Belzuz Abogados, S.L.P. is an International law firm, headquartered in Madrid with offices in Lisbon and Oporto, with a dedicated Corporate and Commercial Law Department that provides legal advice in the prevention and resolution of shareholder disputes, including shareholder exclusion or withdrawal, corporate restructuring, capital increases, negotiation and transfer of shareholdings, as well as the definition and implementation of the most appropriate legal strategies to safeguard the interests of both the company and its shareholders.