The donation of shares can be a valuable instrument in the context of corporate reorganization, allowing entrepreneurs to plan generational succession and transfer control of the company to their heirs or other family members. In this article, the most significant aspects of the donation of shares are examined from a corporate perspective.
Capacity and procedure for the donation of company shares:
In order to donate and accept the donation of shares, it is necessary to have the legal capacity to carry out transactions (art. 624 CC). In this regard, special attention must be paid to the case of minors and emancipated minors, who can carry out this type of business, although with certain restrictions and capacity complements. Similarly, in the case of a donation made by a spouse married in community of property, it will be necessary to have the consent of both spouses.
As to the formalities, unlike the donation of real estate, the donation of shares by private document is valid between the parties, although it will not produce effects against the company until it is recorded in a public deed, unless the company itself has explicitly or implicitly acknowledged the transfer made.
Donation of shares while retaining economic and political rights:
The donation of the bare ownership of shares in a company may be of interest when seeking the anticipated distribution of the entrepreneur’s inheritance, allowing him to retain control in the company (political rights) and the right to receive dividends (economic rights).
In order for the donor to continue receiving dividends, it is necessary to establish a usufruct on the donated shares. In this way, the status of shareholder falls on the bare owner, while the usufructuary has the right to the dividends determined by the company during the life of the usufruct (art.127.1 of the Capital Companies Act).
In order to maintain the voting rights, a clause could be included in the deed or contract of donation whereby the donee undertakes to vote and exercise the rights of the shareholder in accordance with the instructions of the donor. In the event that the donee votes otherwise, the donor could withdraw his donation and take back the donated shares.
Donation of shares while retaining or prohibiting the faculty to dispose of them:
The entrepreneur can make a donation of shares to his successors in the company while retaining the right to dispose of them. This right includes actions such as transfer, donation, dation in lieu of payment, etc. and may be full or limited (provided only in case of need of the donor, to a specific transaction or person, etc.). It is a right that may be sold, but not seized.
Similarly, donor and donee may agree on a prohibition of disposal of the donated shares. As this is an obligation of non-performance, this prohibition will produce effects between the parties (compensation for damages in the event of breach, for example), but in order for it to produce effects against third parties, it will be necessary to communicate the existence of the agreement to the company so that the administrators do not accept the registration of the shareholders who have acquired the shares while the obligation to dispose exists.
Donation of shares or participations imposing a condition:
The entrepreneur and the donee have the possibility to agree on an obligation to give, to do or not to do, with no other limitation than that established by law, morality, and public order. The breach of such an obligation will result in the withdrawal of the donation, requiring the donee to return the donated good to the donor.
These obligations are particularly useful when the entrepreneur wishes to prevent his assets from passing to the spouses of his children in the event of divorce or death. In this context, it is possible to impose the condition that, in the event of marriage, the donee should subject it to the separation of property regime.
The donation of company shares appears as a basic strategy for the succession planning of family-owned businesses. The donation of the bare ownership offers an option to anticipate the inheritance distribution while maintaining control and economic rights. The imposition of conditions, the retention of the power of disposal or the prohibition of disposal provide the entrepreneur with additional tools to safeguard the assets and prevent contingencies.
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