You want your partner out: the action for exclusion
Last updated 2026-09-01 · Reviewed by Jaime Piñeira Pardo, registered with the ICAM bar, no. 138826
The short answer
Exclusion requires a resolution of the general meeting and a statutory or articles-based ground. If the shareholder holds twenty-five per cent or more of the capital and does not accept it, a final court ruling is also needed, obtained by suing before the Commercial Section of the Tribunal de Instancia (the first-instance court). His shares are paid at fair value, set by an independent expert if there is no agreement.
Your partner holds 30 % of the limited company and is registered as a joint and several director alongside you. For two years he has barely set foot in the business, and eight months ago he incorporated another company with the same corporate purpose, which already invoices three of your long-standing clients. He never disclosed that conflict or asked the meeting for authorisation. You have twice offered to buy his shares and he asks a figure with no relation to the balance sheet. The company cannot go on like this.
The case, in five lines
- What is brought
- A resolution of the general meeting to exclude and, where the shareholder does not accept it, the action for exclusion under article 352 LSC, with valuation of his shares under article 353 LSC.
- Before which court
- The general meeting passes the resolution; the final court ruling is obtained before the Commercial Section of the Tribunal de Instancia (the first-instance court), with a later appeal before the Audiencia Provincial (the provincial appeal court).
- Deadline
- Article 352.3 LSC gives one month from the date the exclusion resolution was passed: if the company does not bring the action within that time, any shareholder who voted in favour may bring it on the company's behalf.
- Who can bring it
- The company, through the resolution of the general meeting, and in the alternative any shareholder who voted in favour of the resolution where the company does not sue within one month.
- Financial risk
- If the case is lost, on top of costs you are left with a hostile shareholder inside the company and a resolution annulled against you. And if it is won, the company must pay the fair value of the shares, which calls for cash or a capital reduction.
The law gives three grounds, two needing a director's role
Article 350 LSC is a closed list and deserves careful reading. A limited company may exclude a shareholder who voluntarily fails to perform ancillary obligations, and a shareholder-director who breaches the non-competition prohibition or who has been ordered by final judgment to compensate the company for harm caused by acts contrary to the law or the articles, or carried out without due diligence.
From that follows something that surprises almost everyone: a shareholder who does no work, contributes nothing and merely collects dividends is not, in itself, a statutory ground for exclusion. Neither is a bad personal relationship, nor the systematic blocking of resolutions. The law does not expel the passive shareholder; it expels the one who breaches a specific obligation he had taken on.
In your case the ground exists because your partner is also a director and is competing. Article 229.1.f) LSC prohibits a director from carrying on activities, on his own account or for others, that amount to actual or potential effective competition with the company, or that otherwise place him in permanent conflict with its interests. That is the breach which opens the door to exclusion under article 350.
If the shareholder is not a director, look at the articles
Article 351 LSC allows specific grounds for exclusion to be written into the articles, and existing ones to be amended or removed, but it requires the consent of every shareholder. That unanimity is easy to gather on incorporation day and practically impossible once the conflict has broken out, because the shareholder you intend to exclude would have to vote in favour of the ground affecting him.
That is why, where the difficult shareholder is not a director, the way out rarely runs through article 350. We then examine any ancillary obligations recorded in the articles and their voluntary breach, the grounds for exclusion agreed at the time and, in parallel, liability actions and challenges to resolutions, which attack the real problem by another route.
It is worth reviewing the articles before anything else. Many family and professional companies once wrote in grounds for exclusion tied to breach of an exclusivity covenant, to competition or to loss of a licence, and nobody remembers them until they are read. If they are there, the road is far shorter than it looked.
With twenty-five per cent a meeting resolution is not enough
Article 352.1 LSC requires a resolution of the general meeting and adds a detail that is often forgotten and later costs dearly: the minutes of the meeting, or an annex to them, must record the identity of the shareholders who voted in favour. It is not a minor formality, because that list determines who may later bring the action on the company's behalf.
Paragraph 2 is the key to your case. Except where the shareholder-director has been ordered to compensate the company, excluding a shareholder holding twenty-five per cent or more of the capital requires, in addition to the meeting resolution, a final court ruling, provided the shareholder does not accept the exclusion resolved upon. With 30 %, your partner falls squarely within that situation.
Paragraph 3 starts a clock. Any shareholder who voted in favour of the resolution has standing to bring the exclusion action on the company's behalf where the company has not done so within one month from the date the resolution was passed. If the company sits still, that month is the window to act.
A release to compete exists only by express separate resolution
The usual defence of a shareholder-director who competes is that everyone knew and nobody objected. Article 230.1 LSC begins by recalling that the regime of the duty of loyalty and of liability for its breach is mandatory, and that provisions in the articles limiting it or contrary to it are not valid.
Paragraph 3 sets out the only possible way through. The duty not to compete with the company may be released only where no harm to the company is to be expected, or where the expected harm is offset by the benefits foreseen from the release, and that release is granted by an express and separate resolution of the general meeting. Silent tolerance by the other shareholders is not a release.
That same paragraph 3 offers an immediate tool: at the request of any shareholder, the general meeting shall decide on the removal of a director carrying on competing activities where the risk of harm to the company has become material. It can be raised at the very meeting dealing with the exclusion, and it separates the partner from management while the matter is resolved.
The price of his shares is set by an independent expert
Exclusion is not free: the excluded shareholder is paid the fair value of his shares. Article 353.1 LSC resolves the very disagreement you already have. Failing agreement on fair value, or on who is to value the shares and by what method, they are valued by an independent expert appointed by the commercial registrar of the registered office, at the request of the company or of any affected shareholder.
That appointment changes the balance of the negotiation. Against the unsupported figure your partner is asking, the value is fixed by a third party appointed by the Companies Register on the basis of the accounts and the real position of the business. Knowing that this mechanism exists usually brings positions closer before it has to be used, which is why it is announced in writing during negotiations.
Once the amount is paid or deposited, the company completes the operation without needing the excluded shareholder. Article 358 LSC requires the directors to execute immediately a public deed of capital reduction, and article 359 LSC provides for a deed of acquisition where the meeting authorised the company to buy the shares, without the participation of the excluded shareholder being required.
How we run the case, step by step
- 1
We verify the ground and his status as a director
We check the Companies Register and the articles to see whether any ground in article 350 LSC or an articles-based ground under article 351 LSC applies, and whether the shareholder holds office as a director, which is what enables exclusion for competing.
- 2
We document the actual competition and the absence of release
We gather evidence of the competing activity within the meaning of article 229.1.f) LSC and review every set of minutes to show that the express and separate release resolution required by article 230.3 LSC was never passed.
- 3
We call the meeting and pass the exclusion resolution
We prepare an agenda covering the exclusion and the removal of the director provided for by article 230.3 LSC, and we make sure the minutes or an annex record the identity of the shareholders who voted in favour, as article 352.1 LSC requires.
- 4
We negotiate the exit before going to court
With the resolution passed and the evidence in hand, we put forward in writing an orderly exit with a price and a timetable. Many partners prefer to sell at fair value rather than submit to a valuation by an expert appointed by the commercial registrar.
- 5
We bring the exclusion action within the month
If the shareholder holding twenty-five per cent or more does not accept it, we sue before the Commercial Section of the Tribunal de Instancia, watching the one-month period in article 352.3 LSC so the company does not lose the action through inaction.
- 6
Valuation, repayment and public deed
Once the ruling is final, fair value is set by agreement or by an independent expert appointed by the commercial registrar and, after repayment or deposit, the deed of capital reduction or of acquisition is executed.
The evidence that decides the case
- The Companies Register extract for the competing company, with its corporate purpose, incorporation date and the office your partner holds in it.
- The invoices and delivery notes proving that company supplies the same service to clients who were yours.
- Every set of meeting minutes from recent years, proving no express and separate release to compete was ever resolved upon.
- The minutes of the exclusion meeting with the annex identifying the shareholders who voted in favour of the resolution.
- The articles in force, with the ancillary obligations and the grounds for exclusion agreed at the time.
- The annual accounts and a valuation report to test the price the shareholder is demanding.
What closes the door
- Trying to exclude a shareholder who is not a director for competing with the business. Article 350 LSC reserves that ground for the shareholder-director who breaches the non-competition prohibition.
- Failing to record in the minutes or an annex the identity of those who voted in favour. Article 352.1 LSC requires it, and that list determines who may later sue on the company's behalf.
- Letting the month from the resolution slip by trusting the company will sue. Once that period in article 352.3 LSC passes, the shareholder who voted in favour loses his chance to act on its behalf.
- Tolerating the competing activity for years without recording any objection, handing the shareholder the argument that the company consented to it.
- Excluding without planning the cash for the repayment. If the capital falls below the legal minimum, article 358.2 LSC refers back to the rules on winding up.
The law that applies
- Art. 350 LSC. Sets the statutory grounds for exclusion in a limited company: the shareholder who voluntarily fails to perform ancillary obligations, and the shareholder-director who breaches the non-competition prohibition or has been ordered by final judgment to compensate the company for harm caused by acts contrary to the law or the articles or carried out without due diligence. BOE-A-2010-10544
- Art. 351 LSC. Allows specific grounds for exclusion to be written into the articles, and existing ones to be amended or removed, always with the consent of every shareholder. BOE-A-2010-10544
- Art. 352 LSC. Requires a resolution of the general meeting recording who voted in favour, adds the need for a final court ruling where the shareholder holds twenty-five per cent or more and does not accept it, except where the shareholder-director has been ordered to pay, and gives standing to a shareholder who voted in favour to sue on the company's behalf if it does not do so within a month. BOE-A-2010-10544
- Art. 353 LSC. Failing agreement on the fair value of the shares, on who is to value them or on the method, it requires valuation by an independent expert appointed by the commercial registrar of the registered office at the request of the company or of any affected shareholder. BOE-A-2010-10544
- Art. 229 LSC. Requires a director to refrain from contracting with the company outside ordinary and immaterial transactions, from using its assets and confidential information for private ends, from taking its business opportunities and from carrying on activities amounting to actual or potential effective competition with it, and obliges him to disclose any conflict situation. BOE-A-2010-10544
- Art. 230 LSC. Declares the regime of the duty of loyalty mandatory, allows release from the duty not to compete only where no harm is expected or it is offset, and always by an express and separate resolution of the meeting, and provides that at any shareholder's request the meeting shall decide on removing the competing director where the risk of harm has become material. BOE-A-2010-10544
Each article checked against the consolidated text published in the BOE (the Spanish official gazette).
Frequently asked questions
My partner does no work at all. Can I exclude him for that?
On its own, no. Article 350 LSC covers only the voluntary breach of ancillary obligations, the shareholder-director's breach of the non-competition prohibition, and a final judgment ordering him to compensate the company. Passivity is a ground for exclusion only if the articles set up that dedication as an ancillary obligation or wrote in a specific ground under article 351 LSC.
He holds 30 %. Is a meeting resolution enough?
Not if he refuses. Article 352.2 LSC requires, in order to exclude a shareholder holding twenty-five per cent or more of the capital, a final court ruling in addition to the meeting resolution, except where the shareholder-director has been ordered to compensate the company. If the shareholder accepts the exclusion resolved upon, there is no need to go to the Tribunal de Instancia.
We knew he competed and said nothing. Have we lost the ground?
Not necessarily. Article 230.3 LSC requires the release from the duty not to compete to be granted by an express and separate resolution of the general meeting, so silence or tolerance is not an authorisation. What does help is recording your objection in writing as soon as possible, because the passage of time weakens the account and makes the other side's defence easier.
How much must he be paid for his shares?
Fair value. If the company and the shareholder cannot agree on that value, on who should carry out the valuation or on the method, article 353.1 LSC requires the shares to be valued by an independent expert appointed by the commercial registrar of the registered office, at the request of the company or of any affected shareholder. The figure the shareholder demands binds nobody while there is no agreement.
Can I keep him out of management while the case runs?
That route exists. Article 230.3 LSC provides that, at the request of any shareholder, the general meeting shall decide on removing a director who carries on competing activities where the risk of harm to the company has become material. It can go on the agenda of the very meeting dealing with the exclusion, so the partner is out of management even though he still owns his shares.
This guide explains how the action works in general. It does not replace the study of your own case: deadlines depend on when things happened and on what you have done since.