Imagine you enter a daycare center where everyone has a different toy and where everyone gets to play with everyone else’s toys. You have a great time, since you can have fun every day with a large selection of toys… but one day, a big kid starts to break the toys of the younger ones, and you realize that trust is not enough. You need to establish rules.
🤝 Syndication Partner Agreements
Within the shareholders’ agreements there is the syndication or syndicate voting agreement, in which all the signatories agree to become “syndicate shareholders” and vote in the shareholders’ meetings in the same sense. The direction of the vote is defined by the majority of the syndicate partners, or as determined in the syndicate voting agreement.
📝 Availability
In principle, shareholders’ agreements are generally not enforceable against the company, but they do bind the parties that enter into them. Therefore, if we want syndicate voting agreements to bind the company, the latter must appear as a signatory party.
This comes from Article 29.1 of the Capital Companies Act (LSC) and several Supreme Court rulings (such as No. 300/2022 and No. 296/2016):
“The effectiveness of the reserved covenants […] are binding for those who subscribed them, but not for third parties, including the company.”
📌 Other sources that solidify this position:
- Articles 1.091 and 1.255.2 of the Civil Code, which enshrine the binding force of law of contractual obligations and the autonomy of the will to agree.
- Article 28 of the LSC, on the autonomy of the will in the incorporation of the company, allowing the inclusion of all the covenants and conditions that the founding partners deem convenient to establish as long as they are not contrary to the law.
🤔 What happens if a syndicated voting pact is breached?
When a partner signs a syndicated voting agreement, it is legally bound to respect what has been agreed. However, if he/she decides to vote otherwise, the following situations may occur.
- Validity of the vote at the meeting:
- The Company is not obliged to verify compliance with the syndication agreement, unless it is a signatory thereto, so that if a syndicate member votes differently from that agreed among the other syndicate members, the Company is not entitled to question it, as this would be a problem between the voter and the rest of the syndicate members.
- Liability for non-compliance rests solely with the defaulting syndicate partner.
- Legal consequences within the covenant:
- A defaulting member may face penalties provided for in the covenant itself, such as severance pay or restrictions on future decisions within the union.
- The other signatories may take legal action to enforce the covenant or claim damages.
- Impact on the relationship between partners:
- This type of non-compliance can generate distrust among the signatories of the pact, affecting the cooperation and stability of the union.
🔎 How is a syndicated voting agreement revoked?
If a syndicate member wishes to exit a syndicate voting agreement and vote on its own, it must comply with the following conditions:
- Convene the signatories: Inform all members of the syndication covenant of your intent prior to the meeting.
- Comply with the covenant rules: These may include indications on how to proceed, such as deadlines, indemnities or additional provisions set forth in the Bylaws.
- Elevation to public: If the agreement was executed in public deed, its total or partial revocation can only be made by elevating it to public.
Procedures must be followed to avoid legal liabilities or sanctions resulting from a unilateral exit. In some cases, the union vote is provided for in the Bylaws, so the procedure to eliminate it may be more complicated.
👀 Do you have doubts about syndicated voting pacts?
At The Lighthouse Team, we help companies and partners manage their relationships effectively and diplomatically. From negotiating the terms of these agreements to holding syndicate partner meetings, we are ready to guide you through every step of the process.
Do you have questions related to this or any other related corporate matter? Contact us today and ensure a smooth future for your company!
We move forward, as a team 🤝✨ Will you join us?
