Termination of shareholder's rights by lapse of statute of limitations

It is usual that in the most traditional corporations of the country there is an increasing number of associates who are totally inactive or completely withdrawn from the corporate life. These are shareholders who, having been shareholders for several decades, have been refraining, for several decades, from attending General Shareholders' Meetings, from exercising their right to inspect their company's documents, from collecting the profits generated by their shares in each period and even, in some cases, from claiming the title that proves their status. In the meantime, corporate administrations continue to be obliged to summon defaulting shareholders when required and to take them into account for the purpose of determining quorums, which hinders the day-to-day management of the company and may even make it impossible to adopt the so-called complex statutory reforms (mergers, spin-offs, transformations).

Against this background, it is necessary to find legal institutions that allow the change of ownership of shares in favor of more active agents or the extinction, without further ado, of the rights of omissive shareholders. In order to explore the first possibility, some years ago, an attempt was made to subject the "abandoned" shares to the regime of assets that could be titled in favor of the ICBF (cf. arts. 706 et seq. of the Civil Code or the "CC"), a mechanism that, in the end, proved to be inept for the achievement of the purpose pursued. In relation to the second, the resolution of the rights of defaulting shareholders is currently being sought by means of extinctive prescription, in order to alleviate the burden of the companies with respect to their internal creditors. Let us see how.

Without going into details, since this format requires speed, let us understand that a share is a security that represents the participation of its holder in the capital of a company and incorporates in its favor rights of corporate and economic nature (cf. art. 379 of the Code of Commerce or the "CCo"). These rights imply, in turn, the existence of correlative obligations to be borne by the company. Through the rule contained in Article 822 of the CCo, the provisions of the CC are applicable to such obligations, "in their effects, interpretation, mode of extinguishment, annulment or termination".

According to article 1625 of the CC, "obligations are extinguished (...): By prescription". Article 2512 of the CC defines prescription as "a way of (...) extinguishing (...) rights of others, for (...) not having been exercised (...) during a certain period of time, (...)". Said lapse amounts to 10 years (cf. art. 2532 of the CC). Finally, Article 2513 of the CC requires that all these circumstances be alleged and accredited by whoever has an interest in the extinction.

In our opinion, the reluctance of a shareholder to exercise the rights associated with an action for more than 10 years entitles the debtor of such rights to judicially obtain its extinction by prescription. Once the rights associated to a share have been extinguished, it is not possible to ensure that the share continues to exist, under penalty of incurring in a contradiction: the existence of a security without incorporated rights (cf. art. 619 of the CCo).

Therefore, and by way of conclusion, the statute of limitations, thus applied, extinguishes the rights incorporated to the action and, consequently, extinguishes the action itself, there being no usucaption for anyone.