I. Shares in a Corporation and the Rights They Confer 

Article 90 of the Honduran Commercial Code establishes that a corporation is one that exists under a corporate name, with founding capital stock divided into shares, in which shareholders limit their liability to the payment of the shares they have subscribed. Likewise, Dr. Jorge Maradiaga, in his Treatise on Commercial Companies, states: “Within the general framework of a corporation, the share constitutes a fundamental and essential concept. Its capital stock is divided into a predetermined number of equal parts called shares, each representing a proportional fraction of the capital stock. Acquisition of a share is a necessary, and at the same time sufficient, requirement to become part of the company, granting each holder all rights inherent to the status of shareholder.” (Maradiaga, s.d.)

From this, we can clearly observe the following: i. The capital stock of the corporation is divided into shares; ii. The share is the instrument that certifies shareholder status; and iii. The share grants each shareholder the rights inherent to such status. 

¿Cuáles son los derechos que otorgan las acciones a cada accionista? Esencialmente, las acciones otorgan dos clases de derechos: a) Los derechos patrimoniales; y, b) Los derechos sociales o políticos. Los derechos patrimoniales son aquellos que tienen una significación económica, como ser el derecho a dividendos o el derecho a la cuota de liquidación. Los derechos sociales o políticos son aquellos relacionados con la administración y la participación en la toma de decisiones de la sociedad, siendo el ejemplo perfecto el derecho al voto. 

Regarding voting rights, it is important to highlight two provisions of the Commercial Code. Article 147 establishes that each share will be entitled to one (1) vote. Article 127 states that shares will confer equal rights. However, the company bylaws may stipulate that the capital stock be divided into various classes of shares, with special rights for each class, always in compliance with Article 29.

II. Classes of Shares in Corporations under Honduran Law

The Honduran Commercial Code does not provide a formal classification of types of shares. Instead, it merely states that the company’s bylaws may stipulate that the capital stock be divided into various classes. Considering the principle of freedom of contract governing private law, shareholders may determine any class of shares, provided they do not contravene the provisions of the Commercial Code. 

Al revisar el Código de Comercio, podemos afirmar que existen dos clases de acciones: a) Las Acciones Ordinarias; y, b) Las Acciones Privilegiadas. Las Acciones Ordinarias son aquellas acciones que otorgan la totalidad de los derechos al accionista, tanto los derechos patrimoniales como los derechos sociales o políticos. En contraste, las acciones privilegiadas son aquellas que otorgan todos los derechos patrimoniales, pero cuentan con una restricción en el derecho al voto. 

As Dr. Maradiaga states in his Treatise on Commercial Companies: “These shares are also known in legislative and doctrinal terms as preferred or limited voting shares. Their distinctive feature is that they have priority in economic matters; however, they have restrictions in exercising the voting right, without this implying a total deprivation of such right.” (Maradiaga, s.d.)

This classification derives from the differing interests among shareholders, as stated in paragraph eight of Section Three (on the Status of Shareholder), Chapter V of the Explanatory Memorandum of the Honduran Commercial Code: “Indeed, the Executive Branch, drawing on foreign experience, has understood that it could not and should not avoid the problem of divergent interests within the company. On one hand, those with a permanent interest in the company; on the other, those who see the company solely as a temporary instrument for profit-making investments.” 

III. Preferred or Limited Voting Shares

Article 148 of the Commercial Code regulates Preferred or Limited Voting Shares and establishes the following rules:

1. The capital stock must exceed five hundred thousand lempiras (L 500,000.00). 
2. Limited voting shares may not exceed two-thirds (2/3) of the subscribed capital stock. 
3. The voting right may be restricted, but in no case may holders be deprived of voting in extraordinary meetings, particularly those convened to: a) amend the term of the company; b) amend the corporate purpose; c) transform or merge the company with another; d) relocate the corporate domicile outside the Republic;
e) approve the issuance of bonds. 

As shown, voting restrictions are never absolute, being limited to decisions of an ordinary nature, such as approving financial statements or appointing corporate administrators. For all decisions of a fundamental nature—such as amending the corporate charter or merging with another company—these shares retain their full voting rights. 

The restriction on voting for preferred shares is not applied solely because holders lack interest in management. The benefit is reflected in a preference or enhancement of their economic rights. 

Article 149 of the Commercial Code provides that no dividends may be assigned to ordinary shares unless and until limited voting shares are first allocated a dividend of no less than seven percent. When in any fiscal year no dividends are declared, or the declared dividends are below said seven percent, the shortfall must be made up in subsequent years with the indicated priority. The company bylaws may stipulate that limited voting shares be assigned a higher dividend than ordinary shares. Holders of limited voting shares will also have the rights that the Code grants to minorities to oppose resolutions of the shareholders’ meeting in matters affecting them, and to review the balance sheet and corporate books. 

Preferred shares usually grant a higher dividend than ordinary shares. It is also common to stipulate that the payment of dividends on preferred shares takes precedence over the payment of dividends on ordinary shares, both at the time of profit distribution and in the event of corporate liquidation, in which case the liquidation quota of such shares is paid preferentially. 

IV. Conclusions

Considering the principle of freedom of contract that governs commercial and private law and given that companies are legal instruments with an inherently economic and commercial nature, the legislator has deemed it important to grant shareholders the power to establish different classes of shares with different types of rights.

The right to vote is one of the fundamental rights granted by shares, particularly so that holders may exercise their will and participate in decisions affecting the company’s operation. However, when there are shareholders uninterested in corporate management, whose sole aim is to invest and receive economic returns, the voting right becomes secondary. 

Preferred shares are an excellent legal instrument from two perspectives: a) For holders of ordinary shares, they allow the company to receive capital stock while maintaining control over corporate management; and b) For investors uninterested in corporate management, they provide the means to obtain preferential economic benefits. 

BIBLIOGRAPHY

Maradiaga, J. R. (s.d.). Treatise on Commercial Companies Tegucigalpa: s.d.

(1)  It is important to highlight that Article 113 of the Commercial Code establishes that shares will represent equal parts of the corporate capital and will have a nominal value of ten lempiras (L10.00) or their multiples. This means that shares will always have the same value, since they represent equal parts of the capital.

(2)  Article 126 of the Commercial Code. 

Article 29 of the Commercial Code. Provisions that exclude one or more partners from participating in the profits shall have no legal effect.

(4) This should not be confused with what is indicated in Article 155 of the Commercial Code, which establishes that any statutory clause restricting the shareholders’ freedom to vote is null. Said article is aimed at protecting the will of the shareholders when exercising their voting rights, in the sense that it is not possible to stipulate how they must vote on certain matters. 

(5) Article 169 of the Commercial Code. 

(6) It is important to state that, in our opinion, the appointment of administrators is indeed a fundamental decision, especially with respect to the control of the company. However, considering that holders of preferred shares have a fundamentally economic interest in the company, the appointment of administrators shall not be regarded as a major decision.