Shareholder with a conflicting interest (art. 248 LGS)
A conflicted shareholder or representative must abstain; if that person votes and the vote is decisive for the majority, that person is liable for damages.
What article 248
Article 248 requires a shareholder with an interest contrary to the company’s in a particular transaction to abstain from voting.
A shareholder or representative who, in a particular transaction, has for that person’s own account or another’s account an interest contrary to that of the company is required to abstain from voting on resolutions relating to it.
If this rule is breached, the shareholder shall be liable for damages where the necessary majority for a valid decision would not have been achieved without that vote.
Source: Law 19,550, art. 248 — InfoLEG (updated official text)
Commentary
This is the shareholder conflict-of-interest rule: a person with an opposing interest in a specific transaction may not vote on it, preventing self-dealing in the decision.
Liability requires the conflicted vote to have been decisive. The resolution may also be challenged. The abstention should be recorded in the minutes.
Distinctions often confused
Practical impact
A conflicted shareholder should abstain; a decisive conflicted vote can trigger damages and a challenge. The minutes should document the abstention.
Frequently asked questions
May a shareholder vote on a matter where that shareholder’s own interest conflicts with the company’s?
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