Two former Banco Pupolar shareholders purchased in 2016 shares as part of a capital
increase that was the subject of a public offer to subscribe. On 7 June 2017, the SRB decided that Banco Popular would be resolved and all shares (in circulation on that date and issued from the conversion of the additional Class 1 capital instruments) were written down without consideration. Banco Santander acquired all the new Banco Popular shares (issued from the conversion of the Class 2 capital instruments) and carried out a merger by acquisition in 2018 that saw Banco Popular’s legal personality extinguished.
Having lost the entirety of their investment, in March 2018 the two shareholders brought an action against Banco Popular seeking a declaration of the invalidity of the share
purchase contract by reason of an error that invalidated their consent, by virtue of the
incomplete or inaccurate prospectus published prior to the share issue, or by reason of deception on account of deliberately falsified or concealed information about the company’s financial position.
Banco Santander, having assumed the position of defendant from the proceedings at first
instance, appealed against the ruling made at first instance to uphold the action for a declaration of nullity by reason of error and to order the reimbursement of the purchase price of the shares, plus statutory interest.
The Audiencia Provincial de A Coruña (Provincial Court, A Coruña, Spain) explains that
Spanish case-law recognises the possibility, in the case of an incorrect or incomplete prospectus published in connection with a public offer to subscribe, of an action for damages or for a declaration of nullity being brought, with retroactive effect, vis-à-vis the share purchase contract by reason of deception or error. In its view, the two actions (for damages or for a declaration of nullity) have equivalent effects in terms of compensation, with the exception of the retroactive effect of a decision of nullity which extends back to the date of subscription of the purchase contract, which pre-dates the bank’s resolution. It adds that the impossibility of restoring the shares is not in itself an obstacle to an action for a declaration of nullity.
The Provincial Court of A Coruña decided to stay the proceedings and to refer the following questions to the Court of Justice of the European Union for a preliminary ruling. The Court answered the questions, ruling that the Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms .
Santander was represented by Pérez-Llorca, with a Litigation team comprising partner Juan Rodríguez Cárcamo and associate Ana María Rodríguez Conde.
Banco Popular´s shareholders were represented by A Coruña-based law firm Pérez-Lema.
