The Essential Corporate Law in Spain (1)

These are the highlights if you want to know the essential of Corporate Law in Spain. This entry was drafted by “ILP Abogados” for “E-IURE COMPENDIUM” 2018. Link to e-IURE Network.

This collaboration is a brief global vision. In no case it can be considered as legal advice. If you want or need legal advice, ask for a lawyer or a law firm.

Regulations and Rules

The legal framework. Any of these Laws are available in English. The translation is provided by The Spanish Ministry of Justice.

• Code of Commerce (1885). Consolidated text that brings together all the current amendments.
• (English Version) Code of Comerce (Código de Comercio) (PDF. 2,12 MB)
• (Spanish Version) Corporate Enterprises Act (RD 1/2010 Ley de Sociedades de Capital, LSC). Consolidated text that brings together all the current amendments
• (English Version) Corporate Enterprises Act 2015 – Ley de Sociedades de Capital (PDF. 1,31 MB)
• Trade Registry Regulation (RD 1784/1996)- Reglamento del Registro Mercantil
• Private Equity Act 22/2014, Law 22/2014, of November 12, which regulates the Private Equity and Venture Capital Companies an other Collective Investment Institutions.
• Bankruptcy or Insolvency Act 22/2003, Consolidated text that brings together all the current amendments
• (English Version) Bankruptcy or Insolvency Act: Act on Insolvency (Ley Concursal) (PDF. 2,13 MB)
• The Securities Exchange Act – RDL 4/2015, Consolidated text that brings together all the current amendments
• (English Version) Act 21/2014, dated November 4, by which the Intellectual Property Act (Ley 21/2014, de 4 de noviembre, por la que se modifica el texto refundido de la Ley de propiedad intelectual)
• (English Version) Consolidated text of the general consumer and user Protection Act and other complementary laws (Ley de protección de consumidores y usuarios) (PDF. 871 KB)
• Royal Decree approving the regulations relating to Constitucional Act on Personal Data Protection (Reglamento de desarrollo de la Ley Orgánica de Protección de Datos de Carácter Personal)
• (English Version) Royal Decree approving the regulations relating to Constitucional Act on Personal Data Protection (Reglamento de desarrollo de la Ley Orgánica de Protección de Datos de Carácter Personal) (PDF. 1,69 MB)
• Constitutional Act on Personal Data Protection (Protección de Datos de Carácter Personal)
• (English Version) The Intellectual Property Act (Ley de Propiedad Intelectual) (PDF. 1,56MB)
• (English Version) Act 3/2009, of April 3, on structural changes in corporations (Ley 3/2009, de 3 de abril, sobre modificaciones estructurales de las sociedades mercantiles)
• Scheeme of Mergers Procedure in Spain is available in this link

Types of Companies and Liability of shareholders

Joint Stock Companies (Sociedades Anónimas), Private Limited Liability Companies (Sociedades de Responsabilidad Limitada), Collective Companies (Sociedades Colectivas), Partnership Companies – both simple and with registered shares (Sociedades Comanditarias Simples o por acciones) – and other associative forms have a diverse range of commercial uses

For setting up a business in Spain there are different legal forms. The forms most commonly adopted by foreign investors are:

• Sociedad Anónima (S.A.) (Public Limited Company or Joint-Stock Company): Corporation with a minimum capital stock of 60,000 euros of which at least 25% must have been paid at the time of incorporation, divided into freely transferable shares (similar to: UK: PLC; Germany: A.G.; France: S.A., Italy: SpA)
• Sociedad de Responsabilidad Limitada (S.L.) (Private Limited Company or Company Limited by Shares): Small sized corporations (a minimum capital of 3,000 euros, fully paid at the time of creation) which are subjected to lower reporting and auditing requirements than the S.A., and which may not issue stock (similar to UK: Ltd.; Germany: GMBH.; France: SARL., Italy: SRL)
• Sucursal (Branch): a division of a foreign company with separated accounting.
• Differences between Company, Branch, Subsidiary and Permanent Establishment are available in this LINK

Other less common but valid legal forms are:

• Empresario individual (Proprietorship): an individual manages the business, providing the capital and assuming unlimited responsibility.
• Comunidad de bienes (Co-ownership): the business is not an independent legal entity and belongs to two or several proprietors who assume unlimited responsibility.
• Sociedad Colectiva (General Partnership): an independent legal entity which is owned by two or more general partners, all assuming unlimited responsibility.
• Sociedad Comanditaria (Limited Partnership): an independent legal entity which is owned by one or more general partners assuming unlimited responsibility and by one or more limited partners whose liability is limited to the amount of capital contributed.
• Sociedad Profesional (Limited or Join Stock Companies): their corporate purpose is to develop the exercise of professional activities.

The establishment of a branch – amended by the Eleventh Council Directive 89/666/EEC of 21 December 1989 concerning disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State – requires:

• A formal resolution of the foreign head office governing authorizing the establishment of a branch in Spain and appointing a representative.
• The resolution must be duly legalized to be valid in Spain, in order to constitute the branch with a Spanish Notary.
• Application for CIF (tax identification number) in the Tax Office´s of the registered branch office with the articles of the association and the DNI or NIE of the representative agent in Spain.
• Sell off the ITP tax (Impuesto de Transmisiones Patrimoniales y Actos Jurídicos Documentados); it is mandatory to lodge it, but there is an exemption for the incorporation and for the capital increase.
• Registration of the public deed in the Mercantile Registry in Spain (of its register office), including a copy of the head office’s corporate bylaws duly stamped with an Apostille issued under the Hague Convention and a sworn translation into Spanish.

Regulations and Rules

Minimum Stock Capital

Sociedades Anónimas: 60.000 Euros

Sociedades de Responsabilidad Limitada: 3.000 Euros

Classes of shares (registered/bearer, preferred/ordinary) Registered/Bearer

Bearer shares are corporate stock certificates which are owned simply by the person who holds them, the “Bearer”. These shares are not registered on the books of the issuing corporation and are transferred by delivery. These shares are only allowed when capital stock has been fully paid.

Registered Shares are those which are registered on the books of the issuing corporation (Libro Registro de Acciones Nominativas) and certificates the name of the owner.

Common (ordinarias o comunes) Stock and Preferred (privilegiadas o preferentes) Stock.

The shares can grant different rights.  The shares that have the same content of rights constitute the same class. When inside a class several series are constituted, those that integrate a series must equal nominal value.

The preferred stocks grant some privilege out of the ordinary ones, it will be necessary to observe the formalities prescribed for the modification of By-laws.

If there is only one class of shares issued, they may be called “common shares”, “capital shares”, or just “shares” or “stock”.

Common Stock

They represent ownerships in a corporation. Holders of common stock exercise control of the society by electing a board of directors and voting on corporate policy.

Preferred Stock

These shares bestow certain rights and privileges not accruing to common stock. These rights or privileges shall be financial (mainly concerning dividends); but never political, such as “the right of vote” or “the preferred subscription right”.

After the incorporation, the issuance of Preferred Stock is an amendment to the By-Laws.

Quorum Rules

Quorum Rules are available in this link

Liquidation Rules

How to liquidate a Company is available through this link