The procedure related to company formation in Spain is regulated by the provisions of the Company Act. The legislation for company incorporation in Spain is actually based on the Commercial Code and the Corporations Law. Other sources for the rules of opening a company in Spain are the Limited Liability Companies Law and the Mercantile Register Regulation. The Company Act in Spain was modified by the Law 19/1989 – the Corporations Law and our team of specialists in company formation in Spain can assist local and foreign investors with in-depth information on the provisions of this rule of law.
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Latest modifications of the Spanish Company Act
The Limited Liability Companies Law became applicable in Spain starting with 1995. The Capital Companies Act in Spain was approved in 2010 and it brought several changes regarding theminimum share capital required for company formation in Spain, which can be detailed by our team of specialists.
Later on, the Company Act was modified in 2014, bringing new regulations available for any investor who runs a business in this country. The amendments of the Act were published in the Official Gazette on 3rd of December 2014 and the document entered into force on 24th of December 2014, regulating the following:
- specific company transactions are to be approved by the company’s shareholders (acquisition, disposal and transfer of shares);
- company’s resolutions can generally be challenged only by the shareholders who have entered the company’s share capital prior to the adoption of the resolutions;
- the document prescribed new provisions that aim at theprotection of the minority shareholders;
- new rules were introduced regarding the transparency of the directors’ remunerations.
What are the main changes of the Act regarding Spanish directors?
One of the main concerns of the latest modifications brought to the Spanish Company Act refers to the remuneration of the directors. The Act imposed new transparency regulations on remuneration matters and it sets out new procedures; thus, the maximum amount of money a director can receive in Spain has to be approved by the company’s shareholders and the threshold has to be established in accordance with the company’s income, size and others.
The remuneration of the directors has to be established under the general meeting of the shareholders, where a remuneration policy will be approved for a period of three years. It is necessary to know that the Act introduced new measures concerning the election of the directors, which is now established at a four years term, compared to a six years term, as prescribed by the previous legislation. Even though the new legislation reduced the term, the directors have the right to be re-elected for the same function within the company.
It is important to know that the Company Act mentions that, in the case of listed companies, at the selection of the company’s directors has to be taken into consideration the appointment of female directors and facilitate their participation in such functions; our team of consultants in company formation in Spain can offer more information on this subject.
The new provisions introduced the “business judgement rule” for the company’s directors, which is set out with the purpose of increasing their due diligence and loyalty towards achieving the company’s business goals. The document prescribes that directors have to abstain from voting in a particular situation that creates conflict within the company.
We can also help you with opening a bank account and accounting services in Spain.
What does the Company Act regulate?
Company Act in Spain regulates all the types of Spanish companies. The most popular are considered the stock corporations and the limited liability companies. The Company Act in Spain mentions that a sole proprietorship can be registered with the corporate registry as a company with only one owner, with the mention that there is no legal distinction between the company’s representative and the company itself.
This implies that the company’s owner will beheld liable with his or her personal assets in the situation in which the business faces financial difficulties. Our team of consultants in company registration in Spain can advise on how to set up any type of legal entity prescribed under the national legislation.
More details related to the Company Act in Spain are available in the following presentation:
The registration of a business must follow the regulations of the Company Act in Spain. A Central Commercial Registry certificate has to be obtained by any legal entity incorporated here, which will confirm the official name of the company. Atax identification code must also be issued for the company before the initial capital is deposited in a bank account, opened at a local commercial bank. According to the Company Act, the company registration procedure is followed by the procedure of VAT registration in Spain.
Employment Law in Spain is related to the Company Act. Thelabor contractsare strictly regulated and theemployersmust know that employees have to be registered with the Social Security General Treasureship. Besides, all employment contracts must be registered with the Spanish Institute of Employment, according to the law in Spain.
What are the main requirements for legal entities under the Spanish Company Act?
As mentioned earlier, the Spanish Company Act (Ley de Sociedades de Capital) regulates all the business forms that can be set up in this country; it sets out the legal framework for any matter concerning the registration of a company, from the requirements for a suitable trading name, the share capital, the minimum number of investors, to the legal requirements that have to be met in the case in which the company will be closed down.
In respect to the company’s trading name, the Company Act stipulates that any suitable trading name will have to be followed by the business form under which the company operates. Thus, in the case of a limited liability company, it is necessary to add the words “Sociedad de Responsabilidad Limitada” or its respective abbreviation, which, in this case, is “S.R.L”.
This is required for other business forms as well – a joint stock company in Spain must add the words “Sociedad Anonima” or the abbreviation “S.A.” In the case of a limited partnership in Spain, the company’s founders are allowed to use as a trading name the names of the founders, but it is also required to add the abbreviation of this business form or the words “Sociedad Comanditaria por Acciones”.
The Act also stipulates that any business set up in Spain has to have an official business address and it sets out the manner in which a company can appoint directors; the document provides a clear definition of the parties that are not allowed to be appointed for this position, such as minors, convicted persons and other similar situations, but investors can easily request further details on this matter from our team of consultants in company registration in Spain.
What information is included in the deed of incorporation in Spain?
When opening a company in Spain, the investors will have to draw specific statutory documents, including the deed of incorporation. According to the Company Act, the document has to offer a set of details, such as the identity of the founders, the intention to form a company registered under one of the legal entities available in Spain and the company’s articles of association.
The deed of incorporation must also provide information concerning the identity of the person who has the right to act on behalf of the company, as well as the contribution of each member to the company’s capital. Our team of agents in company registration in Spain may provide full assistance on other compulsory requirements. It is necessary to know that the company’s capital differs based on the legal entity chosen for registration and that it needs to be deposited in EUR, the country’s national currency.
For more details on the Company Act and how to open a company in Spain, you may contact our local agents, who are prepared to offer professional consultancy services to both local and foreign investors who want to register a business here; our representatives may also assist in obtaining a residence permit.