Company Formation in Spain
The shareholders or their representatives must appear before a notary public to execute the public deed of incorporation. Subsequently, the public deed of incorporation has to be registered in the Mercantile Register. Upon registration, the company acquires legal status and capacity.
Sociedad Anónima (SA)
Sociedad Anónima (SA) shows certain peculiarities. There is an alternative procedure for incorporation called “successive formation.” Essentially, this procedure involves an offering to the public at large by the promoters to subscribe shares before the execution of the public deed of incorporation. To this end, means may be used such as publicity or financial brokers. This system is rarely used in practice and much less so in the case of foreign investors.
Memorandum of Association
The Memorandum of Association:
- Gives expression to parties’ consent to establish a company.
- Must contain minimum contents that are not subject to waiver: founders’ identification data, true intent, investments, number of distributed shares, and articles of association.
- Public instrument requirement (by deed) is an ad solemnitatem formal requisite, not a mere prerequisite.
- In case that the purportedly incorporated company starts to operate in the market, collective company rules shall be applicable thereto.
Articles of Association or Bylaws
The Articles of Association represent rules governing the structure, organization, and functioning of the new-born legal entity.
Minimum provisions:
- Registered name
- Address
- Scope of business
- Term of the company
- Date of beginning operations
- Capital
Requirements for Registration and Effects
Legal personality is acquired by the incorporation of the company in the competent Mercantile Registry.
Company in Formation
A company in formation arises from the time when the memorandum of association has been made before the Public Notary and as far as it is not yet registered in the competent Mercantile Registry.
- The time gap existing between the deeds and the registration should not last longer than one year.
- A special legal regime is applied for this period of time:
- The acts, contracts, and transactions directly and indispensably aimed to register the company shall be automatically assumed by the company in formation.
- For those acts and contracts other than the foregoing one, persons who have entered there into are personally and jointly and severally liable, unless subject to the condition of registering the validity and effect of such acts and transactions.
Irregular Company
Irregularity may appear once the first year from the deed has passed. General Partnership rules shall govern it in the case that the scope of business is of commercial character.
New Limited Liability Company (SL)
Regulated by LSC.
Origin
Initiatives led by the European Union from 1997 to stimulate entrepreneurship and promote competitiveness in the common market by simplifying procedures in small and medium-sized enterprises.
Typical Features
- It is a sub-type of the existing SL intended for new businesses.
- It has a limited number of partners: maximum of five individuals, but not legal persons, at the time of incorporation.
- Their capital is divided into “participaciones,” and their members are called partners or “socios.”
- Minimum and maximum capital requirements: 3,000-120,200 euros.
- The name is registered on a personal basis.
- Only contributions in cash to the social capital are allowed; contributions in kind are banned.
- There is a wide and generic scope of activities to enable more flexibility in the performance of business.
- Simplification of procedures and provision of technical assistance are erected as founding pillars: the assistance commitment is implemented by assembling an original supporting infrastructure composed of the Centro de Información y Red de Creación de Empresas (CIRCE) and a network of advisory points where the incorporation procedure may be initiated (Puntos de Asesoramiento e Inicio de Tramitación or PAIT).
- The electronic incorporation procedure is based on the combination of the information system of CIRCE and the Documento Único Electrónico (DUE, an electronic record gathering all relevant data that are required for carrying out the incorporation process).
- The electronic procedure enables the average term of incorporation to be cut down from 60 days to 48 hours, reduces the required visits to public organizations from 8 to 2 (PAIT and the Notary), and minimizes the number of forms from 15 to 1.