Key Concepts in Spanish Commercial Law: A Comprehensive Analysis

Posted on Dec 29, 2024 in Law & Jurisprudence

The Factor in Commercial Law

A factor is a manager of a company or establishment, serving as an employee authorized to manage, direct, and enter into contracts. They possess varying degrees of power and act as authorized agents, empowered to make legally binding actions on behalf of the employer. These actions pertain to the company’s or establishment’s trafficking or finances. The operations related to the company’s trafficking or finances are those common in developing activities and are considered normal by third parties. To delimit the scope of representation of the factor, it is important to know what is considered normal in the economic sector where the company operates. The term “factor” is somewhat archaic and is often replaced by terms like “manager,” “director,” “general manager,” or “managing director.”

A factor may manage a company or a branch. In the case of an establishment factor, their level of representation is determined by the establishment’s operations, not the company in general. The factor assumes no liability to third parties; those obligations are met by the employer.

The factor is normally appointed by the employer or another person designated by the employer. If the employer is a minor or incapacitated, the guardian or legal representative can name the factor. If the employer is a legal person, the administrative and representative body makes the appointment. The appointed factor must have overall capacity to act and cannot be subject to any prohibitions that prevent the exercise of trade, such as disqualification in competition or special provisions (e.g., judges, prosecutors).

It is crucial to know how third parties have contracted with the company to understand the factor’s scope of representation. Advertising can occur through two means: legal publication in the Commercial Registry and advertising that reflects the factor’s performance (notorious factor).

Trademarks: Notorious Marks

A trademark is a designation that grants the exclusive right to use a sign by an employer to identify a product or service in the trading process. It is a distinctive sign that differentiates a product or service of one employer from another, whether identical or similar.

Trademarks can be words, numbers, logos, dimensional figures, packaging, images, graphics, letters, envelopes, or forms of the product or its presentation.

The law regulates the prohibition of using signs, letters, etc., capable of being registered as a trademark identical or similar to trademarks or trade names already registered.

The mark is registered upon application by the applicant before the competent authority or the Spanish Patent and Trademark Office, which then checks the adequacy and formal documentation.

There is a principle of priority registration. The Register must state the hour and minute of the registration application. After the newsletter is published in Industrial Property, and failing opposition from a third party, the trademark is registered.

The registration gives the holder the exclusive right to use the mark for 10 years, after which it may be renewed successively for periods of equal duration.

The lack of use of the mark for a period of 5 years can lead to the loss of exclusive rights.

Mercantile Registry: Concept and Functions

The Mercantile Registry is an administrative institution whose purpose is the official advertising of the legal situations of employers enrolled in it. It provides security in commercial publishing by disclosing information about economic and legal societies, the individuals on the list, and their representatives.

• Bookkeeping identified by the RRM: daily filing, registration, legalization, deposit accounts, appointment of independent experts and auditors, as well as indexes and inventory.
• The RMCentral is responsible for ordering, processing, and publishing reports received from the territorial RM, archiving and advertising companies and legal entities, publishing in the BORME (Official Gazette of the Mercantile Registry), and keeping the Register of Companies and entities that have transferred their residence abroad without losing Spanish nationality.
• Other features:
  • Legalization of business books.
  • Appointment of independent experts to ensure the reality of assets for cash, avoiding overvaluation that would lead to an undercapitalized society.
  • Appointment of auditors if the company has not appointed one before the end of the year, when the nominees do not accept or cannot meet their obligations, and when requested by 5% of the share capital and no auditor is appointed or 3 months have passed since the end of the year.
  • Deposit of annual accounts, which can be made in electronic form, sent to the RM by electronic means in compliance with the legal requirements of the AES.

Public Limited Company (Sociedad Anónima)

A Public Limited Company (SA) is a commercial entity in which capital is divided into shares, consisting of contributions from partners who are not personally liable.

• It has legal personality and commercial character, whatever its object.
• It is established through a public deed and subsequent registration with the Mercantile Registry.
• The name must include “Sociedad Anónima” or “SA.”
• The minimum registered capital is €60,101.21, which must be fully subscribed and paid up to at least 25%.

Foundation of an SA

• Simultaneous Foundation: Founders, whether individuals or legal entities, subscribe to all the shares.
• Successive Foundation: Before the foundation, a public stock promotion is made, and the promoters do not subscribe to all the shares.

Deed of Incorporation

1. Name and age of the grantors (individuals) or trade or corporate name (legal entities).
2. The will of the grantors to establish an SA.
3. Sums in cash, property, or rights that each partner contributes, indicating the title under which it is done, and the number of shares allotted.
4. Agreements reached by the promoters, always in compliance with the law.
5. The amount of the incorporation costs.
6. The statutes governing the functioning of the company.
7. The names and ages of the initial directors or their corporate name, nationality, and domicile (for legal persons).

Responsibility of Promoters

The grantors or their representatives are responsible for the incorporation and its registration in the Mercantile Registry within 2 months, as well as the real estate if necessary, and the liquidation of expenses and taxes.

The promoters are jointly and severally liable to third parties for the assumptions in order to form the company. They are also jointly and severally liable to shareholders, the company, and third parties regarding the accuracy of the subscription lists of social contributions, the valuation of contributions in kind, payment of incorporation expenses, as published in the program and in the prospectus.

The company, once registered, is bound by the acts and contracts lawfully performed by the developers.

If after one year from the establishment, the SA has not been registered, members are entitled to a refund of contributions paid.

Bylaws

1. Name.
2. Objects and activities of the company.
3. Duration of the company.
4. Date of commencement of operations.
5. Registered address.
6. Share capital, the undisbursed portion, form, and maximum to be paid in dividends liabilities.
7. Number of shares, nominal value, class and number, amount paid, and whether they are represented by certificates (bearer or registered) or book entries.
8. Administrative structure, number of directors (Board = 3).
9. How to deliberate and adopt resolutions.
10. Closing date of the financial year (if not specified, December 31).
11. Restrictions on the free transfer of shares when they have been stipulated.
12. Ancillary benefit scheme.
13. Special rights of the founders or promoters of the company.

Shares

Shares are the aliquots of equity and confer on the holder membership and the following rights:

1. Participate in the distribution of profits and the liquidation of assets.
2. Pre-emption in issuing new shares or debt.
3. Attend and vote at general meetings and challenge social arrangements.
4. Information.

Classes of Shares

1. Represented by securities:
   1. Registered: Show the name of the owner. Mandatory when the amount has not been fully disbursed, has statutory restrictions on their transferability, carries ancillary services, or when required by special provisions. Included in a registration book in the company, recording successive owners, property rights, and taxes on them.
   2. Bearer: Required if the capital is fully paid. Securities are numbered consecutively, issued in books, may incorporate one or more shares of the same series, and contain the particulars required by law.
2. Represented by book entries.

Corporate Bodies

1. General Meeting

• The sovereign body to which managers are accountable and can be removed.
• Represents the inner sphere of the company.
• For resolutions adopted by the General Meeting to have effects against third parties, managers should be involved.

Features:

1. The body’s actions need not be permanent; it only meets in cases provided by law and when deemed appropriate by the administrators or by a judge at the request of members.
2. The General Meeting involves all stakeholders, some of whom may not have the right to vote (holders of shares without voting rights and shareholders in arrears of dividend payments).
3. It is a collegiate body, characterized by the method that complies with the principle of majorities.

Competencies:

1. Derivative acquisition of its own shares.
2. Censorship of social management.
3. Approval of annual accounts.
4. Ordinary dividends and advance dividend payments.
5. Approval of the dissolution balance of the company.
6. Appointment/removal of administrators.
7. Social action for responsibility against the managers.
8. Increases and capital reductions.
9. Modification of the statutes.
10. Transformation, merger, or division of the company.
11. Dissolution agreement of the company.
12. Emission of obligations.

Types of Meetings:

• Ordinary General or Periodic: Convened by the manager or judge.
• Extraordinary General: Not having an annual periodicity.
• Universal: All partners are present or represented.

Limited Liability Company (Sociedad de Responsabilidad Limitada)

A Limited Liability Company (SL) is a corporation, regardless of its object, with a closed nature, a minimum capital of €3,006 divided into shares, and whose partners are not personally liable.

Three differences with the SA:

1. The regime is more flexible.
2. Its closed nature: contributions belonging to the partners may not be transferred freely to persons other than members, certain relatives, heirs, or companies belonging to the group.
3. The capital must be fully subscribed and paid at the time of incorporation.

Foundation of an SL

1. The Company is formed by a public deed that must be registered in the Mercantile Registry. With the inscription, it acquires its legal personality.
2. It must be registered in writing within 2 months from the date of the award.
3. The founders and administrators are jointly and severally liable for damages caused by the breach of this obligation.
4. The SRL is subject to the provisions of the LSA (Law on Public Limited Companies) in terms of irregular/training companies.
5. Agreements that remain reserved between the partners cannot be relied upon by the company.

Constitution

The deed must be granted by all founding members, either in person or by their representatives, who will assume all the shares.

1. Identity of the partner(s).
2. The will to form an SL.
3. Contributions each partner makes and the numbering of the shares in payment.
4. The company statutes.
5. Determination of how to organize the administration initially.
6. The person(s) responsible for the administration and social representation initially.

Bylaws

1. Name of the company.
2. Objects, determining the activities it comprises.
3. Closing date of the financial year.
4. Registered address.
5. Share capital, the shares into which it is split, their value, and their sequential numbering.
6. Mode(s) of organizing the company’s administration in legal terms.

Trade of a Married Person

The legal regime of trade for a married person is given in the Commercial Code but must be interpreted with the Civil Code articles relating to marriage and its economic system.

In any case, the separate property of the spouse of the trader is affected. As a result of trade, the latter must take into account that acquisitions are divided within the common goods of the marriage: those resulting from trade and those that are not the result of the commercial activity of the merchant partner. This rule is mandatory and may be limited or even by marriage (in defense of creditors). Therefore, the creditors of a married merchant spouse have direct access to the goods acquired through the business.

The rest of the common goods (where they exist, as they may not exist under a separation of property regime) and the property of the other spouse are determined by what is agreed upon in the marriage contract, which must be recorded in a deed and registered in the Mercantile Registry.

If there is no marriage contract, the provisions of the Commercial Code apply, which requires or presumes the consent of both spouses to affect the responsibilities of the rest of the common property of the marriage (not from the trade). Consent is presumed given the passive behavior of the non-merchant spouse in two cases:

1. When the other spouse exercises trade, knowing it and not expressing opposition.
2. When upon marrying, one of the spouses is already engaged in trade and continues without opposition from the other.

Thus, the merchant spouse may dispose of the goods concerned. However, the non-merchant spouse can expressly and formally oppose this through a public deed and registration in the Mercantile Registry, breaking the legal presumption.

Economic Interest Group (EIG)

These are commercial companies, non-profit, whose purpose is to facilitate the results of the activity of the partners. Their sole purpose is to develop an economic activity auxiliary to that of their members.

Social capital is not a requirement for establishing an EIG. Even if there were, the deed of incorporation must contain the numerical expression of each partner’s participation and contributions of property or rights, indicating the title or concept under which they are carried out and their value.

It must include the expression “Economic Interest Group” or the initials “EIG.”

Only individuals or legal entities that carry out business, agricultural, or artisanal activities, non-profit entities dedicated to research, and professionals can be members.

The partners of an EIG are jointly and severally liable to each other for the debts of the EIG. The partners’ liability is subsidiary to that of the EIG.

It will be managed by one or more individuals or legal entities identified in the deed of incorporation or appointed by agreement of the partners. The representation of the EIG in court or out of it corresponds to the managers. Where there are several administrators, each will hold the representation of the EIG unless the deed provides that two or more administrators must act jointly.

The Bill as a Means of Proof

The bill is a signed document sent by the seller to the buyer, detailing the goods or services rendered, including quantity, type, and price.

The bill is documentary proof of goods sold and services provided and can serve as a default notice to the debtor.

It is not regulated in the Commercial Code but in the Law of Retail Trade, which establishes that every buyer has the right to require delivery of a document stating the object, price, and date of the contract. It also requires a trader to issue an invoice, receipt, or similar document when the perfection of the contract and delivery of the object do not coincide or if the buyer has been granted the power to withdraw (distance sales).

In professional relations between retailers and suppliers, the LOCM (Law on the Regulation of Retail Trade) states that invoices issued by the supplier must state the day payment is due. The invoice must be delivered to the buyer within 30 days from the date of delivery and receipt of goods. Invoices are deemed accepted in their entirety and acknowledged by their recipients if they have not undergone repair within 25 days after their referral. If not conforming, the buyer has 10 days to return the invoice and request a corrected one.

The LEC (Law on Civil Procedure) recognizes the ability of the bill to initiate the payment process, intended to facilitate the rapid recovery of claims on money due and payable with a value below €30,000.

Formal Requirements of a Promissory Note

These are set out in the LCCh (Exchange Act and the Check):

1. The term “promissory note” inserted in the title (in the language used for writing).
2. The straightforward promise to pay a certain sum.
3. The handwritten signature of the issuer (signer).
4. The name of the person to whom or to whose order payment is to be made. Bearer promissory notes are not supported, although the designation of the blank holder is allowed.
5. Date and place of issuance of the note.
6. Place of payment.
7. Maturity: For sight notes, if not otherwise indicated, they can be rotated in four ways: at sight, at a fixed period from sight, at a fixed period from date, and on a fixed date.

Principles of the Mercantile Registry

1. Obligation of Registration: Registration in the Mercantile Registry is mandatory except in cases where otherwise stated. The effect of failing to register an act or deed is that such acts cannot harm third parties.
2. Priority: Once a title or annotation is registered, no other title or entry of equal or older date that is opposite or incompatible with it can be registered. The document that accesses the Registry first will have preferential access over later ones.
3. Legality: The registrar must consider whether the documents in the record supporting the application for registration meet the requirements (e.g., payment of corresponding taxes).
4. Successive Tract: To register acts or contracts for an employer or a company, prior registration of the employer or company is required. For amending acts or contracts or other extinctive acts of those mentioned above, registration of these events is required. Acts or contracts awarded by trustees or managers will require prior registration of them.
5. Publicity: The Mercantile Registry is public. Interested parties can know what data it contains. Publicity is manifested through certification or a note of all or some of the data.

Capacity of the Individual Employer

Concept: Individual merchant/employer: one who, having the capacity to exercise legal trade, regularly conducts it. Two requirements must be met:

• Capacity to Exercise Commerce: Of legal age, not disabled, and with free disposal of their property. Emancipated minors without free disposal of property cannot be traders (requires parental consent/guardian for loans, selling/taxing). Minors and disabled individuals can continue to pursue trade started by their parents through a factor appointed by the tutor if they are unable to engage in commerce or have an incompatibility. Judicial enforcement allows the employer to be disabled through a legal representative. These exceptions are based on the principle of conservation of the business. The condition of a minor or disabled entrepreneur lies in this: their legal representative must record it in the Mercantile Registry.
• To be a merchant: Possession of general legal capacity (of legal age, not disabled, emancipated minors/incapacitated individuals must have the capacity to act as a merchant and have the majority of their property available (single, of legal age, not disabled). For minors/incapacitated individuals, the actual trade is exercised by their legal representatives. The condition of a trader and its legal effects, except criminal, fall upon them and not their representatives.
• Habituality: Should be devoted to commercial activities (commercial, industrial, service). Non-commercial activities include livestock, crafts, professions, and artists. A professional should use their capacity for the company (common).

Branches

A company is a mode of activity (legal action). The commercial establishment is a tool for this activity (either of economic value) and an external manifestation of the exercise of a company.

Commercial Establishment: An organized set ready for business, distinct from the goods that make it up.

Branches: Secondary establishments gifted with permanent representation and a certain autonomy in management, developing all or part of the business of a company.

The need to use various facilities arises due to geographical dispersal to extend the scope of business beyond the limits of the principal establishment and capture new customers. The principal establishment is the address of the employer, its business center, while the rest are branches.

There are no legal differences between the principal establishment and a branch. Sometimes, a branch may be more economically relevant than the principal, but this does not alter its secondary nature due to senior management or the address of the employer. A branch has some autonomy and must be registered in the Mercantile Registry of its province.

Elements of a Bill of Exchange

1. Concept and Personal Elements (LCCh)

A bill of exchange has a dual economic function:

1. Facilitate and promote the granting of credit. It is particularly effective (exchange trial) versus non-payment.
2. The right to credit can be transmitted and discounted for immediate liquidity. Its usual function is to allow the seller to provide credit to the buyer, and their bank deducts the bill of exchange.

Concept: A formal, literal, abstract title to order, endowed with legal effectiveness, incorporating an unconditional order or mandate directed to the drawee and the order of the taker, to pay the lawful holder at maturity a determined amount of money, linking all its signatories in solidarity.

Personal Elements:

1. Drawer: The person issuing or creating the bill of exchange.
2. Drawee: The person to whom the bill is addressed, usually the debtor. They are only liable when they expressly agree to pay by signing the bill.
3. Taker: The first holder of the bill of exchange and creditor of the obligations incorporated.
4. Holder: The person who lawfully possesses the bill at a given time.
5. Endorser: A natural or legal person who, being the holder, transmits it to another (the endorsee) through endorsement.
6. Guarantor: The person who guarantees payment made by any signatory of the bill. If the drawee does not pay, the taker can seek payment from the guarantor. Signature on the back.

2. Requirements of a Bill of Exchange

Formal Requirements:

• Name of the bill in the text of the title.
• Pure and simple mandate to pay a certain sum.
• Name of the person who must pay the bill (drawee).
• Name of the person to whom or to whose order payment is to be made.
• Date of issuance.
• Signature of the issuer.

Natural Conditions:

1. Indication of Maturity: If not stated, the bill is payable on demand at any time it is presented for payment. Forms of rotating bills:
   • At Sight: Matures and is payable upon presentation to the drawee.
   • At a Term from Sight: Expires and is payable when the time elapses from the date of acceptance or, failing that, the protest or equivalent statement.
   • At a Term from Date: Counted from the date of issuance and is payable when the time elapses from that date.
   • On a Fixed Date: Expires and is payable on the date set in the bill itself.
2. Indication of Place of Payment: If not established, the address appearing next to the name of the drawee is considered the place of payment.
3. Place of Issuance: If not entered, the place designated next to the name of the drawer is regarded as the place of issuance.

Elements of a Mercantile Establishment

The elements vary according to the class and needs of the business to which it belongs. They include:

1. Personal Property: Goods, raw materials, tools, machinery.
2. Real Property: Local industry or business.
3. Rights: May be real, credit, intellectual property, etc.
4. Labor Relations: Linking the businessman with the people working there, disciplined by the Workers’ Statute and complementary legislation.
5. Know-How and Material Relations: Economic value that are not things or rights. Know-how is unique to each company. Customers and profit expectations depend on the company maintaining its market position.

The Mortgage Law requires the mortgagor to have goods or materials for the establishment of equal or greater value than those mortgaged in writing.

Requirements for Patentability

1. Novelty: The invention is not included in the state of the art, referring to what has been made publicly available in Spain and abroad before the filing date of the patent application.
2. Inventive Activity: The application is inventive when it is not obvious from the state of the art to a person skilled in the art. Discoveries, scientific theories, mathematical methods, literary, artistic, or scientific works, plans, rules, and methods for performing mental acts, games, or commercial activities, computer programs, or forms of reporting are not considered inventions.
3. Industrial Application: The subject matter can be made or used in any industry, including agriculture. This requirement distinguishes a patentable invention from a mere discovery, which is not patentable.

Trade Usages: Definition and Classification

Concept: Repeated practice of a particular behavior by the subjects involved in trade. It is an objective source of law.

Normative Usages: Fill legal loopholes. An objective source according to some authors.

Interpretative Usages: Help interpret contracts. Not an objective source; they just interpret the will of the parties.

Classes of Usages:

• Due to the matter: Common usages apply to all kinds of trade, while special usages apply to a particular commodity.
• Due to spatial scope: General usages apply to the entire territory, while local usages have priority in case of conflict.

Can a Shareholder in an SL Attend the Regular General Meeting with Only One Share?

Yes, all partners are entitled to attend the ordinary General Meeting. The statutes may not require ownership of a minimum number of shares for attending it.

Must an Administrator in an SA be a Shareholder?

No, unless the statutes provide otherwise, the condition of being a shareholder is not required to be appointed as an administrator.

Who Convenes the Regular General Meeting of an SA and When?

The ordinary General Meeting must meet within the first 6 months of the year or sooner if the statutes so provide, to censor management, approve the accounts for the previous year, and decide on the application of the results.

• The call should notify all partners in advance and with certain guarantees that the meeting will be held.
• Convened by the Administrators: Within the first 6 months. If there is a Board of Directors, the convening can be delegated to a member of the board (chairman) if authorized by the statutes. This delegation only authorizes the signature of the convening notice, not the ability to agree personally or unilaterally. The meeting will be valid even if convened later.
• Judicial Call: If the meeting is not convened within the statutory period, the court of first instance can convene it at the request of members and with an audience of administrators. The judge will appoint the person presiding. Minority shareholders (5% of the equity) can also request the judge to convene the meeting if the administrators have not complied with their request.

5 Cases of Unfair Competition

1. Confusion: Mere risk of confusion regarding the activity, performance, or establishment of one or the other competitors.
2. Deception: Use or dissemination of incorrect or false particulars or omission of the real ones, always misleading.
3. Denigration: False statement capable of discrediting the establishment, products, or business of a competitor, undermining its credibility in the market.
4. Acts of Imitation and Exploitation of Another’s Reputation: Imitation is allowed, but certain circumstances constitute unfairness, especially continued systematic imitation of services, initiatives, and products of others, abuse of intellectual property of others such as distinctive signs, and false geographical identification or business.
5. Violation of Secrecy: Misuse of legitimately acquired knowledge under a duty of confidentiality, such as know-how (industrial espionage).
6. Inducement to Breach Contracts: Inducing employees, suppliers, and customers to default on contracts previously entered into with a competitor.
7. Infringement of Rules to Acquire a Competitive Advantage: Tax offenses, licensing, health and safety, reducing costs, and facilitating market access, therefore constituting unfairness.
8. Tied Contracts: Absolutely and totally subordinating the conclusion of a contract to the acceptance of supplementary provisions that have no connection with the principal contract.
9. Discrimination: Without just cause and based on economic weakness or dependency of a consumer or business on an employer in the market, only when there is discrimination in equal situations where dissimilar behaviors are adopted.
10. Predatory Pricing: Using prices below their acquisition costs when intended to mislead consumers, debunk products/establishments of others, or aimed at eliminating another competitor in the market.

Liability of Partners in Commercial Companies

• Unlimited Personal Liability: Partners in general partnerships and general partners in limited partnerships are liable with all their present and potential assets.
• Limited Personal Liability: Limited partners in limited partnerships are liable up to the limit of their contribution.
• Partners in SAs and SLs are not liable for the company’s debts.

Powers of Dependents and Shop Assistants

Dependents: Have singular power that covers all operations of the branch’s activity.

Shop Assistants: Have the power to conduct certain specific turns or traffic of the establishment. Two cases:

• Retail or Wholesale Sales: If retailing, they have the power to recover the amount of the sale and issue receipts on behalf of the employer. If wholesaling (warehouse), they can charge and issue a receipt if the sale takes place in cash and payment is made in the store itself, not for installment sales or outside the warehouse.
• Receiving Merchandise: The manager has the same effects as if the principal received it. They can only receive goods related to the business’s own traffic, never personal property such as machinery outside the business traffic.

Both shop assistants and dependents are unique proxies. Their powers are not registrable in the Mercantile Registry (publicity in fact or by posting notices/circulars).