SETTING UP A COMPANY IN SPAIN
FORM OF BUSINESS SET-UP
There are two main types of companies in Spain, the Sociedad Anónima (abbreviated as S.A.) which requires a minimum share capital of 60.000 Euro and the Sociedad Limitada (abbreviated as S.L. or S.R.L.) which requires a minimum share capital of 3.000 Euro.
For the S.A. type the 25% of the share capital has to be paid up at the incorporation date and for the S.L. type the full amount of the share capital also has to be paid up at that date. Both types of company provide limited liability to its shareholders.
The S.A. type is usually used by bigger companies with several shareholders and has to comply with more strict administrative procedures. The S.L. is easier to run, with less administrative procedures, what makes it more suitable for a few partners company or to start a business in Spain. During the last years the S.L. type has become more frequent and also used for big companies. The capital of an S.A. is divided into shares (stock) whereas the capital of an S.L. is divided into participation units.
There is not a minimum number of shareholders required to incorporate an S.A. or an S.L. There is a specific regime applicable to sole shareholder companies for both S.A. and S.L. involving special reporting and registration requirements. (I.e. when a company has a sole shareholder such circumstance has to appear always next to the company’s name). Also when a shareholder is a foreign company its investment in the Spanish company will have to be registered before the Foreign Investment General Directorate. This registration has no other effects than keeping a record of foreign investments in Spain.
Company Information:
· Name of the company: A name reservation has to be made in advance with the Spanish Commercial Registry (Registro Mercantil). In the application to reserve the name of any company 3 choices may be included. It is not possible to adopt an identical designation to a pre-existing company.
· Business purpose: This should be stated in a clear, concrete and well defined manner. It serves to establish the general framework for the activities of the company. It cannot be a general business purpose allowing to do any activity.
· Duration of the company: It is normally stipulated an indefinite duration.
· The date on which activities commence: Normally cannot be earlier than the date of execution of the public deed of incorporation.
· Registered Office Location: It must be in Spain.
· The accounting year-end: If not stated expressly, the company will be deemed to end its accounting year on December 31. The accounting year can not exceed twelve months.
· Restrictions to the transferability of shares, if any. There are restrictions for the free transfer of participations units in a S.L. regime. For both types or companies, S.A. or S.L. some restrictions or conditions can be established in the bylaws to regulate the transfer of the company shares.
· Shareholders: The shareholders meeting as in other countries corporate regulations is the supreme governing body. The shareholders meeting must be held at least once a year to approve the company financial year accounts. This is the so called ordinary shareholders meeting. The extraordinary shareholders meeting may be held at any time according to the relevant corporate procedures.
· Directors: Board of Directors, sole director or joint directors must be stipulated in the bylaws, but can be changed at any time by the shareholders´ meeting. In case of Board of Directors the bylaws or in default, the Shareholders meeting will establish the number of members which may not be lower than three.
Process:
· Execution of the Incorporation Deed: The execution of the incorporation deed will need to be done before a Notary Public in Spain. It will have to be granted by the shareholders or its representatives which will have to be present or duly represented (by means of a power of attorney) before the notary.
· Registration and filings: After signing the incorporation deed the stamp duty has to be paid. The Company also has to obtain a tax number and then the incorporation deed has to be filed with the Commercial Register. The Commercial Register has a period of 15 working days to register the Company or ask for any clarifications. Sometimes the Register may take longer. Please note that the company will not be fully and legally incorporated until the registration is completed.
· Timeframe: Incorporating a S.A. or S.L. can take an average time of one month. Another option would be to buy an existing empty “off-the shelf” company and then make the relevant modifications to its bylaws and other corporate aspects.
For more information see the website of the Spanish Commercial Registry: http://www.rmc.es