June 2020

If you are setting up a branch or a subsidiary of a UK limited company in Spain, in this post I outline the different types of limited companies under Spanish law as well as the legal requirements and steps for forming and incorporating a limited company, a branch or a subsidiary company.

Types of limited companies in Spain

There are two types of limited companies in Spain. Private limited companies, which are called simply ‘sociedad limitada‘ or ‘sociedad de responsabilidad limitada‘ —this can be confusing, as the ‘private’ aspect is omitted in the name. And there are also ‘sociedades anónimas‘, which is the name used for publicly listed or public companies limited by shares. Most companies in Spain are private companies limited by shares.

Classification of limited companies in Spain

According to s122 of the Spanish Code of Commerce (Código de Comercio), trading companies or corporations (sociedades mercantiles) in Spain can only be incorporated as follows: as a sociedad limitada, sociedad anónima, sociedad comanditaria por acciones (similar to limited partnerships), which, in turn, are the three types of what is called ‘sociedades de capital‘; or as ‘sociedades colectivas‘ (a type of general partnership) or ‘sociedades comanditarias simples‘ (a special type of limited partnership), these two being categorised as ‘sociedades personalistas‘. In sociedades de capital, particulary in limited companies, the focus is on the capital contributed by each shareholder. So, in case of debt, only the company’s assets are at risk (except for sociedades comanditarias por acciones, where the socios colectivos —general partners— are personally liable), whereas in sociedades personalistas, shareholders are personally and unlimitedly liable for paying the company’s debts.

Governing law

Apart from the Código de Comercio, the two main pieces of legislation currently regulating the incorporation and management of sociedades mercantiles are Real Decreto Legislativo 1/2010, approving the Codified Text of the Ley de Sociedades de Capital (the Spanish Companies Act), and the Reglamento del Registro Mercantil (the Spanish Companies Registry Regulations).

Main legal requirements for setting up a private company limited by shares in Spain

Under s4 of Ley de Sociedades de Capital, the minimum share capital required for incorporating a private limited company in Spain is EUR 3,000 (s4) and EUR 60,000, for public limited companies (s5).

Also, s6(1) of the said act provides that any private limited company in Spain must be labelled as ‘Sociedad de Responsabilidad Limitada’ or ‘Sociedad Limitada’ or include the abbreviation ‘S.L.’ or ‘S.R.L.’ in its name, whereas for public limited companies the label must be ‘Sociedad Anónima’ or S.A.’.

Section 19 of the said act provides that sociedades de capital (including limited companies) shall be formed by contract between two or more shareholders, except for single-shareholder arrangements (sociedades unipersonales). This contract must subsequently be converted into a public deed that must be submitted at the Spanish Companies Registry (Registro Mercantil).

SETTING UP A LIMITED COMPANY IN SPAIN

These are the main steps for setting up a limited company in Spain:

1. Reserving the company name

The applicant should request for a certificación negativa de denominación social, a document certifying that no other company is already using this name, at the Registro Mercantil (Spanish Companies Registry). This certificate is valid for three months.

2. Opening a business bank account in the company’s name

Once the certificate has been obtained, the next step is opening a bank account in the company’s name and depositing the minimum initial share capital (EUR 3,000 for private limited companies or EUR 60 000 for public limited companies). The bank will issue a certificate that must be subsequently submitted at the notary’s office.

3. The articles of association (estatutos sociales)

Once the bank account has been opened and the initial share capital has been deposited in the account, the applicant should draft the articles of association which will be subsequently incorporated into the memorandum of association (escritura de constitución). There are templates of articles of association available for applicants. These should set out, at least, the company name (denominación social), the registered address (domicilio social), the corporate purpose (objeto social), the activities that the company intends to conduct, the capital (capital social) and the shares (participaciones, for private limited companies; acciones, for public limited companies) in which the capital will be divided, how these shares will be numbered and their face value, as well as how the company will be managed.

4. The memorandum of association (escritura de constitución)

The memorandum of association must be executed by the shareholders before a notary public. The following documents must be submitted to the notary public: the articles of association, the certificación negativa de denominación social, the receipt issued by the bank stating the monies contributed by each shareholder to the capital, IDs of the founding partners and a statement of foreign investors (declaración de inversores extranjeros), if any.

5. Applying for a temporary tax identification number (número de identificación fiscal)

In order to obtain a tax identification number, form 036 (modelo 036) must be completed. Then, this form must be submitted at the tax office (Agencia Tributaria) together with a photocopy of the applicant’s ID and a photocopy of the memorandum of association. A temporary tax identification number (NIF) will be issued which will be valid for 6 months. The applicant must apply for the final number (NIF definitivo) within that period.

6. Registering for the Spanish Tax on Economic Activities (Impuesto de Actividades Económicas)

The IAE (Impuesto de Actividades Económicas) is obtained by submitting form 840 (modelo 840), together with the NIF, at your local tax office. If you expect a yearly turnover of more than EUR 1,000,000, you are exempt from this step. You will only need a tax register declaration or declaración censal (see below).

7. Tax register declaration (declaración censal)

This is a certificate specifying the commencement, change and discontinuance of business activities. In order to apply for this document, the applicant must submit form 036 (modelo 036), the tax identification number (NIF) and the document accrediting registration for the Spanish Tax on Economic Activities (IAE).

8. Registering with the Spanish Companies’ Registry (Registro Mercantil)

The applicant must register the company with the Spanish Companies Registry in the province where its registered office will be located. This must be done within two months from the date of obtention of the notarized memorandum of association (escritura de constitución) for private limited companies, and within one month for public limited companies. The following documents must be submitted: a certified copy of the memorandum of association, the certificación negativa de denominación social, the document accrediting payment of the Spanish Tax on Economic Activities (IAE) and a copy of the temporary NIF.

9. Applying for the definitive identification number (NIF)

Once all the previous steps are completed, the definitive tax identification number (NIF) can be requested.

There will be additional steps depending on the activity that the company intends to conduct, for example, applying for a permit with the local authority if you intend to open business premises or to carry out works in these premises.

Now, if your company is already incorporated and operating in your country and you want to set up a branch or a subsidiary in Spain, these are the steps you need to follow.

SETTING UP A BRANCH OF A FOREIGN COMPANY IN SPAIN

Because branches (sucursales) are not independent legal entities, the steps that you need to follow for opening one are the same as the process for setting up a new company, except for the first two:

1. The directors or the Board of Directors of the parent company must approve the establishment of the branch. This resolution and the articles of association must be translated into Spanish by a sworn translator before they can be registered with the Spanish Companies’ Registry.
2. A certificate (duly legalised or apostilled) must be obtained from the Spanish Consulate in the country where the parent company is established, stating that the said company has been incorporated under the laws of the said country.
3. Once this certificate has been obtained, steps 4-9 as above should be followed, including the submission of the translated articles of association at the notary’s office, as well as the ID of the person authorized to represent the company under a power of attorney, also to be translated into Spanish (step 4 above). Branches must be registered with the Spanish Companies’ Registry within one month from the date of notarization of the memorandum of association.
4. Once the branch has been created, the parent company must submit its annual accounts with the Spanish Companies’ Registry.

SETTING UP A SUBSIDIARY OF A FOREIGN COMPANY IN SPAIN

Filiales (subsidiaries) are independent legal entities and, as such, the process for incorporating a subsidiary in Spain is very similar to the steps to be followed for setting up a new company:

1. The directors or the Board of Directors of the parent company must approve the creation of the subsidiary. This resolution and the articles of association must be translated into Spanish by a sworn translator before they can be registered with the Spanish Companies’ Registry.
2. A certificate (duly legalised or apostilled) must be obtained from the Spanish Consulate in the country where the parent company is established, stating that the said company has been incorporated under the laws of the said country.
3. Once this certificate has been obtained, steps 1-9 as above should be followed.
4. After registration with the Companies’ Registry has taken place, the incorporation of the subsidiary must be declared at the Registry of Foreign Investments (Registro de Inversiones Extranjeras).
5. When the subsidiary has been incorporated, it must deposit its annual accounts with the Spanish Companies’ Registry.
6. Directors now need to apply for NIE (a National ID number for individuals).

Note: this is the process in place as at June 2020 and it is subject to changes.

If you are setting up a branch or a subsidiary company in Spain, you will need the services of a sworn Spanish translator to translate your certificate of incorporation and other certificates, memorandum of association and articles of association into Spanish. I specialise in Company Law. I am also a sworn translator appointed by the Spanish Ministry of Foreign Affairs. Contact me for a quote here.

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SOURCES

Código de Comercio, https://www.boe.es/buscar/act.php?id=BOE-A-1885-6627

Cómo crear una sociedad limitada, Infoautónomos, https://www.infoautonomos.com/tipos-de-sociedades/como-crear-una-sociedad-limitada/

Implantación de empresas extranjeras en España, Crear-Empresas, https://www.crear-empresas.com/sucursales-filiales

Sociedad limitada: creación y puesta en marcha, Ministerio de Industria, Comercio y Turismo, http://www.ipyme.org/Publicaciones/SRLCreacionPuestaEnMarcha.pdf

Trámites para crear una sociedad limitada o una sociedad anónima, Crear-Empresas, https://www.crear-empresas.com/tramites-constituir-una-sociedad-limitada-anonima

Wolters Kluwer, Guías Jurídicas, Sociedades de capital, https://guiasjuridicas.wolterskluwer.es/Content/Documento.aspx?params=H4sIAAAAAAAEAMtMSbF1jTAAAUMTI0NLtbLUouLM_DxbIwMDCwNzAwuQQGZapUt-ckhlQaptWmJOcSoAXtCK5zUAAAA=WKE

Wolters Kluwer, Guías Jurídicas, Sociedades personalistas, https://guiasjuridicas.wolterskluwer.es/Content/Documento.aspx?params=H4sIAAAAAAAEAMtMSbF1jTAAASMzYzNDtbLUouLM_DxbIwMDS0NDIwOQQGZapUt-ckhlQaptWmJOcSoARGfCPDUAAAA=WKE