For the last almost 15 years, specifically since 2009, in Spain, these structural changes were regulated by a specific Law (Ley de Modificaciones Estructurales). Before that, all these corporate transactions had been included in the Spanish Corporations Act (Ley de Sociedades Anónimas). The Spanish Corporations Act was replaced together with the Spanish Act on Limited Liability Companies (Ley de Sociedades de Resposabilidad Limitada), among others, in 2010, making room for a unified regulation covering all types of corporations, collective companies and limited liability companies: the Spanish Companies Act or, in Spanish, Ley de Sociedades de Capital. However, the Companies Act does not regulate structural changes since they had previously been incorporated into the 2009 Act mentioned above.
Now, the new legal regulation for such structural changes derogates the previous legal provisions of 2009. It has been approved as part of the Royal Decree 5/2023 of 28 June (which has a very long name that, for reasons of pragmatism I have decided not to use in order not to jeopardize this article’s comprehensibility), which I will refer to as New Law on Structural Changes or NLSC for your easier comprehension.
The first critical point regarding the NSLC is that, while it was supposedly approved in order to transpose into Spanish law the relevant EU Directive (EU Directive 2019/2121 of the European Parliament and the Counsel of 27 November 2019, which, at the same time, is an amendment of the EU Directive 2017/1132 regarding cross-border conversions, mergers and spin offs of companies), the reality is different: Spanish lawmakers have decided to make use of the option given under the directive and have extended the new requirements originally only applicable to cross-border structural change to all regulations on structural changes in Spain – both cross-border and domestic. For this reason, we have the NSLC we have today instead of a simple amendment of the previous legal framework already in force in Spain before the NSLC entered into force (i.e., the aforementioned Act of 2009). In fact, this would not be problematic at all, had Spanish lawmakers not decided to structure the new regulation in the way they have done. Apart from ordering the provisions on each type of structural change in a messy – or at least tricky – system, the NSLC also includes new requirements, which in some cases are not really helpful and even absolutely absurd.
This has turned a new regulation, which could have made the relevant legal procedures as easy and fast as possible, without damaging creditors’, employees’, and shareholders’ interests (which was one of the main goals), into a complex path of formalities strewn with obstacles and unclear requirements. Unsurprisingly, at this stage, the new regulation has caused considerable levels of uncertainty.
For example, the companies involved in the transaction must be in compliance with all their tax and social security obligations, making thus mandatory the inclusion of the relevant certificates into the public deed by virtue of which the transaction or structural change is executed. Bearing in mind that companies in Spain are subject to several national, regional, and local taxes, this new requirement could imply that companies should obtain a certificate per territory where they develop their corporate activity. Accordingly, they should contact every single regional and local authoritiy for the issuance of the relevant certificates and, of course, they should obtain the national certificate too. In addition to the certificates, this requirement could also mean that if one of the involved companies has not paid a simple local tax or levy, the transaction would not be able to go ahead until this payment has been carried out and the relevant authority has issued the certificate confirming it. As you can see, this new requirement is absolutely disproportionate and does not make much sense. In fact, most experts and even the registrars accept just a certificate regarding the national taxes for this requirement to be deemed as met. However, at this stage, that is just one possible interpretation because the NSLC has not worded this requirement in this express sense, nor in an adequate and specific way for it to be interpreted unambiguously. So some uncertainty in this regard still remains.
A second example is the requirement regarding the split of the report to be issued by the governing bodyies of the involved companies regarding the intended transaction or structural change. The report must contain a specific part for the shareholders and another part for the employees; both parts could even be issued in two separate reports. Regarding the part related to the employees, from the NSLC provisions it is not clear if this part is compulsory in the event, for example, the transaction is adopted by all of the shareholders in what is called a universal meeting (a shareholders meeting which is not formally called due to the attendance of all the shareholders simultaneously).
Apart from these examples (included as a high-level summary which, of course could be elaborated on based on a deeper analysis, because I think it is enough to understand what I am trying to explain in this article), it is important to highlight that, among other aspects, in order to supposedly increase the guarantees or protection for creditors, employees and shareholders, the NSLC requires even more previous disclosure (even prior to the shareholders meeting called by the directors of the companies) in addition to the disclosure of the approval of the structural changes by the shareholders (although it can be avoided in some simplified cases).
Of course, this is just a brief comment on some critical points of the NSLC. A lot of technical articles have been published and conferences have taken place since the NSLC arrived in the summer of 2023 and some aspects are already awaiting their definition by the trade registrars practice and the Spanish authority for these matters (Dirección General de Seguridad Jurídica y Fé Pública). They will hopefully resolve some of these uncertain points when registrars resolutions are appealed by the companies or notary offices, but in the meantime business goes on and companies continue going into mergers, spin-offs, etc. Hence, there is, depending on the specific cases, some legal uncertainty regarding whether we are properly complying with the NSLC when providing legal advice to a client on the execution of one of these corporate transactions or restructuring processes. As always, this might be easier or more difficult depending on the kind of transaction or structural change we talk about. For example, carrying out a merger between a mother company and its fully owned subsidiary, being both of them limited liability companies, is not the same as planning to merge three companies with different shareholders, with one of them being a corporation, and afterwards wanting to implement a partial financial spin-off or any other possible complex scenario. While the complexity of a transaction has always depended on its specific characteristics such as shareholders’ percentages, types of companies involved, final structure intended for the group of companies, etc., now, with the NSLC, at least for the next years, until practice “teaches” us how to correctly (as per someone’s criteria) apply some of the polemic new requirements and documents to be drafted, our clients will need, more than ever, good and expert legal advisors to be their partners during their restructuring strategies, even helping them with the relevant planification, both from a legal and a tax perspective. Nevertheless, personally, I believe it is a pity (something similar happened when the 2009 Act was approved), that lawmakers usually waste their opportunity to ease the way for market players and make everything “a little bit” less practical and not easy at all.
Of course, all interests involved in these kinds of legal and economic procedures must be properly protected and guaranteed (employees’, employee representatives’, creditors’, shareholders’, etc.) but we should probably be clever enough to combine this goal with a pragmatic focus. In the end, we must not forget that this has a significant, direct impact on business and investments and, therefore, on our national economy. Now is not the time for disturbing businesses since it means disturbing a country’s wealthy and development. Regulation is, of course, necessary for these matters, but it cannot mean thwarting the flow of business. Perhaps, real market players should be more involved in the drafting stages of such regulations instead of Parliament working on it behind closed doors.