Several months ago, a new legal framework was approved in Spain. Its subject were structural changes, which is the technical term for corporate transactions, i.e. basically mergers, spin offs, segregation of assets and liabilities and company conversions.
In this article, we explain what the moratorium for losses is, the regulations it contains and the consequences which may arise when it expires in 2024. We also shed light on possible solutions to ensure that affected companies do not have their hands tied by it.
As part of the emergency measures taken in the pandemic, Spanish legislature considerably restricted the original principle of liberal investment politics in Spain.
On 14 February 2023, the Spanish Council of Ministers approved the Draft for a New Law on Structural Modifications of Companies (the “Draft Bill”).
As is well known, small- and medium-sized enterprises have the irreplaceable task of generating wealth, employment and progress by creating a safety net for many families. Despite the fact that SMEs account for 99% of all businesses in the entire European Union (and in Spain), they are extremely vulnerable to the turbulence of economic cycles and the ravages of financial crises, and many do not survive such periods.
The month of June: for the majority of companies, that is, those for whom the financial year coincides with the calendar year, June is an extremely important month. This is due to the timing of the legally established deadline to agree upon, inter alia, the approval of annual accounts and the distribution of profits.
In June, the creation of companies increased by 43.1% since last year and by 28.8% as compared with June 2019, according to data provided by the Official Association of Registrars of Property, Companies and Moveable Assets of Spain.
In the Spanish Law on Capital Stock Companies (Ley de Sociedades de Capital or “Law”), there is an article (283) which historically has not been attributed much importance because in practice either it was not applicable or very seldomly applied. The article foresees various fines (up to 300,000 euros) for companies that do not deposit their annual accounts by the legally established deadline.
The Spanish Law on Capital Stock Companies (Ley de Sociedades de Capital) establishes that a company has an objective cause for dissolution when losses decrease net equity to an amount equal to less than half of its capital. Within two months of when the governing body learns or should have learned of said situation, it must call the shareholders to a meeting to adopt the necessary corrective measures, proceed with dissolution of the company or request a declaration of insolvency. Failure to comply with this obligation implies that the director is jointly and severally liable for the corporate obligations subsequent to the occurrence of the legal cause for dissolution.
On 13 April in the Official State Gazette (BOE), Law 5/2021 of 12 April (the “Law”) was published. It introduces important amendments to the consolidated text of the Law on Capital Stock Companies (“LSC”), both for listed and non-listed companies. The Law entered into force on 3 May 2021.
Some of the changes caused by the COVID-19 pandemic have come to stay. The crisis has dramatically shown us the importance of digitalisation regarding both public and private life. For companies, investing in digital technologies has proven to be a means of resilience. Following this trend, an amendment to the Spanish Law on Capital Stock Companies (Ley de Sociedades de Capital or “LSC”) is supposed to make complete digitalisation of meetings of the Spanish corporate bodies possible. This article analyses the planned legal reform and its relevance for Spanish companies.
The Spanish venture capital and private equity association ASCRI (Asociación Española de Capital, Crecimiento e Inversión) has recently published the numbers for investments in Spain in 2020 – growth in the venture capital market: despite the pandemic or the result of it?
Once the amendments to the Law on Capital Stock Companies (Ley de Sociedades de Capital) enter into force, it is advisable for companies to modify their corporate bylaws in order to include the new regulations.
When dealing with co-ownership of corporate participations in Spain, in practice there are doubts about whether the co-owners are individually considered members (socios), as well as regarding the way in which to exercise rights inherent to the participations. The ruling handed down by the Spanish Supreme Court on 12 November 2020 clarifies these issues.
By means of a series of emergency decrees, which we explained in this article, the legislature significantly limited the original principle of liberal investment politics in Spain just before summer. Recently, new restrictions entered into force. In Royal Decree-Law 34/2020, of 17 November, effective 19 November, the Spanish government yet again tightened control mechanisms for foreign investment in Spain.
Since its publication, Royal Decree-Law 8/2020 of 17 March (“RDL 8”) has undergone changes, extensions and clarifications, on occasion to shed light on confusing matters and on others to adapt the reality of company life to the so-called “new reality” as a consequence of the pandemic.
The climate for investments in Spain is good and bodes well for the future. Despite a multitude of emergency regulations in the past several months, the legislature’s intentions are generally foreseeable. Additionally, certain industries continue to benefit from low salaries in comparison with other European countries and the attractiveness, particularly that Spanish cities have, for young professionals. This, in turn, leads to a higher level of education in the available work force while applicable labour law is comparatively attractive for entrepreneurs. The political situation has also stabilised, since, after several re-elections in recent years, Spain now finally has a government. It remains to be seen, however, how the new coalition government will support business owners.
