How to incorporate a Spanish company
Spanish law envisages various different kinds of companies, all of which can be used by foreign investors. However, the characteristics of a Spanish “Sociedad de Responsabilidad Limitada (SL)” make it one of the most recommended, fast and practical.
The “Sociedad de Responsabilidad Limitada” or Limited Liability Company, as the English version of the Spanish Corporate Enterprise Act calls it, can be compared to the English Private Limited Company.
First of all, the incorporation of any Spanish company by a foreign legal entity does not change the process of formation; however, it makes some requirements and additional documents necessary.
Every foreign legal entity or foreign natural person who wishes to incorporate a company in Spain needs to be identified. In this way:
a) If one of the future directors is going to be an individual, he must possess at the time of incorporation a Foreigner Identification Number or N.I.E. This number will be the identification number and must appear on all the documents that are issued or processed to such person.
b) If a foreign parent company wishes to incorporate a Spanish subsidiary company needs to submit the following documents: a Spanish Tax Identification Number or NIF, a power of attorney to the person who will incorporate the subsidiary company in Spain on its behalf and a legalized and translated copy of the certificate of incorporation and the articles of association.
After all these steps have been taken, we can properly initiate the incorporation of a Spanish company. The regulation of the companies’ incorporation is set out in the Corporate Enterprise Act. According to this act, the basic requirements for setting up a company in Spain are its incorporation before a Notary Public and its filing with the Mercantile Register. Nonetheless, in order to meet these requirements, the following steps must be carried out:
1º) Negative name certification. Firstly, it is necessary to choose three possible names for the company, which are legally acceptable in order to obtain a name certificate. These three names must be submitted to the Central Mercantile Registry (Registro Mercantil Central) in order of preference to check that no other company is registered under the same name. Provided there is none, we will receive a Certificate of availability of the company name for registration; a document that proves that the chosen name is not already registered (i.e. it is not being used by other companies). This certification is valid for 3 months and should be renewed if the new company is not incorporated within that period. Nonetheless, no one else may reserve the same name within the following 3 months so, in practice, the reservation remains valid for 6 months.
2º) Capital Share of NewCo. The minimum capital for the incorporation of a Limited Liability Company is € 3,000, all of which must be paid up front before or on incorporation. The consideration can be made in cash or in kind. In case of choosing to pay the contribution by cash, the amount must be deposited into a bank account. In return, the bank should give in a receipt that will be presented to the notary public. This account ought to be called with the chosen name and the words “sociedad en formación” (in process of incorporation) added at the end.
3º) Articles of Association.The third step is to draft the articles of association. Spanish bylaws are the legal document equivalent to English memorandum of association and articles of association. This document states the object of the company, the details of its authorised capital and contains provisions for the internal management of the company. In order to draft the articles of association, you will have to decide how the company is going to be managed (Several directors can act jointly or jointly and severally), whether directors will be paid and, if so, what the payment arrangements will be.
4º) Deed of Incorporation. Once we have all these documents, we can incorporate the company. The company is formed properly with the signature of the deed of incorporation before the notary public. The Spanish deed of Incorporation can be equated with the certificate of incorporation. However, unlike England, in Spain it is not possible register the company directly. From this moment, the company will be able to start its business transactions, except that the deed of incorporation states other thing.
5º) Tax on capital transfers and documented legal acts. Before submitting the deed of incorporation to Register, it is necessary to fill out the Tax on capital transfers and documented legal acts order form. This order form called 600 has to be submitted to Tax Office of the Autonomous Region. Currently, although this is a necessary step, the incorporation of a company is exempt from any payment.
6º) Registration of the deed of incorporation. The deed of incorporation has to be submitted to the Mercantile Registry. In this respect, it performs the same functions as the English Registrar of Companies. It will take no less than 15 days until it is registered and original documents are returned.
7º) Definitive N.I.F. Once the new company is registered, we can request the definitive tax identification number of the company. This order is made through 036 form. This form allows register your company trading activity in Spain at the Tax Office at the same time as request the definitive number. This step will take 2 or 3 days.
8º) Foreign Investment Register. The incorporation of a Spanish company by a foreign legal entity or natural person is considered a foreign investment. As foreign investment, the incorporation has to be declared to the Spanish Investments Register of the Economy Ministry. For that, it is necessary to submit the Form D-1A duly filled to the Foreign Investment Register. Although its purpose is only informative, this document is compulsory. It must be submitted within the first month of the new company’s existence.
Lourdes del Corral Pascual
Legal Departament MLT Abogados y Economistas