Company incorporation in Spain

Simon Wells
Authored by Simon Wells
Posted Monday, March 15, 2021 - 8:15pm

When thinking of the most frequently incorporated types of companies in Spain, two figures should come into your mind: Private Limited Companies (Sociedad de Responsabilidad Limitada -SL-) and Public Limited Companies (Sociedad Anónima -SA-) (for more information on company figures and to avoid possible confusions we highly recommend to check our post about Branches vs Subsidiaries).

To give a glance at the main differences between both kinds of companies, we should highlight the fact that SL’s have a closed structure since these are generally composed of a short number of partners who know each other well. In contrast, SA’s composition is arranged in a more relaxed way. The openness/closeness feature is mainly addressed in their respective share transfer regime. While SL’s have a pretty restrictive regime regarding share’s transmission, SA’s have more of a boundless share transmission system, which is mainly manifested in the possibility of trading its shares in the stock market.

Once we have clarified the previous concepts, we will introduce the fundamental steps for incorporating a company in Spain as a foreigner.

Before getting into the incorporation process, it is imperative to obtain a Foreigner’s Identification Number (NIE) for as many partners (whether these are natural or legal persons) and administrators as the company-to-be will have. This is a personal and exclusive sequential number that will serve for identification purposes when performing countless legal actions in Spain. Once the pertinent NIE’s have been provided, the process of incorporation per secan be initiated.

Firstly, we have to establish a Company Name. To do so, we will have to make a five options’ proposal to the Central Mercantile Register (Registro Mercantil Central -RMC-) in preference order. The RMC will verify which of the submitted options are not already part of their database and will expedite a “Negative Certificate of Denomination” appointing as Company Name the first of the suggested list that is suitable to be designated and that hadn’t been already assigned. As a piece of advice, we sincerely encourage you to look at the list of recommendations you should follow for choosing convenient names on CMR’s website.

Secondly, we have to open a bank account where the partners will have to transfer the authorised capital in proportion to their ownership percentage and directly from their bank accounts. Once the bank transfers are already accomplished, the bank will issue a “Bank certificate of contributions”, which will have an authentication effect over said capital contributions.

Thirdly, the Corporate Bylaws will have to be draft, constituting the norms that will bind the relations among partners, administrators and the company. These norms will rule essential aspects for the company's proper functioning, such as establishing the Corporate Domicile, determining the Share Transmission System, choosing the form of Administrators’ Governing Body or defining the Authorised Capital of the company, among others.

Fourthly, the incorporation of these company figures in Spain has to be formalised before the notary. This involves providing the previously referred certificates and the Corporate Bylaws before a notary so that he/she can verify whether all these documents have been appropriately arranged. It is important to note that both the partners and administrators of the company (or their legal representatives) must attend the Notary Formalisation Act as an imperative condition for it to be effective.

Fifthly, for the Company’s Incorporation to become effective, the Deed of Incorporation has to be enrolled in the Mercantile Register (Registro Mercantil -RM-) of the province where the Corporate Domicile has been established. Once the Deed of Incorporation is presented to the RM, the latter has 15 working days to register it.

Finally, once the company has been registered correctly in the MR, it will have to register in the applicable official public organisms such as Hacienda (Spanish Tax Authority) and the Spanish Social Security, among many others.

If you have further doubts, don’t hesitate to contact Ilia Consulting.

 

 

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