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Spain M&A Handbook

Global M&A Series

Spain M&A Handbook_(2012):Brochure template 20/11/2012 13:39

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Through strong understanding of clients’ cultures and objectives, Clifford Chancedraws on the full breadth of its legal skills to provide results-driven, commercial advice.

Visit our website www.cliffordchance.com to discover more about us.


Con

tent

s 1. Forms of Entity 7

2. Management 12

3. Types of deals for private companies 15

4. Types of deals for public companies 27

5. Consents and approvals 37

6. Tax Issues 43

7. Financial Assistance 46


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Spain is located in Southern Europe and, with approximately 46 million residents, is one of the mostpopulous countries in Europe.

Its form of government is a parliamentary monarchy, and the Constitution as supreme law of theSpanish legal system holds freedom, justice, equality and political pluralism as superior values, andalso enshrines respect for linguistic and cultural diversity within a united Spain. The country is dividedinto 17 regions, each its own authorities.

The Spanish Constitution was passed by referendum on 6 December 1978 and signed by the Kingon 27 December 1978. The Constitution sets out the economic model which Spain has adopted:that of a free market economy based on private enterprise. In 1986, Spain signed the Treaty of Romeand became a Member State of the European Union.

As regards the economy, Spain is a dynamic country where the services sector and manufacturing represent approximately 87% of theGross Domestic Product. The contribution of agriculture has dropped notably as a result of economic growth and currently represents2.5% of the total GDP.

Its economy is the fifth largest in the European Union. Based mainly in the services sector, particularly tourism since the early 1990s,Spain experienced a decade of growth. It also has a thriving manufacturing industry, whilst agriculture (especially fruits and vegetables,olive oil and wine) is highly prosperous.

Being in absolute terms the twelfth largest economy in the world, its appeal is evident in its capacity to attract foreign investment,ranking 7th as the country receiving the most direct foreign investment globally. Spain’s attraction for foreign investors lies not only in itsdomestic market, but also in the possibility to interact with international markets from Spain. Spain holds a privileged geo-strategicposition within the European Union which facilitates access to a market of 1.7 billion potential customers throughout the entire EMEAregion (Europe, the Middle East and Africa). In addition, and thanks to its strong economic, historic and cultural ties, Spain is a veryadvantageous platform from which to carry out business with Latin America.

Introduction


In recent years, Spain’s imports and exports have grown rapidly, making it one of the most internationalised countries in the world. Itsmain trading partners are the 27 EU Member States, followed by Asia, Latin America and North America.

Spain has a civil law system. According to the preamble of the Spanish Civil Code, sources of Spanish law are legislation, custom andgeneral principles of law.

Acquisitions are governed by the general principles of civil law contained in the Spanish Civil Code applicable to agreements, sales andpurchases and the relevant provisions of Spanish company law.

In terms of Employment Law, the main legislation is the Workers’ Statute, which sets out the respective rights of employees andemployers, the general conditions of employment contracts, dismissal procedures and collective bargaining rules, among otheraspects. Another important source of Employment Law are the Collective Bargaining Agreements.

The public sector has its own rules governing purchases and contracting, which are defined in various laws. This sector, in general, isbasically structured in 3 levels: (i) the General State Administración; (ii) the administrations of the autonomous regions; and (iii) thelocal government.

For companies listed on a regulated market, the provisions of the Securities Market Law are also relevant. The Spanish SecuritiesMarket regulator, the CNMV, is the supervisory authority for the Spanish securities market in charge of protecting investors andmonitoring the efficiency, transparency and development of the market. In addition, the BME (Bolsas y Mercados Españoles) is theoperator of all stock markets and financial systems in Spain.

Judicial disputes are cleared at first instance in local courts with a right of first appeal to a court located in the regional capital. TheSupreme courts are located in Madrid, the capital.

The materials contained in this publication are provided for general information purposes only and do not constitute legal or other professional advice.

The reproduction of the contents of this publication is prohibited without the prior written consent of Clifford Chance LLP. The position stated is as at

November 2012.

Copyright Clifford Chance: 2012

All rights reserved

5


Plaza de Espana, Seville


1. Forms of Entity

1.1 Common Forms

Sociedad Anónima (S.A.)A Spanish S.A. (or joint stock company), governed by the CapitalCompanies Act (Royal Legislative Decree 1/2010, dated 2 July2010) (the ‘LSC’) and the RRM, is suitable for large scale andcomplex businesses. The Spanish S.A. can be a private or apublic company (either listed or unlisted).

The Spanish S.A. is the only form of business entity which can belisted or which may issue bonds. There are also certain activitieswhich may only be performed by Spanish S.A. (e.g. banking andfinancial institution activities).

The shareholders’ liability for the debts of the company, except inlimited cases, is restricted to the extent of their respectivecontributions.

A Spanish S.A. must have a minimum of one shareholder, butthere is no maximum number.

Special formalities need to be complied with in the case of soleshareholder companies, which, if not complied with, may result,among other things, in the shareholder having unlimited liability.

The Spanish S.A. must be incorporated through a public deedexecuted before a notary public and this deed must be recordedwith the relevant Commercial Registry.

Subject to foreign exchange and investment control regulations,the Spanish S.A. may be incorporated by foreign and non-resident individuals and entities.

The minimum share capital is Euro 60,000 and at least 25% ofthe share capital must be paid up upon incorporation.

A Spanish S.A. may issue registered shares, bearer shares orrepresent shares by book entities, but the shares of a listedSpanish S.A. must be bearer shares and represented by bookentries. Non-voting shares may also be issued.

In certain circumstances shares must be registered (e.g. whenshares are not fully paid up or where their transfer is subjectto restrictions).

The transfer of registered shares in a private Spanish S.A. can bemade by way of endorsement or formalised before a notary public.

The transfer of bearer shares in a private Spanish S.A. must beformalised before a notary public or a Securities Market agency inthe case of a listed Spanish S.A.

Sociedad de Responsabilidad Limitada (S.R.L.)A S.R.L. is a private limited liability company governed by theLSC and the RRM.

It is a convenient vehicle for small or family businesses but isbecoming increasingly popular for large private companies, as ithas greater flexibility and less onerous formal requirements thanthe Spanish S.A. (e.g. lower minimum capital and fewerpublicity requirements).

The minimum capital in the case of a S.R.L. is Euro 3,000 whichmust be fully paid up upon incorporation.

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1. Forms of Entity continued

Shareholders of a S.R.L. are called members. The capital of theS.R.L. is divided into participations rather than shares.

Participations in a S.R.L. cannot be listed or publicly traded.

The liability of the members for the debts of the company is limitedto the extent of their contributions (except in limited cases).

The S.R.L. must be incorporated through a public deed executedbefore a notary public and this deed must be recorded with therelevant Commercial Registry.

Subject to foreign exchange and investment control regulations, aS.R.L. may be incorporated by foreign and non-residentindividuals and entities.

The S.R.L. must have a minimum of one member. Specialformalities need to be complied with in the case of sole membercompanies which, if not complied with, may result, among otherthings, in the members having unlimited liability.

A S.R.L. may not issue bonds or securities acknowledging orcreating a debt.

The procedure for increasing capital in a S.R.L. by way of loancapitalisation or non-monetary contributions is more flexible thanin the case of a Spanish S.A.

Participations cannot be in bearer form. Evidence of ownership isdemonstrated by the entries in the members’ register.

The holder of a participation may have voting or dividend rightsnot proportionate to the percentage of capital held, depending onthe company’s by-laws.

Transfer of participations must be approved at the members’meeting (which may propose alternative acquirers, be theymembers or third parties) and the transfer must be carried outthrough a notarised deed. The company’s by-laws may alsoimpose other restrictions on the transfer of participations.

1.2 Less Common Forms

Sociedad Limitada Nueva Empresa (S.L.N.E.) An S.L.N.E. is a private limited liability company.

This form of entity is governed by the LSC and the RRM.

This type of entity was developed as a convenient vehicle forsmall or family businesses held by individuals.

One feature of the S.L.N.E. is that it is compulsory for the relevantCommercial Registry to record the deed of incorporation within amaximum of 24 hours as from the moment the deed is submittedfor registration.

The minimum capital in the case of a S.L.N.E is Euro 3,012 with amaximum of Euro 120,202. The capital must be paid up bymeans of monetary contributions and not by means ofcontributions in kind.

Shareholders of a S.L.N.E. are called members. The capital of theS.L.N.E is divided into participations rather than shares.

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The liability of members for the debts of the company is limited tothe extent of their contributions (except in limited cases).

Members must be individuals and at the time of incorporation ofthe S.L.N.E. there may be a maximum of five members (afterincorporation this number may be increased if participations aretransferred or a capital increase takes place).

The sole member of a S.L.N.E. cannot become the sole memberof another S.L.N.E.

Participations in a S.L.N.E. cannot be listed or publicly traded.

The S.L.N.E. must be incorporated through a public deedexecuted before a notary public and this deed must be recordedwith the relevant Commercial Registry.

Sociedad Colectiva (S.C.)The S.C. (or general partnership) is governed by the SpanishCommercial Code.

As the partners are jointly and severally liable for the debts of aS.C. (on an unlimited basis) a S.C. would not be appropriate forlarge transactions.

A S.C. must have a minimum of two partners but there isno maximum.

All the partners act as company managers unless this duty isspecifically entrusted to one or more of them.

Resolutions in a S.C. are adopted collectively by the partners.The by-laws will specify whether the resolutions must be adoptedunanimously or by a particular majority.

There is no established minimum capital.

Partners’ own percentage interest in the capital instead of sharesor participations is recorded in the public deed of incorporation orin the relevant share purchase agreement.

The S.C. must be incorporated through a public deed executedbefore a notary public and this deed must be recorded with therelevant Commercial Registry.

The transfer of any interest in the S.C. is recorded at the relevantCommercial Registry.

Sociedad Comanditaria por Acciones (S.C.A.)The S.C.A. is governed by the Spanish Commercial Code andthe LSC.

A S.C.A. has two types of partners: i. general partners - who contribute to the share capital of the

S.C.A., are in charge of management and represent theS.C.A., and

ii. limited partners - who do not perform any management,administration or representation duties but contribute to theshare capital of the S.C.A.

General partners of a S.C.A. have unlimited joint and severalliability, whilst limited partners are only liable to the extent of theircapital contribution to the partnership.

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1. Forms of Entity continued

A S.C.A. must have a minimum of one general partner,although there is no maximum. There may be any number oflimited partners.

As the capital of a S.C.A. is divided into shares, some regulationswhich apply to the share capital of a Spanish S.A. apply equallyto an S.C.A.

The minimum capital in the case of a S.C.A. is Euro 60,000 and atleast 25% of the share capital must be paid up upon incorporation.

The S.C.A. must be incorporated through a public deed executedbefore a notary public and this deed must be recorded with therelevant Commercial Registry.

Shares cannot be in bearer form - ownership is recorded in thepublic deed of incorporation or in the sale and purchase agreement.

Sociedad Comanditaria Simple (S.C.S)The S.C.S. (or simple limited partnership) is the same as theS.C.A., except that the partners of an S.C.S. own percentageinterests rather than shares.

General partners of an S.C.S. have unlimited joint and severalliability, whilst limited partners are only liable to the extent of theircontribution of capital to the partnership.

There is no established minimum capital.

Ownership of percentage interests is recorded in the public deedof incorporation or in the sale and purchase agreement.

The S.C.S. must be incorporated through a public deed executedbefore a notary public and this deed must be recorded with therelevant Commercial Registry.

The transfer of any interest in an S.C.S. is recorded at therelevant Commercial Registry.

BranchesBranches may be incorporated in Spain by both Spanish andforeign companies. A branch has the same legal status as itsparent company.

There is no minimum capital requirement and it can beincorporated without initial capital.

Branches must be incorporated through a public deed executedbefore a notary public, which must be recorded with the relevantCommercial Registry.

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Clifford Chance Global M&A Series The Clifford Chance Spain M&A Handbook is part of our Global M&A Series. The publicationsin this series currently include M&A Handbooks in relation to Australia, the Czech Republic,France, Germany, Italy and Japan and as well as detailed overviews of the takeover regimesof public companies in key jurisdictions including the UK, the United States, France,Germany, Italy and Singapore. We are adding new publications to the series regularly.

Cross Border Acquisition GuideThis M&A Handbook is accurate as at October 2011. For the most up to date information inrelation to M&A in Spain, please log on to the Clifford Chance Cross Border AcquisitionGuide. The Cross Border Acquisition Guide is an online, dynamic and searchable resourcewhich provides an invaluable overview of the specific issues faced by a participant in the fastpaced world of cross-border M&A. To register for the full version of the guide, please [email protected]. Alternatively, a demonstration version of the guide isavailable on the Clifford Chance Global M&A Toolkit (see below).

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