Spain: Simplification of establishing a company

The law 11/2018 dated 28 December has been in force since the beginning of the year. This selectively modifies the Commercial Code, the Stock Corporation Act and the Law on Auditing.

The background for this legal amendment is the continuing efforts of the Spanish government to reduce the administrative expenses for establishing a company and thus to promote the establishment of new companies.

The most important change concerns the standard obligation in Art. 62 of the Stock Corporation Act that the opening of a bank account and the full payment of the share capital must be proven at the time of the founding of the company.

Until now, it was mandatory for the establishment of a Spanish company with limited liability that it be proven to the notary and finally the commercial register, that the company has a bank account in Spain and the shareholders have fully paid in the share capital. This circumstance had to be documented in the founding documents by a corresponding certificate by the bank holding the account. As long as this certificate was not submitted, it was not possible to enter the company in the commercial register.

Assurance of account opening and payment
The law 11/2018 dated 28 December now supplements Art. 62 of the Stock Corporation Act with a second paragraph. Accordingly, this obligation, in principle, still remains valid for the shareholders, however, the company founders can now, as an alternative, assure to the notary that they have paid in the share capital, without requiring a certificate issued by the bank.

If the founding shareholders want to take this route, they must explicitly declare in the founding certificate that they are jointly and severally liable towards the company as well as the creditors with regard to this circumstance.

Practical effects
This statutory revision has practical benefits for foreign companies that want to establish a subsidiary in Spain. Until now, the opening of a bank account and the payment of the share capital for the future subsidiary was often associated with time-consuming formalities, because, for example, numerous banks in Spain continue to insist that the shareholders travel to Spain themselves to sign the contracts with the bank on site so that the account can be opened. Opening a company account outside Spain is also difficult in practice because it is a company in formation.

The new regulation now gives the company founders an alternative to accelerate the process of establishing the company. In view of the existing liability risk for the shareholders, however, this variant should only be used if the establishment is absolutely to be carried out in a timely manner.

Authors: Axel Roth & Fernando Lozano