Partnership Agreements - Spain

• Legal structures for entrepreneurs include individual and legal entity forms.
• Legal entities are favored when businesses require large capital, for mandatory legal requirements, liability limitation, and tax advantages.
• Legal entities can be non-commercial/corporate companies or corporate entities.

Partnership Agreement

• Articles 116-124 of the Spanish Commercial Code and Articles 1665-1708 of the Civil Code regulate partnership agreements.
• The Civil Code outlines the partnership concept in article 1665, while the Commercial Code offers its concept in article 116.
• Partnership definitions revolve around people contributing to a common pool with the intention of making a profit.
• The profit motive distinguishes a partnership from entities like associations, communities of property, and foundations.
• Pooling of assets distinguishes the partnership contract, where partners contribute to achieve a common goal.
• The partnership agreement is multilateral and associative, with aligned interests among parties, differing from other agreements.
• The partnership agreement establishes a long-lasting relationship.
• The exception non adimpleti contractus doesn't apply; a partner can't refuse obligations because another breached theirs.
• The tacit resolutory condition isn't applicable; the company isn't wound up if breached, but the breaching party is excluded.
• Defects in consent only affect the specific declaration to which they relate, assuming at least two valid declarations of will.
• A single person can establish a company, despite traditional concepts requiring multiple partners.
• Directors/managers must safeguard the corporate interest, including stakeholders like workers, suppliers, customers, creditors, and communities.

Legal Form and Reserved Agreements

• The Spanish Commercial Law outlines the partnership agreement form.
• A public deed including business purpose and bylaws are governing operations, as its required.
• Registration with the Commercial Registry is needed for the foundation act and amendments.
• Shareholders' agreements or reserved agreements are common for partners to enter into beyond the founding document and bylaws.
• These agreements are valid among partners in non-listed companies but unenforceable against the company.
• Publicly traded company agreements must be disclosed to the CNMV and registered in the Commercial Registry to be effective.

Commercial Company as a Legal Entity

• A commercial company gains legal personality once registered with the Commercial Registry.
• Legal personality results in the company becoming a legal entity with full capacity to enter into contracts, even with its partners.
• The limitation of the corporate purpose only affects the powers of the directors.
• The company enjoys patrimonial autonomy, owning assets distinct from its partners.
• There is a clear separation of liabilities between the company and its partners.
• The company acquires Spanish nationality and a distinct corporate name.
• The company must establish governing bodies.
• Judges and courts use piercing the corporate veil due to abuse of limited liability by partners and corporate companies.
• Courts may disregard a company's separate legal personality to hold shareholders liable, when is it used to commit fraud.
• Commingling of assets, underfunding, avoiding obligations, or lacking corporate formalities could cause courts to pierce the viel.
• Irregular companies operate without being registered in the Commercial Registry.
• Contracts with third parties have full effect to protect those acting in good faith.
• Partners of irregular companies are jointly and without limit liable.

Types of Commercial Companies

• The Commercial Code allows for both typical and atypical companies.
• The Corporate Companies Act makes it difficult to create a new type that doesn't violate the rules.
• The public limited company (sociedad anónima) was historically the most common in Spain.
• Since 1995, the number of public limited companies has decreased.
• Limited liability companies have become a simpler, more effective alternative.
• Public limited companies are now primarily limited to large companies, those listed on the stock exchange, and those with special statutes.
• The public limited company (sociedad anónima) has capital divided into freely transferable shares.
• Partners are not personally liable for the company's debts.
• The company is managed by individuals who may or may not be shareholders.
• The limited liability company (sociedad limitada) is the most common type.
• Capital is divided into shares, with other partners having a right of first refusal.
• The European public limited liability company (sociedad anónima europea -SAE) is based on the public limited company.
• The minimum capital is 120,000 euros.
• The company can be established through a merger.

General and Limited Partnerships

• Both the general partnership (sociedad colectiva) and limited partnership (sociedad en comandita simple) are traditional.
• In a general partnership, a partner's status isn't transferable unless authorized by all partners.
• The partners are jointly and without limit liable for the company's debts.
• Management is exclusively entrusted to the partners and can't be delegated to a third party.
• The Spanish Commercial Code regulates partnerships.
• The limited partnership (sociedad en comandita simple) involves general and limited partners, its rarely used.
• General partners' ownership is not transferable unless authorized, and they are personally liable for the company's debts and management.
• Limited partners can transfer their share, and they cannot participate in management.
• A cooperative meets the needs or interests of its members and the community
• Cooperatives are regulated the Cooperatives Act of 1999, and at the regional level.
• Economic Interest Groupings are second-tier whose members perform an activity that supports their businesses.
• The members are liable for the company's debts.
• Management can be exercised by the members or by third parties.

Corporate Name, Registered Office, and Website

• A corporate name identifies the company in legal transactions.
• Companies can only have one name, which must be used in all their relationships.
• Companies cannot adopt a name identical to another and must provide a certificate from the Commercial Registry.
• The name must not mislead regarding the company's identity, type, or nature.
• Three types of corporate names exist: objective, subjective, and mixed.
• Companies with their main establishment in Spain must have their office there.
• The company will not have Spanish nationality without an office in Spain at the time of incorporation.
• Corporate companies may have a website if agreed by the General Meeting of Shareholders.
• The decision to create the website must be recorded with the Commercial Registry.
• A system of joint liability is foreseen for any damage caused by website outages.

Group of Companies

• Corporate groups are connected through ownership or control under a parent company.
• Subsidiaries are legally distinct but are controlled or influenced by the parent company.
• Control is exercised by holding the majority of voting rights or agreements with minority shareholders.
• There is no general regulation of corporate groups in Spanish law.
• Subsidiaries isolate activities, compartmentalize liability, or emerge through acquisitions.
• Corporate groups present legal challenges.
• Articles 42 requires groups to prepare consolidated financial statements.
• A key legal challenge arises when a subsidiary company has external or minority shareholders.

Nationality

• A joint interpretation of Articles 15 of the Commercial Code 28 of the Civil Code indicates that for a commercial company to be Spanish, it must meet two requirements:
  • It must be registered in Spain.
  • It must be constituted according to Spanish law, either originally or by later nationalization.
• Spanish Companies Act establishes that any public or private limited company constituted in Spain must have its registered office within the national territory.

Multinational Companies

• Multinational companies have a parent company controlling subsidiaries in various foreign countries.
• Subsidiaries are established in specific countries and hold that state's nationality.
• Multinational companies have economic and legal problems.

Single-Member Company

• A single-member company has only one shareholder and is in Spanish law, for limited liability companies and public limited companies.
• The company must expressly state its single-member status on documentation, correspondence, invoices, and promotions.
  • Ownership: The company is owned by one person or entity, who holds 100% of the shares or equity.
  • Liability: The owner's liability is generally limited to the capital they invest in the company, which means their personal assets are usually protected.
  • Management: The single member can be the sole director or appoint others to manage the company.
  • Legal Personality: The single-member company retains legal independence.