International Law FirmBuying into a Spanish SL is easy to start and easy to get wrong. Who has to say yes before you become a shareholder?
A transfer of shares (participaciones) in an SL must be made in a public document. In practice that means a notarial deed. A transfer that breaks the law or the bylaws has no effect against the company.
The company keeps a register of shareholders and treats as a shareholder only the person entered in it. Once the company knows of the transfer, the buyer can exercise shareholder rights. Any shareholder can inspect the register and ask for a certificate of what is registered in their name.
Bylaw restrictions and pre-emption
By law, transfers between shareholders, and to a spouse, ascendant, descendant or group company of the seller, are free unless the bylaws say otherwise. Other transfers follow the bylaws. If the bylaws are silent, the default is:
- the seller tells the administrators in writing the number of shares, the buyer's identity, the price and the terms;
- the general meeting must consent, by ordinary majority;
- to refuse, the company must name other shareholders or third parties who will buy all the shares, and shareholders at the meeting have preference;
- the deed must be signed within one month of the company naming the buyer, and the seller may sell on the notified terms if three months pass in silence.
The bylaws cannot make the transfer practically free. A ban on voluntary transfers is valid only if the shareholder has a right to leave the company at any time, and a lock-up of up to five years from incorporation, or from a capital increase for the new shares, is allowed. The rules in force when the seller notifies the company are the ones that apply.
Basic due diligence
- Read the bylaws. The Mercantile Registry is public, and the bylaws set the transfer rules.
- Ask for the shareholder register. Confirm the seller is the registered holder and see whether pledges or other charges are recorded.
- Compare the seller's accounts with those filed at the Mercantile Registry.
- Ask about shareholders' agreements, which are not binding on the company but bind the people who signed them.
- Review tax, employment, contracts, property and litigation, as the business requires.
Picture a Swiss founder buying 40% of a Madrid SL from two co-founders. The bylaws require general meeting approval for any outside buyer. If the founder signs the deed first and asks later, the sale has no effect against the company.
A foreign buyer should also check whether the investment must be declared to the Investment Registry, or needs prior authorisation in a sensitive sector.
Read the bylaws before you sign the deed.
This article reflects the position at its publication date. Rules change, so check them against your own case before acting.
Sources
- Real Decreto Legislativo 1/2010 (Ley de Sociedades de Capital), articles 29, 104 to 108, 111, 112 and 279, BOE-A-2010-10544: https://www.boe.es/buscar/act.php?id=BOE-A-2010-10544
- Código de Comercio, article 23 (publicity of the Mercantile Registry), BOE-A-1885-6627: https://www.boe.es/buscar/act.php?id=BOE-A-1885-6627