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Beyond Borders: Eversheds Sutherland's ICR insights series. EU Mobility Directive – Legal Update – Spain

  • Europe
  • Spain
  • Corporate
  • Labor law and trade union issues

10-11-2022

Country specific - Spain

This country specific outline contains further information regarding the implementation of the provisions of the EU Mobility Directive into Spanish law and provides further local insight.

For further information and to access any of our other country-specific briefings that we have prepared, please refer to the bottom section of our general briefings page here.

Cross-border mergers, divisions and conversions

Status of the implementation

The relevant legislative process necessary to implement the Directive has not yet been initiated. Therefore, it is not expected that Spain will implement the Directive into its national legislation before the implementation deadline of 31 January 2023.

If not timely implemented, certain provisions of the Directive – i.e. only those that are unconditional, sufficiently clear and precise – may have direct legal effect in order to protect the rights of individuals.

Summary of the current and future legal landscape for Spain

With regard to the current legal landscape, Spain already regulates mergers, divisions[1] and conversions (redomiciliations) across borders in its Law 3/2009, of 03 April, on structural modifications of commercial companies (“LME”).

The Directive has introduced some new rules on cross-border divisions and conversions and amended EU-existing rules on cross-border mergers.

Therefore, as far as the future legal landscape in Spain is concerned, in those cases where the Spanish domestic regulation is already consistent with the Directive, the LME will not need to be amended and Spain will continue applying the LME as it is. Conversely, in those other cases where there is not such consistency, the LME will need to be amended accordingly. From a joint analysis of the content of the Directive and the LME, we can anticipate the following inconsistencies mainly, which will require LME amendments[2]:

  1. Content of the cross-border conversion plan and cross-border joint merger (or division) plan. This will now have to include details of the offer of cash compensation for those shareholders that may exercise their right of separation (derecho de separación). The LME will have to be amended in order to make it consistent with the Directive. Also, a new article should be included in the LME in order to implement the new specific regulation of the right of separation in these cases.
  2. Content and notice of the report to be produced by the management body of the companies (informe de administradores) in the case of cross-border mergers, divisions and conversions. The LME will have to be amended in order to implement the new requirements of the report established by the Directive (e.g. calculation of the potential cash compensation in case of separation). In addition to the changes in the scope of the report, the period of notice during which this report should be made available to the shareholders and employees has been extended from one (1) month to six (6) weeks.  
  3. Content of the report to be produced by a third-party expert (informe de experto) in the case of cross-border mergers, divisions and conversions. The Directive regulates the content of this report (e.g. calculation of the potential cash compensation in case of separation) and those cases where it is not required. New articles should be included in the relevant sections of the LME in order to implement the foregoing.
  4. Creditor’s right of objection (derecho de oposición de acreedores). The Directive has introduced new rules regarding this matter, such as the three-month period (from the publication of the plan[3]) during which the creditors may apply to the relevant administrative or judicial authority for appropriate securities, where applicable, if not already granted (under LME the objection period is currently one month). LME should be amended accordingly.
  5. Anti-abuse check. The Directive has introduced a detailed procedure aimed at controlling any cross-border merger, division or conversion which conceals fraudulent or abusive purposes. The LME may have to be amended in order to implement this procedure in detail, as the LME simply establishes that the Commercial Registrar (Registrador Mercantil) must issue a certificate stating that all acts and formalities have been carried out correctly with regard to the cross-border merger, division or conversion. This issue is further explained in sections below.

In view of the above, it can be concluded that the implementation into Spanish law of the Directive will require the amendment of the LME to accommodate it to the new rules introduced at EU-level.

Permitted companies and geographic scope

In the Spanish context, the cross-border transaction can take place between (a) on the one side, Spanish limited liability companies, that is, sociedades anóminas (S.A.), sociedades comanditarias por acciones (S.com) or sociedades limitadas (S.L.); and (b) on the other side, limited liability companies (sociedades de capital) from other EU/EEA Member States.

Other entities, such as foundations, may need to rely on the freedom of establishment and relevant EU case law as a basis or, alternatively, convert into a limited liability company. Under the Directive, these cross-border transactions are principally limited to EU/EEA Member States and Spanish legislation does not expressly regulate those transactions with limited liability companies outside of the EU/EEA.

Timing

With the implementation of the Directive, generally speaking, the Spanish side of a simplified, non-complex cross-border transaction (i.e. a transaction involving companies which each have only one shareholder, no employees and no secured assets) would take approximately four months to complete at a minimum, given the prescribed three-month period during which the creditors may apply to the relevant administrative or judicial authority for appropriate securities. More complex cross-border transactions could take between 6-9 months for actual implementation, particularly, as formalities in the EU/EEA Member State of exit and entry will both need to be complied with.

The Directive provides for an extensive legal framework and (largely) harmonised legal process for these cross-border transactions and introduces specific safeguards for creditors, employees and (minority) shareholders. For any further guidance and advice on these matters, please do reach out your local Eversheds Sutherland contact.

Competent authority, pre-transaction certificate and anti-abuse checks

Currently in Spain, the notary is the designated competent authority that supervises and executes the Spanish documentation (i.e. notarial deeds) of the cross-border transaction. In addition, the Commercial Registrar (Registrador Mercantil) must currently attest, by means of the issuance of a so-called pre-transaction certificate, that all the Spanish requirements for the cross-border transaction have been complied with at Spanish level and that the cross-border transaction has successfully been executed so far. This is a material formality at the end stage of the Spanish part of the cross-border transaction.  

In case of an outbound cross-border transaction, meaning a transaction whereby a Spanish company converts to or transfers (assets) (in)to a company based in another EU/EEA Member State, the cross-border transaction shall subsequently be finalised in the other Member State involved. Based on the pre-transaction certificate issued by the Spanish Commercial Registrar, the designated competent authority of the other Member State is able to proceed and legally complete and effect the procedure locally.

In case of an inbound cross-border transaction, meaning a transaction whereby a company (or companies) based in another EU/EEA Member State transfers (assets) (in)to or is converted into a Spanish company, the cross-border transaction shall subsequently be finalised in Spain. To be able to legally complete and effect the procedure in Spain, the Spanish Commercial Registrar will require a pre-transaction certificate from the designated competent authority of the other Member State(s) involved.

After the implementation of the Directive, as part of its pre-transaction certificate due diligence, the relevant Spanish authority will have to conduct an exhaustive anti-abuse check. This authority will not issue the pre-transaction certificate and will not authorise the cross-border transaction if it determines that the transaction has been set up for unlawful or fraudulent purposes aimed at evading European or national law.

Effective date, method and manner of inbound cross-border transactions

Inbound cross-border transactions (i.e. inbound conversions, mergers and divisions) become effective in the form, manner and on the date as prescribed by Spanish law. Inbound cross-border transactions must be executed in the form of a notarial deed before a Spanish notary and must be subsequently registered at the Commercial Registry. Once duly registered, the conversion, merger or division will become legally effective from the date on which it has been filed at the Commercial Registry.

Key local contacts

Should you have any questions or require any assistance, please do not hesitate to contact us.

Other country specific

In case you are interested, please find other country-specific information we prepared as part of this Insight Series here.

 


[1] Cross-border divisions (escisiones transfronterizas comunitarias) are not expressly regulated in the LME. However, they are regulated by reference to the rules applicable to cross-border mergers.

[2] Please note that this is not an exhaustive list, but rather an example of some of the main issues that will need to be addressed.

[3] i.e. joint merger plan; joint division plan or conversion (redomiciliation) plan.