Company structuring and formation, and capital changes in Malaga

Who we help

• Entrepreneurs and shareholders who are going to set up a Spanish private limited company (Sociedad Limitada, SL), with several shareholders or a single one.
• Companies that need their own funding or want to bring in a shareholder through a capital increase.
• Companies with losses, or with a share capital that no longer reflects their reality, that are considering reducing it.
• Shareholders and directors who want to amend the articles of association: the corporate purpose, the registered address, the management body or the majorities.

What it is and when it makes sense

A corporate transaction is an act that, because it affects the structure of the company, Spanish law subjects to its own requirements: a resolution of the general meeting with a specific majority, a public deed signed before a notary (in Spain, a public official who authenticates the deed) and, in most cases, registration at the Commercial Register. The most common are these:

• Setting up the company. It requires a public deed and registration at the Commercial Register (article 20 of the Spanish Companies Act, Ley de Sociedades de Capital). The deed records the identity of the shareholders, their intention to set up a company of a specific type, the contributions, the articles of association and who runs the company (article 22). Before signing, the notary must be given the negative name certificate from the Central Commercial Register, which is valid for three months (articles 413 and 414 of the Commercial Register Regulations). An SL can be set up entirely online, unless there are contributions in kind (article 22 bis).
• Minimum capital. For an SL it is one euro. Until it reaches 3,000 euros, two rules apply: at least 20% of profit must go to the legal reserve and, if the company is liquidated with insufficient assets, the shareholders are jointly liable for the difference up to that 3,000 euros. For a public limited company (Sociedad Anónima, SA) the minimum is 60,000 euros (article 4).
• Single-member company. This is a company set up by one shareholder, or one in which all the shares have come to belong to a single shareholder (article 12). This must be recorded in a registered deed and shown on all its documents, invoices included (article 13).
• Capital increase. It is resolved by the general meeting (article 296) and can be made with new contributions, in cash or in kind (for example, the shares contributed to a holding company through a share-for-share exchange), by offsetting debts or out of profits or reserves (article 295). In cash increases, shareholders have a pre-emption right (article 304).
• Capital reduction. It can be used to absorb losses, fund reserves or return contributions to shareholders (article 317). The general meeting’s resolution must state the amount, the purpose, the procedure and the time limit for carrying it out (article 318).
• Amending the articles of association. Any change is for the general meeting (article 285) and is recorded in a public deed registered at the Commercial Register (article 290). In an SL, a capital increase, a capital reduction and other amendments to the articles require the votes in favour of more than half of the votes attached to the shares into which the capital is divided (article 199).

When it makes sense

• When the company needs its own funding and the shareholders prefer to provide it as capital rather than as debt.
• When a shareholder has lent money to the company and wants to convert that loan into shares.
• When losses have reduced net assets to less than half of the share capital: this is a ground for dissolution unless the capital is increased or reduced by enough (article 363.1(e)).
• When the articles no longer reflect how the company works or what the shareholders have agreed.

When it does not

• If only short-term funding is needed, a shareholder loan may be simpler and reversible.
• If it is proposed in order to dilute a shareholder. The shareholder has a pre-emption right, and removing it requires that the company’s interest calls for it, a report from the directors and the votes of two thirds (articles 308 and 199). A resolution imposed abusively by the majority can be challenged (article 204).
• If the reduction takes the capital below the legal minimum, because the deed will not be authorised (article 5).

That is why, before proposing a transaction, we check whether there is a simpler and less costly solution; if there is, we will tell you.

When it makes sense

• You are about to set up a company and need to structure it: choosing the type of company, the capital, the management body and articles of association that will work in the future.
• A shareholder has lent money to the company and wants to convert it into capital.
• A new shareholder or investor is coming in and a capital increase is the agreed route, usually after negotiating a term sheet.
• Losses have eroded the company’s assets and the balance between capital and net assets must be restored.
• You want to change the corporate purpose, the registered address or the management system.

What the engagement can include

• Structuring and setting up the company: designing the structure (type of company, capital, management body and rules between shareholders), drafting the articles of association, requesting the name, the deed and registration.
• Capital increases: designing the transaction, directors’ reports, notice and resolutions of the general meeting, handling the pre-emption right, the execution deed and registration.
• Capital reductions: the resolution, calculating the amounts and, where contributions are returned, analysing the shareholders’ liability to creditors.
• Amendments to the articles of association: drafting the new text, general meeting resolutions and formalisation.
• Single-member companies: the sole shareholder’s decisions and publicity of the single-member status.
• Coordination with your tax adviser on the tax treatment of each transaction.

What the scope depends on

• The type of transaction and whether it is combined with others, for example a capital increase together with an investor coming in.
• Whether there are contributions in kind, which require a valuation and mean the company cannot be set up entirely online.
• The number of shareholders and whether all of them agree with the transaction.
• Whether there are debts to offset, reserves to use or creditors to protect.
• The statutory periods, which cannot be shortened, and the Commercial Register’s own processing times, which do not depend on us.

Once we have studied the documents, we send you a quote tailored to your case.

How we work

1. Initial contact. You tell us about your situation and send us the documents.
2. Review of the documents and proposals. We review the documents and set out the possible routes, starting with the simplest one that achieves the goal.
3. Quote and letter of engagement. We send you the quote and the letter of engagement in writing.
4. Implementation and follow-up. We see the matter through to the end and coordinate with your tax adviser or accountants (gestoría), the notaries and the registries: the Commercial Register and the Land Registry.

Who handles your matter

Your transaction is handled directly by Sara González Domínguez, a practising lawyer (abogada) registered with the Málaga Bar Association (no. 8502), whose practice focuses on corporate architecture, holding companies and M&A transactions, always backed by the rest of the firm’s team.

If the capital increase is linked to an investor coming in, we work on it together with the shareholders’ agreement that will govern that investor’s relationship with the other shareholders.

Illustrative example: a shareholder in an SL in Cártama has lent the company 60,000 euros and wants to convert them into capital. A capital increase by offsetting debts requires the debt to be liquid and due, and the directors must make a report on it available to the shareholders when the meeting is called (article 301). With that file in order, the general meeting approves the increase, the deed is signed and registered: the shareholder ends up with more shares without the company having to pay out any cash.

Frequently asked questions