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Public limited Company

The "Sociedad Anónima" is a capitalist company in which the stock capital is divided into shares that can be freely transferred and in which the shareholders are not personally liable with respect to the company’s debts.

These characteristics, together with the investment opportunities that such companies offer to small investors, given the usually low par value of the shares, have contributed to the fact that, for many years, this has been the legal form most often used in the incorporation of companies.

However, the adaptation of business law to the Directives of the European Community, approved by Act 19/1989, 25 July 1989, involving the establishment of a minimum stock capital of 60,000 € for a public limited company, has led this legal form to lose ground in favour of the limited liability company, which, on requiring a smaller amount of capital, is the preferred business form at the present time.

The incorporation of a company is conditioned to the execution of a deed and the registration of the company in the Mercantile Registry. The stock capital must be fully subscribed and at least 25% of the par value of each of its shares must be paid up. The incorporation of the company may be arranged in a single act by agreement among the founding partners (simultaneous formation) or through the successive subscription of the shares as from the time when the intention of incorporating the company has been made known (successive formation).

There is no minimum requirement with respect to the number of shareholders in order to incorporate a public limited company, as this can be achieved with a single shareholder (a sole shareholder company or "Sociedad Anónima Unipersonal"). Neither is there a maximum number of shareholders.

The deed of incorporation of a public limited company must necessarily include:

  • The names, surnames and marital status of the individuals executing the deed, if they are natural persons, or the name or trade name, in the case of legal persons. In both cases, the nationality and domicile must be indicated.
  • The intention of the persons executing the deed to found a public limited company.
  • The articles of association which are to govern the operation of the company.
  • The cash, properties or rights contributed by each shareholder or which each shareholder undertakes to contribute, indicating the title under which he does so and the number of shares received in exchange.
  • The total amount, at least an approximate amount, of the incorporation expenses, both those already paid as well as those merely envisioned in order to accomplish the company’s incorporation.
  • The names, surnames and age of the persons who are to initially take charge of the management and representation of the company, if natural persons are concerned, or the company names, in the case of legal persons, and, in both cases, their nationality and domicile, together with the same details, for the company’s auditors, if applicable.
  • Moreover, any and all agreements, as the founding partners may consider advisable, can be included in the deed, provided that they are not contrary to the Law and that they do not contradict the principles inherent to the form of a public limited company.

In turn, the company’s articles of association must contain:

  • The name of the company.
  • The corporate purpose, determining the activities comprising such purpose.
  • The duration of the company.
  • The date on which it will commence its business activities.
  • The registered office, as well as the body competent for deciding on the establishment, elimination or relocation of branch offices.
  • The stock capital, mentioning the part not paid up, if any, as well as the manner in which that part is to be paid up and the maximum time limit allowed.
  • The number of shares into which the stock capital is divided; their par value; their class and series, if several exist, with a precise indication of the par value, number of shares and the rights pertaining to each of the classes; the amount actually paid up, and whether the shares are represented by means of certificates or book entries. If the shares are represented by certificates, there must be an indication of whether they are registered or bearer shares, and whether the issue of multiple certificates is planned.
  • The structure of the body entrusted with the company’s management, determining the directors to whom the power of representation is to be given, as well as the regime under which they are to act, in accordance with the Public Limited Companies Act and the Mercantile Registry Regulation. Furthermore, the number of directors must be stated and, in the case of a Board of Directors, the number cannot be less than three, or at least mention must be made of the maximum and minimum numbers, as well as the duration of the term of office and the system of remuneration, if there is any.
  • The procedure to be used by the corporate bodies of the company for holding discussions and adopting their resolutions.
  • The closing date of the business year. If no provision is made in the articles of association, the business year will be understood to end on the 31st of December each year.
  • The systems of accessory contributions, if any are established, expressly mentioning their content, their gratuitous or remunerated nature, the shares that bring with them the obligation to make such contributions, as well as the eventual penalty clauses inherent to non-fulfilment.
  • The special rights, if any, reserved by the founders or promoters of the company.
  • The restrictions to the free transfer of the shares, if any are stipulated.
  • The public limited companies pay tax under the Company Tax system and do not have access to the Simplified Regime or to the Equivalence Surtax under the Value Added Tax.
  • The rate applicable under the Company Tax system is 30% in 2012). There is a special tax regime within the Company Tax system for small companies, which are those companies whose net turnover does not exceed eight million euros, whereby the first 300,000 € of profit are subject to a reduced tax rate of 25%.

The legal relations of the public limited companies are regulated by Royal Legislative Decree 1564/1989, 22 December 1989, which approved the revised text of the Public Limited Companies Act.

  • Its own legal personality.
  • The status of a trading concern regardless of the nature of its purpose.
  • Incorporation formalised through a public deed and its subsequent registration in the Mercantile Registry.
  • It is mandatory for the name of the company to include the expression "Sociedad Anónima" (Public Limited Company) or its abbreviation "S.A."
  • The stock capital may not be less than 60,000 €.
  • Capital fully subscribed, and at least 25% of the par value of each of the shares must be paid up.
  • Capital divided into shares that are freely transferable once the company has been registered with the Mercantile Registry, unless otherwise stipulated in the articles of association.
  • Stock capital comprised by the contributions made by the shareholders, which can be in cash, property or rights.
  • The non-monetary contributions, regardless of their nature, must be assessed in a report prepared by one or several independent experts appointed by the Mercantile Registry.
  • The cash outlays must be verified before the Notary Public who authorises the deed, by presenting the receipts of the deposit of the amounts in a credit institution in the name of the company, or by means of handing over the said amount in order for the Notary Public to deposit it on behalf of the company.
  • Only those assets or rights capable of being value-assessed may be contributed. In no case may an individual’s work or the provision of services be contributed in exchange for shares.
  • Registered or bearer shares. Shares must be registered until such time as their amount has been fully paid up and whenever so required by Law.
  • The founders will be jointly and severally liable to the company, the shareholders and third parties, for ensuring that the contributions are actually made, for the appraisal of the non-monetary contributions, for the proper investment of the funds to be used for the payment of the incorporation costs, for the omission of any mentions in the deed of incorporation required by the Law, as well as for the inaccuracy of any statements made therein.
  • No shares may be handed over or transferred until such time as the company has been registered with the Mercantile Registry.
  • The shareholder must contribute to the company the portion of capital not paid up in the manner and within the time limit stipulated in the articles of association or, if no such provision is made, in accordance with a resolution or decision by the directors.
  • The shares are indivisible.
  • The shares can grant different rights, with those having the same entitlement content constituting a single class. Whenever there are several series of shares within the same class, all of those forming a single series must have the same par value.
  • Possibility of issuing shares without voting rights for a par value not to exceed half of the stock capital paid up.
  • Shares will be entitled to collect the minimum annual dividend established in the articles of association. Once the minimum dividend is agreed, the holders of non-voting shares will be entitled to the same dividend as that corresponding to the ordinary shares.
  • Company bodies:
    • General Shareholders Meeting.
    • Directors: the management of the company can be entrusted to one person or to a group of people. When the management is entrusted jointly to more than two people, they will establish themselves as a Board of Directors. The appointment of the directors and the determination of their number, whenever the articles of association solely establish a minimum and a maximum, is the responsibility of the General Meeting. A person does not have to be a shareholder in order to be appointed as a director, unless the articles of association stipulate otherwise.
  • The company directors are under the obligation of preparing the annual accounts, the management report and the proposal for the application of the profits, as well as the consolidated accounts and consolidated management report, if appropriate, within a maximum time limit of three months counting from the closing of the business year.
  • The directors will hold their offices for the term stipulated in the articles of association, which may not exceed five years. They may be re-elected for one or more periods of the same duration.
  • The directors are liable to the company, the shareholders and the company’s creditors for any damages they may cause on account of acts contrary to the Law or to the articles of association, or acts performed without the diligence with which they are bound to exercise their offices.
  • The annual accounts will include: the balance sheet, the profit and loss account and the annual report.
  • The annual accounts and the management report must be reviewed by auditors, with the exception of companies entitled to submit an abridged balance sheet. Those who are to audit the accounts must be appointed by the General Meeting before the end of the business year to be audited, for a specified period of time, which may not be less than three years nor in excess of nine, with the possibility of being re-elected annually by the General Meeting once the initial period has ended.
  • An abridged balance sheet may be submitted by companies in which, during two consecutive business years, as of the end of each year, at least two of the following circumstances concur:
    • That the total of the items on the assets side does not exceed 2,850,000 €.
    • That the net amount of the annual turnover is less than 5,700,000 €.
    • That the average number of employees during the business year does not exceed 50.
  • An abridged profit and loss account may be prepared by companies in which, during two consecutive business years, as of the end of each year, at least two of the following circumstances concur:
    • That the total of the items on the assets side does not exceed 11,400,000 €.
    • That the net amount of the annual turnover is less than 22,800,000 €.
    • The average number of employees during the business year does not exceed 250.
  • In the case of a newly established company, an abridged balance sheet and an abridged profit and loss account can be submitted, whenever two of the three conditions mentioned above are met at the time of the closing of accounts at the end of the year.
  • The annual accounts must be presented for deposit in the Mercantile Registry within a period of one month following their approval. The submission can be made on a paper or on a computerised support.
  • The public limited company has the power to issue debentures.

Shareholders rights
  • To share in the distribution of profits and in the assets resulting from the winding-up of the company in accordance with their respective stakes.
  • Pre-emptive subscription right in the issue of new shares.
  • The right to vote at the General Meetings. Spanish solicitors in London

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