Business succession in Spain: the guarantees that must be respected

Business succession might happen because of the sale of a company or as a consequence of the business manager’s death.

However, when a business succession is planned, various aspects must be considered including the situation of the employees. In this way, which social guarantees must be respected in the framework of a business succession in Spain?

According to the Article 44 of the Workers’ Statutes, business successions involves an ownership change of a company, of a work centre, or of a production plant, when the succession impacts an economic entity which maintains its identity, understood as a group of organized resources, in order to set up an economic, essential or subsidiary activity.

From this definition, two aspects should be highlighted: first, the company ownership change must be necessary and second, the economic activity must be maintained.

Therefore, the productive element should be transmitted, including, in general, those necessary to maintain the activity. In consistent jurisprudence since the judgement of the 19th, March 2002, the Spanish Supreme Court considers that two elements must exist:

  • The substitution of a business manager by another, without the requirement of previous contractual relations between the former business manager and the new one, because the succession must be achieved through a third party
  • The effective transfer of elements that allow the continuation of the company activity.

When the business succession occurs, the buyer is required to respect all rights and engagements that the employees may have had with the former employer.

The grantor may also respect some other obligations such as communication to the employees of the succession’s planned date, the cession motives and the succession’s consequences. These steps must be achieved through the employees’ representatives or by direct contact with employees if there are no representatives in the company.

The ceding company must look to the collective agreement to determine if there was an agreement on the deadline to communicate this information. It will have to set up a consultation period if the grantor or the buyer intends to realize modifications on remuneration conditions.

Furthermore, the applicable collective agreement will remain the same, except if there was a contrary agreement, because of a social agreement between the new business manager and the employee’s representatives.  These representatives must also continue their activities in the company in the same conditions as the ones existing before the succession.

It is important to highlight that Article 44.3 of the Workers’ Statute states that without prejudice to the Social Security Law, with transmissions made inter vivos, the grantor and the buyer will be severally liable for three years for the remuneration obligations originating before the succession and which have not been satisfied.

The succession must be realized with efficient prior preparation in order to guarantee a peaceful future for the company. To do so, it is necessary to consult experts on this matter

In this way and to have more information as well as a necessary support in every step, do not hesitate to contact Mariscal Abogados, your legal advisers in Spain.

This article is not considered as legal advice

Nicolás Melchior

A Law graduate from the Universidad Carlo III de Madrid, Nicolás Melchior specialises in corporate Law, commercial contracts and electronic commerce. Working languages: Spanish, German, English and French. For any further enquiries please Contact us