The filing of annual accounts of foreign branches is one of the most problematic issues facing foreign companies whose investment in Spain is formalised through the establishment of a branch. The branches of foreign companies, like all commercial entities in Spain, must comply with this obligation on an annual basis.
In this sense, it should be remembered that a branch is a secondary establishment equipped with permanent representation and with a certain degree of management autonomy, through which the companys’ activities are fully or partially developed. Therefore, branches lack their own legal personality and are, in essence, ‘extensions’ of the foreign company in Spain.
The obligation to file annual accounts of foreign branches in Spain is set out under articles 375 et seq. of the Commercial Registry Regulations (RRM), which provide for two scenarios around the so-called ‘equivalence control’:
The filing of annual accounts of branches of foreign companies with equivalence control in Spain
In the event that the foreign company is obliged by its internal regulations to draw up annual accounts, ‘it will be necessary that [the foreign company] files, with the Registry of the branch, the accounts containing data relating to the company’s annual accounts and, if applicable, the consolidated accounts that would have been drawn up in accordance with its legislation.’
Article 375.2 of the RRM indicates that, in the cases in which there is equivalence control and the accounts were already deposited in the foreign company’s Mercantile Registry, the Registry’s appraisal is limited to the verification of this circumstance.
For the accreditation of the effective approval and the filing of the annual accounts in the Foreign Registry, a supporting document must be provided.
The filing of annual accounts of branches of foreign companies without equivalence control in Spain
For cases in which the legislation of the foreign company does not require the preparation of annual accounts, or does so in a manner not equivalent.
To Spanish legislation, the company must draw up said accounts in relation to the activity of the branch and file them with the Mercantile Registry.
In these cases, there is some uncertainty about how the accounts should be prepared and according to what criteria this preparation should be done. In this sense, the DGRN understands that, for the preparation of these ad-hoc accounts and their filing, the provisions of articles 366 et seq. of the RRM must be followed in accordance with the Capital Companies Law. Thus, in order for the branch to overcome the parameters established for submitting abbreviated accounts and/or audit reports, it must abide by the regulations that apply in Spain.
The DGRN understands that the publicity entailed by a company’s filing of accounts interests not only the partners of the company or its creditors, but rather all those that have, or could have in the future, relations with the company through its branch office.
All parties are interested in understanding, with the greatest assurance, the reality of the company’s assets and accounting position, in order to correctly interpret its economic situation, and achieve the security of its assets and, in short, that of its commercial legal traffic.
This article is not considered as legal advice