When a foreign company decides to operate in Spain through a subsidiary company, it may consider doing so through company formation or by acquiring a shelf company. Hereafter we explain the main characteristics, differences, and recommendations of both options.
Preliminary administrative procedures
Both in the case of incorporation and acquisition, future shareholders and directors must have a Spanish tax identification number (NIF, in the case of legal persons) or a Spanish foreigner identification number (NIE, in the case of natural persons). It is common practice to grant powers of attorney for authorized representatives to make such requests.
Preliminary legal procedures
If the founding shareholders are foreigners, it is advisable to prepare special powers of attorney so that the authorised representatives can appear before a notary in Spain and grant the corresponding public deeds in their name and behalf.
|Formation of a company||Acquisition of a Shelf Company|
|Powers of attorney||They include all the necessary faculties for the company to be incorporated in favour of the founding shareholder(s).||They empower the authorised representatives to acquire the shelf company on behalf of the shareholder(s).|
|Recommendation||The faculties relating to the request for the tax identification numbers can be included in both cases.|
In both cases, the power of attorney must be written in Spanish, granted before a notary (foreigner) and duly apostilled (legalised).
Before granting the Public deed
Both in the case of company formation and acquisition, it is necessary to appear before a Spanish notary to grant the corresponding deeds for the creation of the subsidiary. Beforehand, the following measures should be carried out:
|Company Formation||Acquisition of a Shelf Company|
|Corporate name reservation||It is necessary to reserve a corporate name.||If the purchaser wants to change the corporate name of the shelf company, it will be necessary to reserve a new corporate name.|
|Opening of a bank account||It is necessary to open a bank account in the name of the future company.||It already exists.|
|The transfer of social capital||The founders must transfer the minimum capital to the previously opened bank account.||The purchaser must transfer the amount of the share capital to the owner of the shelf company.|
|Drafting of by-laws||It is necessary to draw up the by-laws that will regulate the future company.||They already exist.|
Public deed before a Spanish notary
|Company Formation||Acquisition of a shelf company|
|Principal deeds||Granting of the public deed of incorporation.||Granting of the share purchase public deed.|
|Granting of the public deeds regarding the changes in the company’s bylaws (change of corporate name, corporate purpose, directors, etc.).|
|Granting of the public deed regarding the change of sole-shareholder of the company or the loss of sole shareholder condition.|
|Other deeds||In both cases, identification deeds of the real owner (of the parent company and of the incorporated company) must also be granted.|
After the public deed
|Company Formation||Acquisition of the Shelf Company|
|Application for provisional Tax Identification Number||To be requested from the Tax Agency.||It already exists.|
|Tax Settlement||The Tax on Asset Transfer and the Documented Legal Acts -ITP and AJD- (subject but exempt) regarding the Incorporation of the Company must be settled.||The Tax on Asset Transfer and the Documented Legal Acts -ITP and AJD- (subject but exempt) regarding the acquisition of the Shelf Company must be settled.|
|Inscription in the Commercial Registry||The deed of incorporation must be registered.||The deeds regarding the changes in the company’s by-laws must be registered.|
|Application for definitive Tax Identification Number||It must be requested before the Tax Agency once the incorporation public deed has been duly registered.||It already exists.|
|Registration for the Tax on economic activities||The company shall be registered with the Tax Agency before carrying out any Economic Activities.||It can be requested beforehand.|
|Application for the Social Security contribution code||In order for the company to be able to hire employees, it must request the corresponding contribution code from the Social Security.||It can be requested beforehand.|
Company formation or acquisition?
The incorporation of a company and the acquisition of a shelf company are two operations that end in the same result: the ownership of a subsidiary in Spain to be able to operate in the market.
As a general rule, company formation is recommended when investors wish to exercise greater control over the incorporation procedure. They may be involved, for example, in the drafting of the company’s by-laws, as well as in the selection of the bank entity to open the bank account. Although this alternative takes more time, it also entails a reduction in costs.
On the other hand, it is recommended to acquire a shelf company when investors urgently needs the company, for example, as a vehicle for a certain transaction. Since the company already exists, the interested party will simply have to acquire it and adapt it to their needs. In these cases, although the acquisition and/or adaptation costs are usually higher, the speed of the operation takes precedence.
Luis Trigueros von Korff
This article is not considered as legal advice