This article introduces the formalities or corporate housekeeping duties that companies established in Spain must fulfil in order to legally develop their activities. There are many different types of corporations in Spain. The most important are the limited liability company (“Sociedad Limitada”), the private limited company (“Sociedad Anónima”) and the new business limited company (“Sociedad Limitada Nueva Empresa”). The following article discusses only these three.
From a juridical point of view, companies are a unique legal entity because they only exist through the recognition of the state that gives the company a legal status as a legal entity. In order to maintain this legal personality, a company must fulfil certain formalities, so-called corporate housekeeping duties. If the minimum formalities are not met, the company’s existence can be threatened in the event of a lawsuit.
Most important corporate housekeeping duties:
- The most important and fundamental prerequisite is that the company must register with the commercial register. Without such an entry, no company can exist on its own
- Furthermore, each company is obliged to compile and keep records of all shareholders’ meetings and board of directors’ meetings
- Additionally, careful accounting is required. This includes submitting the annual financial statements within the time limit. The exact requirements arise from the principle of the “business judgement rule”, anchored in Spain in article 226 of the Capital Companies Act (Ley de Sociedades de Capital).
- Moreover, the following documents must be available to the shareholders at the headquarters of the company:
- The documents with information about new shareholders, as well as any amendments thereto
- The Articles of Association of the Company, as well as any amendments thereto
- The minutes of all the meetings of the shareholders
- The annual financial statements of the company
- All stock corporations must also keep a list recording the following: First, all shareholders with their respective number of stocks or shares, together with the total holding in the company, as well as the proportion of stocks or shares of the respective genera.
These are the basic requirements of any company. Overall, it is striking that it is a clear list of corporate formal obligations. This is why it is not difficult to comply with these points and thus guarantee a legal continuity of the company.
As of the founding of a company and its entry into the commercial register, all minutes of all the meetings of the shareholders or managers must be kept. In addition, careful accounting must comply with the Business Judgment Rule standard. In the end, it is necessary to make certain documents accessible to the shareholders (including minutes, annual accounts, articles of incorporation).
For all stock corporations, it is also necessary to have a list with all the information on the shares, where the shares are held, who owns which shares, and which type and genre they are.
If these corporate housekeeping duties are respected, the company’s formal obligations are fulfilled and the company can continue to exist legally and “cleanly“.
Christian Lederer & Emmanuela López
This article is not considered as legal advice