The use of representation and warranties insurance (R&W) is becoming more and more frequent in Spain in the field of the purchase and sale of companies. The premiums increase, costs reduction or process simplification are some of the reasons for their growth.
Mergers and acquisitions of companies, known by the acronym M&A., is a corporate economic strategy. Mergers between business entities assuming the termination of investee companies and the transmission of their assets to a new entity – merger for a new creation – or for an existing one– merger through absorption.
The Share Purchase Agreement (SPA) is one of the most used contracts in Spain for the purposes of acquiring a mercantile company. Its basic content should include some clauses or contractual promises about the company (warranties) which will bind both parties for the transaction’s success.
The letter of intent is a written document that serves as a starting point for mergers and acquisitions. Among the most common main clauses are included the terms of the transaction, the exclusivity, the confidentiality and the legal audit.
The contract of the sale of shares or Share Purchase Agreement, is one of the most useful contracts in the practice of acquiring mercantile companies. It consists of four main phases: the contract of confidentiality, the letter of intent, the due diligence procedure and the signing of the contract of the sale of shares.
The purchase agreement of corporate shares or holdings is a document that establishes conditions that will govern the transfer of the company and it applies to all forms of non-listed companies.
Investment in Spain through acquiring shareholdings in a Spanish company requires a series of steps in order to ensure the successful conclusion of the transaction. These are, in brief: the letter of intent, the due diligence process, the signing of the purchase/sale agreement, the closure of the transaction and the closing operations, or post-closing of the transaction.
Although the sale of assets is generally subject to Value Added Tax (IVA) and Capital Transfer and Stamp Tax (ITPyAJD), the transfer of a complete branch of activity or business in Spain has flexible taxation.
The main instruments for acquiring companies are the purchase and sale of shares and participations and the purchase and sale of company assets. The choice of each of them has its advantages and disadvantages, and entails different legal consequences.
Business cooperation and the entrance into the Spanish market are often controlled through joint venture agreements. A joint venture is not defined by Spanish law. To determine the legal requirements, general standards of the Spanish Civil and Commercial Code should be applied, particularly Article 1255 of the Civil Code.
The European Union and Spain have introduced laws that regulate cross-border mergers that occur in Europe and ensure the rightful completion of the process. This article elaborates and compares the existing laws for this type of ventures.