The new Spanish Law of Labour Companies

Law 44/2015, of 14 October 2015, of Labour Companies came into effect in Spain on 14 November 2015. It repealed Law 4/1997 of Labour Companies and established a new legal framework for corporate entities while introducing important improvements and updates.

The new Law represents an improvement in:

  • Setting the requirements for the formation of employee-owned companies
  • Facilitating the incorporation of workers as corporate partners and
  • Reducing administrative procedures.

Article 19 of Law 44/2015 incorporates for the first time in Spain the definition of a labour company for workers, which is understood as a company that promotes various forms of employee participation in the company and has workers that:

  • Have an interest in the share capital and/or the results of the company
  • Have an interest in the voting rights and/or decision making of the company
  • Adopt a strategy that encourages the incorporation of workers as partners of the company.

Another key requirement that Law 44/2015 of Labour Companies introduces is that employees who personally and directly perform paid work through a permanent contract must own the majority of the share capital of a company.

With regard to the partners in this type of company, none can have corporate shares representing more than one third of the capital. However, after the Law came into effect, the initial establishment of employee-owned companies allows two people to have 50% of shares for a maximum period of 36 months. This is a significant development since under the old law, the minimum number of partners of a labour company was three. The Law also includes regulation in the situation of separation and exclusion of partners, which until now did not exist.

Regarding the recruitment of non-partner workers, Law 44/2015 increased the limit to 49% of the number of hours/years worked for non-partner workers who are contracted indefinitely, when before the reform, that limit was between 15 and 25%.

The Law also introduced the simplification of documentation and administrative procedures. In addition to reducing the documentation needed for the constitution of Labour Companies, apart from existing companies, the new Law implements the use of electronic means for obtaining the qualification and registration of such companies.

Law 44/2015 of Labour Companies also aims to promote the participation of workers with the following measures:

  • Establishment of a common procedure and reducing the period to offer stocks and shares,
  • Increase the possibilities of workers with indefinite contracts to acquire stocks and shares,
  • The shares and participations, regardless of the class they are in, have the same nominal value and confer the same rights for the purposes of security and control,
  • Possibility that the company provide financial assistance for the acquisition of share capital,
  • Simplification of the system of first refusal of the transfer of stocks and shares,
  • Possibility to set in the corporate bylaws the criteria and systems for the prior determination of the value of stocks and shares.

As for the allocations, while the previous law required the provision of 10% of net profits to a Special Reserve Fund, now there is a maximum limit of double the share capital. This reserve may be used to acquire a treasury stock, marking the first time a company’s acquisition of its own shares is regulated, that must be sold to workers within 3 years to facilitate their access to the status of partners.

Among the numerous advantages this Law introduces, there are also fiscal benefits including the 99% discount in the corporate tax payment on capital transmissions and documented legal acts.

The Law also requires all companies to adapt their existing bylaws to the new Law within a maximum period of two years from the date the Law came into effect.

If you need additional information regarding the law of labour companies in Spain,

Please note that this article is not intended to provide legal advice.

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