Setting up a company in Spain: how changes in the parent company affect the affiliated branch or subsidiary
Do you want to set up a business in Spain? Do you have concerns about how changes in the parent company may affect the affiliated branch or subsidiary? In this post we put to rest your concerns and explain what consequences any changes in the parent company may have on the business that has been established in Spain.
Starting a business in Spain is relatively easy, however it is important to comply with those legal regulations that deal with the relationship between affiliated branches or subsidiaries and their parent companies. However, as a first step, it is important to take a look at how subsidiaries are registered in the Mercantile Register.
Should a subsidiary be registered with the Mercantile Registry?
In order to provide a clear answer we must look at articles 295 onwards of the Mercantile Registry Rules that state:
- Subsidiaries are under obligation to be registered
- The following information must be included in the registration form: the registration date, the date of closure and other important information and circumstances related to the subsidiary
- Whenever a subsidiary is opened this must be written on the company’s registration sheet. Afterwards the subsidiary is also registered at the Mercantile Registry at its business address.
- The registration details should include:
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- The identification credentials of the subsidiary
- The address of the subsidiary
- An outline of the activities that are going to be carried out
- The details of the employees in the subsidiary and their roles.
What changes to the parent company could affect the affiliated branch or subsidiary in Spain?
Usually an affiliated branch has an independent legal personality and therefore is not affected by changes in the parent company because they are separate companies, but a liquidation process or insolvency proceedings can have an effect.
In the case of subsidiaries, they do not have an independent legal personality, nor do they have articles and therefore are totally dependent on the parent company (which answers for everything related to the subsidiary), thus meaning that changes at that parent company will affect the subsidiary.
With subsidiaries, when a change happens at the parent company, this must be reflected on the subsidiary’s entry in the Mercantile Registry. Some of the most common changes are the following:
- The company name or business address of the parent company abroad changes. In this case the changes must be noted in the subsidiary’s entry. In order to register these changes, you must go to a Notary Public taking paperwork from the foreign company that show the change, and sign a public notice that states this change.
- The company’s stated purpose changes. The parent company changes its stated activities and this influences the activity of the branch
- Cessation or alteration in the administrative core of the affiliated branch. As a foreign business owner you should know that certain formalities must be followed: adopt an agreement via the General Assembly and write it down in the minutes as well as in a certificate that is issued by the administrative core of the affiliated branch; sign a public notification before a Notary Public; and include it in the public deed at the Mercantile Registry, which we will look into below in more detail.
What steps should be taken if there are changes at the parent company?
If you have decided to set up a business in Spain and have decided to set up a subsidiary, but over time there have been changes at the parent company, you must know the steps to follow:
- Request a certificate from the Mercantile Register reflecting the change in the parent company
- Add this certificate to the records that reflect the partnership or shareholder agreements relating to the change in the parent company
- Make an appointment with a Notary Public to sign the deed recording the change of corporate purpose
- Pay the relevant company transactions tax within the Property Transfer Tax regime, to which this transaction is subject and yet exempt from.
- Register the deed at the Mercantile Register.
- Inform the Treasury about this change via form number 036 (modelo 036).
How can LEIALTA help you set up a company in Spain?
If you want to set up a company in Spain you will need a business advisor who is an expert in the formalities that need to be followed. The experts at LEIALTA can help you in all that you need because they understand this can be a complex procedure for those who do not have a comprehensive understanding of the rules to be followed.
We offer the following services to help set up a company in Spain:
- We carry out a tailored study. We analyse your company’s specific needs and suggest the most favourable way forward taking into account fiscal, employment and legal considerations. Upon carrying out this analysis we can decide with you which legal framework is best for the company that you wish to set up in Spain.
- Legal and fiscal representation. Non-residents are obliged to appoint a fiscal representative in Spain that has a business address in Spanish territory. If this obligation is not met the corresponding fine is between 2,000 and 6,000 euros.
- Cash Handling Services. If you wish to set up a business in Spain you must note that foreign businesses have difficulties in opening bank accounts. We recognize these difficulties and provide the option of working through one of LEIALTA’s bank accounts instead.
Are you interested in finding out more? Get in touch!
Leialta website: https://www.leialta.com/en/
Blog for doing business in Spain: https://www.leialta.com/en/blog-for-doing-business-in-spain/