Building a businessin Spain starts withunderstanding Spain.

The first business decision should not necessarily be how to incorporate a company, but how the project should be structured.

Depending on the circumstances of each case, we analyse:

• the business structure
• the shareholders’ stakes
• the investment
• the intended activity
• the assets
• the financing
• the initial contracts
• the regulatory obligations
• and the relationships between Spain and the other jurisdictions involved

Because a structure that is right for starting out must also be able to carry the project as it grows.

Before building the business, build the right structure.

A company is far more than a legal entity.

It is a structure of interests between shareholders (in a Spanish S.L., holders of participaciones rather than shares, which cannot be freely transferred), directors, investors and, in some cases, third-party funders.

We advise on matters relating to:

• incorporation and corporate structure
• corporate governance
• shareholders and directors
• shareholders’ agreements (pactos de socios: binding between the signatories, but not enforceable against the company)
• admitting and exiting shareholders (transfers of participaciones, withdrawal and exclusion rights)
• capital increases and reductions
• reorganisations
• corporate transactions (M&A and structural modifications)
• directors’ liability (personal, extending to the director’s own assets)
• and shareholder disputes (including challenges to company resolutions, each subject to strict time limits)

A company is more than a legal entity. It is a structure of interests.

A commercial transaction often begins with a conversation. But it ends up as a set of obligations.

• Services agreements (arrendamiento de servicios, with the risk of reclassification as employment)
• Sale and purchase agreements (ownership passes by title plus delivery, not on signature)
• Distribution agreements (with possible goodwill compensation on termination)
• Collaboration agreements
• Joint ventures (structured as a jointly owned company, a UTE or a purely contractual arrangement)
• Commercial agreements
• International transactions

And when the relationship stops working, other questions arise:

• breach (a fundamental breach, as assessed by the court)
• liability
• damages (actual loss and loss of profit; Spanish law knows neither punitive nor consequential damages)
• termination for breach (Article 1124 of the Civil Code)
• claims
• and commercial disputes

That is why our work is not simply a matter of reviewing documents, but of understanding what the business is trying to achieve and what legal risks it takes on in doing so.

The contract is only the document. The real question is what it protects.

Financing can make a company’s growth possible. But it can also put at risk its assets, its liquidity and, in some cases, its shareholders or directors.

We work on matters relating to:

• loans
• credit facilities
• business finance
• security and guarantees
• avales (Spanish guarantees, usually joint and several; where drafted on first demand, the guarantor pays first and argues afterwards)
• mortgages (the borrower remains personally liable: Spanish lending is not non-recourse)
• refinancing and restructuring plans (Book II of the Insolvency Act)
• maturity and acceleration
• defaults
• enforcement proceedings (a public deed is enough to enforce, without a prior declaratory action)
• and disputes with credit institutions

We analyse not only the financing itself, but also the obligations it creates, the security behind it and the consequences that may follow if the transaction comes under strain.

The financing structure can be as important as the business itself.

A business investment requires far more than identifying an opportunity.

You need to understand what is being acquired, how the transaction is structured and what risks exist before committing capital.

We advise on transactions such as:

• investment in companies
• acquisition of businesses
• admission of investors
• joint ventures
• acquisition of assets
• business transactions involving real estate
• due diligence
• negotiation
• structuring
• and completion

For international investors in particular, we coordinate the Spanish legal issues with the international elements of the transaction.

Before you invest, understand what you are actually acquiring.

Not every business dispute begins as litigation. It may begin with:

• a breach
• a company resolution
• a disagreement between shareholders
• a non-payment
• a financial transaction
• a question of contractual interpretation
• or a decision that one of the parties considers harmful

We analyse the dispute from the outset to determine:

• what rights exist
• what obligations were undertaken
• what documentation is relevant
• what assets may be exposed
• which claims can be brought
• and which strategy offers the client the best protection

Litigation is not always the first move. But it should always be part of the strategy.

Financial difficulties do not always mean that a company must disappear.

At certain points it may be possible to reorganise its structure, negotiate with creditors or modify certain obligations in order to preserve its continuity.

We analyse situations of:

• financial strain
• loss of liquidity
• indebtedness
• refinancing
• negotiation with creditors
• restructuring (restructuring plans under Book II of the Insolvency Act, capable of binding dissenting creditors)
• pre-insolvency situations (the comunicación de apertura de negociaciones: formal notice to the court that stays enforcement for a defined period)
• business continuity
• and risks for directors and shareholders

Here, timing can be decisive.

The earlier the problem is understood, the more options may remain.

Insolvency is one of the most complex moments any company can face. Once it is actual rather than merely imminent, the directors must file for insolvency proceedings within two months.

It does not affect the company alone. It may involve:

• directors
• shareholders
• creditors
• credit institutions
• guarantors
• employees
• and the business’s own assets and liabilities

We analyse the different alternatives and their consequences in relation to:

• insolvency situations, actual or imminent
• concurso de acreedores (Spanish insolvency proceedings, which may end in a creditors’ arrangement, the convenio, or in liquidation; smaller businesses below the statutory thresholds go through a separate procedimiento especial para microempresas)
• creditors
• masa activa and masa pasiva (the insolvency estate and the body of admitted and ranked claims)
• liability
• sección de calificación (the classification stage, in which the insolvency is declared fortuitous or culpable, with possible disqualification of the directors and an order to make good the shortfall)
• sale of the business as a going concern (venta de unidad productiva)
• business continuity
• liquidation
• and recovery of assets and claims (ranked as privileged, ordinary or subordinated)

The objective is not always to save the structure. Sometimes it is to save what matters within it.

A company may be incorporated in Spain and, at the same time:

• have foreign shareholders
• be financed from another State
• contract with foreign companies
• hold assets outside Spain
• operate internationally
• or have directors and shareholders resident in different countries

These scenarios may raise questions of:

• private international law
• jurisdiction
• applicable law
• international contracts
• recognition
• international corporate structures
• and coordination between different legal systems

The business may cross borders. The legal structure has to follow.