4Formation of a company

4.1. Legal formalities

The ordinary steps and expenses involved are similar for both legal forms and are detailed in the following tables.

STEPS FOR THE INCORPORATION OF A SPANISH LIMITED LIABILITY COMPANY

Requirements	Applicable to any kind of limited liability company or corporation.
1. Clear name search certificate	Application to the Central Commercial Registry by the interested party or anyone authorized by it (may contain up to 3 alternative corporate names, in order of preference)¹⁴. The Central Commercial Registry will issue a name reservation certificate for the new company. Names are reserved for a period of six months as from the date of issue of the certificate. However, the clear name search certificate will be valid for three months for the purposes of executing the deed, reckoned from the date of its issue by the Central Commercial Registry. Once the certificate has expired, an application may be submitted for its renewal with the same name. The expired certificate must be attached to the application.
2. Application for provisional N.I.F.	See section 3.3 above.
3. Opening of a bank account	Opening of a bank account in the entity’s name for payment of the capital stock. Once the founding shareholders have paid in the capital, the bank must issue payment certificates.
4. Document containing representations by the beneficial owner	The founding shareholders must execute a document containing representations by the beneficial owner in accordance with Law 10/2010, of April 28¹⁵.
5. Execution of deed before a notary	The founding shareholders must execute a public deed before a notary, containing: Evidence of the identity of the founding shareholders. If any of the shareholders is represented at the act of formation, a notarized power of attorney to represent the shareholder must be produced to the notary. If the power of attorney is issued abroad, it must be duly legalized¹⁶. Representations by the beneficial owner (see requirement 4 above). Evidence of contributions and whether they are to be made in cash or in kind (if applicable) using the corresponding bank documentation, as well as details of the capital stock subscribed by the shareholders (see requirement 3 above)¹⁷. Clear name search certificate issued by the Commercial Registry (see requirement 1 above). Company bylaws. If the company is a limited liability company, the deed of formation must specify the initial form of the managing body, if the bylaws provide for different alternatives. Identification of and acceptance by the company directors. Subsequent declaration of foreign investment to the Register of Foreign Investment of the Directorate-General for International Trade and Investments (“DGCI") of the Ministry of Industry, Trade and Tourism (see Chapter 1, section 8 for further information). In some cases, limited mainly to foreign investments from countries or territories deemed to be tax havens, a prior declaration must be made (see Chapter 1, section 8 for further information). Identification of the economic activity code describing the activity in accordance with the National Classification of Economic Activities (CNAE). If the company is a corporation, the deed of formation must also state, at least approximately, the total amount of the formation expenses, both of those already paid and those merely envisaged until registration.
5. Execution of deed before a notary	The deed must be executed within the three months following the issue of the clear name search certificate by the Central Commercial Registry.
6. Application for registration of the registered office at the Commercial Registry	The deed of formation will be submitted (i) telematically by the notary; or (ii) in person by the interested party.
7. Period for assessment and registration in the Commercial Registry	Fifteen (15) days as from the date of the entry recording the filing of the deed, unless there is just cause, in which case the period will be thirty (30) days.
8. Obtainment of definitive N.I.F.	See section 3.3 above.
9. Opening formalities for tax and labor purposes	Registration for the purposes of the Tax on Economic Activities: submission of Form 036. Companies being set up must describe the activities they are going to pursue and the reason why they are exempt from this tax. The following, among others, are exempt from this tax: Individuals are exempt in any case. Legal entities during the first two years they pursue their activities. Legal entities whose net turnover is less than one million euros. Nonprofit associations and foundations for people with physical, mental or sensory disabilities, for teaching, scientific or welfare activities. Taxpayers that qualify for the exemption under international treaties. This step must be completed before the company commences operations. Registration for the purposes of Value Added Tax (VAT). Obtainment of an opening/operating license, or sufficient enabling instrument for pursuit of the activity, from the relevant municipal council¹⁸. For labor purposes, please see Chapter 5, section 10.

As a general rule, setting up a corporation or limited liability company using the ordinary procedure takes between 6 and 8 weeks (for aspects relating to labor formalities and authorizations, see Chapter 5).

For additional information please visit www.investinspain.org.

In addition, Law 14/2013, of September 27, on support to entrepreneurs and their internationalization (the “Entrepreneurs Law”) provides an express regime for the telematic formation of limited liability companies, with and without standard bylaws, the content of which is implemented by Royal Decree 421/2015, of May 29 (regulating the standard bylaws and standard public deed forms for limited liability companies, approving the standard bylaws form, regulating the Notarial Electronic Agenda and the Exchange of reserved business names) and by Order JUS/1840/2015, of September 9 (approving the public deed form in standard format and codified fields of limited liability companies, as well as the list of activities that can be included in the corporate purpose¹⁹). This notwithstanding, according to the provisions of the Entrepreneurs Law, the regime will consist of the following steps:

A. Formation of a limited liability company with standard bylaws using a standard-form public deed.

Nº	STEPS
1	At the Entrepreneur Service Point (PAE): Completion of single electronic document (DUE) and commencement of electronic processing. Documents that are drafted in a foreign language must be accompanied by a translation into Spanish or any other official language in the province of the registered office by a sworn translator. Foreign public documents must have the corresponding apostille or diplomatic legalization, except where exempt (by law or pursuant to international treaties in force in Spain). In any case, documents attested by a Consul in the exercise of notarial functions or notarial documents executed abroad and legalized by the Spanish authorities will be subject to Spanish tax obligations. Filing of request to reserve the name of the company (up to 5 different names) with the Central Commercial Registry, which will issue a certificate within the following 6 business hours. A date will immediately be set for the execution of the deed of formation by means of real-time communication with the electronic notarial agenda, obtaining information on the notary’s office, date and time of execution of the deed, which will be within the 12 business hours following the filing of the application.
2	The notary will: Authorize the electronic deed of formation, attaching the document evidencing payment of the capital stock. A standard-form deed of formation will be used, with coded fields. Immediately send a copy of the deed to the tax authorities, requesting the assignment of a provisional N.I.F. via the Business Information Center and Creation Network (CIRCE) remote processing system. Send an authorized copy of the deed of formation to the Commercial Registry corresponding to the registered office via the (CIRCE) remote processing system. Deliver an electronic uncertified copy of the deed of formation to the executing parties at no additional cost, which will be available at the PAE section of the Ministry of Industry, Trade and Tourism website.
3	The Commercial Registrar, on receiving via (CIRCE) (a) an electronic copy of the deed of formation together with the provisional N.I.F. assigned, and (b) evidence of the exemption from transfer and stamp tax, will: Assess the deed and register it within 6 business hours (business hours meaning those included within the opening hours established for the registries). Send a certification of registration to the (CIRCE) on the same date of registration. Request the definitive N.I.F. Where the Commercial Registrar finds defects or impediments that prevent its registration, a negative assessment will be issued and notified to the CIRCE, which will immediately notify such circumstance to the founding shareholders and to the notary. The publication of the registration of the company in the Official Commercial Registry Gazette is exempt from payment of charges.
4	The tax authorities will: Notify the definitive status of the N.I.F. via the (CIRCE). Notify the N.I.F. via the (CIRCE).
5	The formalities for commencement of the activity will be performed at the PAE, which will send the information contained in the DUE to: The State Tax Agency. The Social Security General Treasury. The local and autonomous community authorities, as the case may be.

B. Formation of a limited liability company without standard bylaws using a standard-form public deed.

Nº	STEPS
1	When the founding shareholders choose to form a limited liability company without standard bylaws, the provisions for formation of a limited liability with standard bylaws will apply, with the specific characteristics indicated in this table. At the Entrepreneur Service Point (PAE), the founding shareholders may: File a request to reserve the name of the company. Set the date for the execution of the deed of formation.
2	The notary, once they have the background information necessary to draw up the deed, will: Authorize the electronic deed of formation, attaching the document evidencing payment of the capital stock. A standard-form deed of formation will be used, with coded fields. Both the notaries and the intermediaries must notify the founding shareholders of the benefits of using PAEs and CIRCE for formation of the company and for the performance of other formalities linked to the commencement of the company’s activity. Immediately send a copy of the deed to the tax authorities, requesting the assignment of a provisional N.I.F. via the CIRCE. Send an authorized copy of the deed of formation to the Commercial Registry corresponding to the registered office via the CIRCE. Deliver an electronic uncertified copy of the deed of formation to the executing parties at no additional cost, which will be available at the PAE section of the Ministry of Industry, Trade and Tourism website.
3	The Commercial Registrar, on receiving the electronic copy of the deed of formation, shall initially register the company at the Commercial Registry within a period of 6 business hours, solely indicating the data relating to: (i) name, (ii) registered office; (iii) corporate purpose, (iv) capital stock; and (v) managing body. Definitive registration will take place within five days as from the day after the date of the filing entry or, as the case may be, the date of return of the withdrawn document. For such purposes, each Commercial Registry must set up a remote customer service desk during business hours so that, at the request of the interested parties or their representatives, subject to their identification, they can handle queries, including via video conference, regarding the registrability of lawful bylaw clauses or provisions. If definitive registration takes place while the filing entry is valid, the effects will be backdated to that date. Where it is not possible to complete the procedure within the indicated time periods, the commercial registrar will notify the applicant of the reasons for the delay. Once registered, the Commercial Registrar will notify the competent tax authorities of the registration of the company, requesting the definitive N.I.F.. In order to evidence the correct registration of companies at the registry, and the registration of the appointment of the directors appointed in the deed, the electronic certification issued at no additional cost by the commercial registrar on the date of registration, at the request of the interested party, will be sufficient. On the same date, a notification will be sent to the notary that authorized the deed of formation informing them that the company has been registered with the corresponding registry data, which will be attached to the notarial protocol. The founding shareholders may grant the authorizing notary the authority to electronically rectify any defects found by the registrar in his or her assessment, provided that the notary abides by the assessment and the stated intention of the parties. Any incident arising during the registration process between the relevant public authorities that is not attributable to the entrepreneur, will not give rise to any additional obligation or expense for the entrepreneur, and the relevant public authorities will be responsible for resolving such incident.
4	The tax authorities will: Notify the definitive status of the N.I.F. via the CIRCE. Notify the N.I.F. via the CIRCE.
5	The formalities for commencement of the activity will be performed at the PAE, which will send the information contained in the DUE to: The State Tax Agency. The Social Security General Treasury. The local and autonomous community authorities, as the case may be.

It should be noted that according to the Entrepreneurs Law:

Entrepreneur Service Points (“PAEs”) are: Offices belonging to public and private organizations, including notary offices and commercial registries, which will be tasked with facilitating the creation of new businesses, the effective commencement of their activity and their development, by providing information, processing, documentation and advisory services.
Both notaries and intermediaries must inform founders of the benefits of using PAEs and the CIRCE for the formation process and completing other formalities linked to the commencement of the company’s activity. Specifically, they must inform them of the following points: (i) formation costs and time periods; (ii) provision of information and advisory services; (iii) automatic fulfillment of tax and social security obligations associated with the commencement of the activity; (iv) possibility of completing formalities associated with the commencement of activity vis-à-vis the state, autonomous community and local authorities, by submitting notices and solemn declarations, and (v) monitoring of the status of the procedures vis-à-vis the competent bodies.
All the formalities required for company formation, the actual commencement of an economic activity and its pursuit by entrepreneurs can be completed via the PAE section of the Ministry of Industry, Trade and Tourism website. The PAE section of the Ministry of Industry, Trade and Tourism website will be accessible by computer, cell phone and tablet and will include in all cases:
- All the information and forms required to take up and pursue the activity.
- The possibility of submitting all the necessary documentation and applications.
- The possibility of knowing the status of the procedures in which the entrepreneur is an interested party and, where appropriate, receiving the relevant notification of the mandatory procedural acts and the decisions on them by the competent administrative body.
- All the information on the aid, subsidies and other types of financial support available for the economic activity in question from the state, autonomous community and local authorities.
Any other functions entrusted to it by law.
The Single Electronic Document ("DUE") is the document containing the data that must be sent to the legal registries and to the competent public authorities for:
- The formation of limited liability companies.
- The registration at the Commercial Registry of the Individual Entrepreneur.
- Fulfillment of the tax and social security obligations on commencement of the activity.
- The performance of any other formality on commencement of the activity with the state, autonomous community and local authorities.

¹⁴Applications for clear name search certificates may be made:

Directly at the offices of the Central Commercial Registry with a printed application form.
By mail, by sending an application or letter to the offices of the Central Commercial Registry. The Registry will issue the certificate in return for payment on delivery to the address indicated in the application.
By telematic means, by filling the application form on the website: www.rmc.es. (http://www.rmc.es/Deno_solicitud.aspx?lang=es).

¹⁵Law 10/2010, of April 28, on the Prevention of Money Laundering and Terrorist Financing (“Law 10/2012”) requires the founders of a company to provide a declaration by the “beneficial owner”, that is, by the individual(s):

On whose behalf it is intended to establish a business relationship or take part in transactions.
Who ultimately owns or controls, directly or indirectly, more than 25% of the capital or voting rights of a legal entity, or who otherwise exercises control, directly or indirectly, over the management of a legal entity. An exception is made for companies listed on a regulated market in the European Union and subject to disclosure requirements consistent with EU law or with equivalent international standards that ensure that the information on ownership is suitably transparent. It is interesting to note that in the case of fideicomisos or fiduciary arrangements, such as common law/Anglo-Saxon trusts, all the following persons will be considered beneficial owners: 1. settlor, 2. trustee or trustees, 3. the protector, if any, 4. the beneficiaries or, where they have yet to be designated, the category of persons for whose benefit the legal structure has been created or acts; and 5. any other individual who exercises ultimate control over the trust by means of direct or indirect ownership or by other means. In the case of legal instruments similar to a trust, such as fiduciary arrangements or the “Treuhand” under German legislation, the obliged entities must identify and adopt the appropriate measures to verify the identity of the persons who hold positions equivalent or similar to those listed in numbers 1 to 5 above.
Individuals who are considered beneficial owners must provide the following identifying particulars: first and last names, birth date, type and number of identity document, country that issued the identity document, country of residence, nationality, criteria by which he/she is classified as a beneficial owner, and in the case of beneficial ownership by direct or indirect ownership of shares or voting rights, percentage holding, including, in the case of indirect ownership, information on the interposed legal entities and their interest in each of them. Obliged entities that belong to the same category according to the provisions of Law 10/2010 may create shared systems for reporting, storing and, as applicable, accessing the information and documentation gathered for the purposes of compliance with due diligence obligations, provided they notify the Anti-Money Laundering and Monetary Infringements Commission at least 60 days in advance of its entry into operation.
Information relating to beneficial ownership must be kept for 10 years after beneficial owner status ends.

¹⁶There are two main procedures for such legalization:

Execution of the powers of attorney in the presence of the Spanish Consul in the foreign investor’s home country. The foreign investor appears before the Spanish Consul, provides evidence of his identity and grants the related powers of attorney. If a company, rather than an individual, is the foreign shareholder, apart from his identity, the person appearing before the Spanish Consul must provide evidence of his capacity to grant the powers of attorney to the designated person in the name and on behalf of the shareholder. The Spanish Consul may demand any documentation he considers necessary and will proceed to grant a deed of power of attorney, in Spanish, to the designated person. This power of attorney may be used directly in Spain.
Execution of the power of attorney in the presence of a foreign public authenticating officer. The foreign investor appears before the authenticating officer, provides evidence of his identity and grants the related power of attorney. If the foreign investor is a company, its representative shall execute the power of attorney in the presence of the public authenticating officer, who will certify the document as well as the identity and capacity of the representative of the foreign investor to grant the power of attorney. The signature of the foreign authenticating officer would also require subsequent legalization (either by the “apostille” procedure approved by The Hague Convention of October 5, 1961, or by a Spanish Consul abroad). Under this second procedure, the power of attorney would normally be issued in the language of the authenticating officer who attests to the act, meaning a sworn translation into Spanish would also have to be provided.

¹⁷It will not be necessary to evidence the reality of the monetary contributions in the case of entrepreneurial limited liability companies (see Annex 1, section 4.2).

¹⁸In this connection, in accordance with the provisions of Law 12/2012, of December26, 2012, on Urgent Measures to Deregulate Trade and Certain Services, permanent establishments used for commercial retail purposes and the provision of certain services provided for in the Schedule to the Law with a useful sales and display area not to exceed 750 m² will not generally be required to obtain an opening and operating license beforehand, but rather to submit a solemn declaration or prior communication. However, when the planned commercial activity implies the establishment of a large retail outlet, it will be necessary to hold industry authorization or an equivalent instrument granted by the competent body of the regional government.

¹⁹For these purposes, it is established that the standard form of public deed will be used to form a limited liability company with and without standard bylaws (art. 6 Royal Decree 421/2015, of May 29).

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