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7Other alternatives for operating in Spain

7.4. Silent Participation Agreement (C.E.P.)

  • Concept: This form of business association, which is not subject to any legal formality at all, consists of a financial collaboration whereby one or more entrepreneurs (silent partners) take an interest in the operations of another (the active partner), contributing an agreed portion of capital to the active partner and sharing in the profits or losses in the proportion determined by them.
  • Contributions: The contributions, whether cash or in kind, do not qualify as capital contributions as such, but rather simply represent the right of the silent partner(s) to share in the results of the business concerned. Silent partners are therefore not shareholders of the active partner.
  • Formal requirements: As provided in the Commercial Code, this type of agreement does not require any legal formality to be fulfilled (public deed or registration at the Commercial Registry). However, in practice, the parties tend to record the agreement in a public deed in order to provide proof to third parties.
  • Regulation: Articles 239 through 243 of the Commercial Code, contained in Title II “Silent Participation Agreements” (Book II of the Commercial Code).