8Branches

8.1 Creation of a branch

In addition to the forms of business enterprise created under Spanish law with separate legal personality, a foreign investor may operate in Spain through a branch.

The opening of a branch requires the execution of a public deed, which must be registered at the Commercial Registry, together with the formalities indicated in section 6.1 of Chapter 2.

From a foreign investment legislation viewpoint, it is not necessary to provide the branch with capital, although certain branches of entities with financial activities, due to the special nature of their activity, must be allocated capital.

The decision of the DGRN of May 24, 2007, establishes that foreign companies do not have to obtain a clear name search certificate from the Central Commercial Registry in order to set up a branch in Spain. Given they are not forming a new legal entity, they do not have to meet the requirements for setting up a company (i.e. a certificate from the Central Commercial Registry evidencing that the name of the company to be formed is not registered).

The branch must have a legal representative who is empowered by the head office to administer the affairs of the branch. Apart from this requirement, there are no formal governing or management bodies.

Aside from the obvious differences in terms of internal structure and organization, a branch operates much like a company in its dealings with third parties.

The choice between forming a branch or a legal entity in Spain may be affected by commercial reasons; for example, a company may be deemed to provide a more "solid" presence than a branch.

There are also other differences which are addressed in different chapters of this publication.