Logo Guide to Business in Spain


8.2 Branch vs. subsidiary (whether S.A. o S.L.)

From a legal standpoint, the main differences between a branch and a subsidiary are as follows:

ConceptCompany of a commercial nature engaging in the pursuit of an economic activity, with a capital stock divided into shares and consisting of contributions by the shareholders, who, as a general rule, will be personally liable for company debts only up to the limit of the contribution made or promised.Secondary establishment with a permanent representation and certain management independence, through which the activities of the head office are totally or partially pursued, and with no legal personality independent of that of the head office.
Capital stock€60,000.€19.No capital is required for the establishment of a branch, although for practical reasons it is advisable.
Monetary and non-monetary contributions Monetary contributions must be made in the national currency, while non-monetary contributions, in the case of corporations, will require a report by an independent expert appointed by the Commercial Registrar.
RegistrationThe company must be formed under a public deed to be filed with the Commercial Registry, acquiring legal personality upon registration.Together with the public deed creating the branch, the documents evidencing the existence of the head office, the current bylaws, its directors and the decision to open the branch, duly legalized, must be registered with the Commercial Registry.
Shareholders’ meeting callsSee section 4.6.1 above.A branch does not have decision-making body in the form of a board or meeting, since its legal personality is that of the parent company.
DirectorsThe bylaws may establish various types of managing bodies, granting the shareholders’ meeting authority to choose between them, without any need to amend the bylaws. The position of director will be not remunerated, unless the bylaws otherwise provide and establish the method of remuneration.

See section 4.3 above.
The managing body of the head office will appoint a branch director to act as an attorney-in-fact of the head office at the branch. The director (as a general rule and subject to the limitations provided for in the powers of attorney) may pursue all the activities entrusted to the branch and registered at the Commercial Registry.
Share transfersDepends on how they are represented (book entries, detachable certificate books, etc.) and on their nature (registered or bearer).

In principle, they are free transferable, unless the bylaws establish otherwise.
Transfers must be recorded in a public document executed before a Spanish notary. Any bylaw provisions enabling practically unrestricted share transfers are prohibited.A branch cannot be transferred since it does not have any legal personality.
Financial statements The directors of the company must, within not more than three months of the fiscal year-end, prepare the financial statements, the management report and the proposal for the distribution of profit, to be approved by the shareholders’ meeting within six months of the fiscal year-end.As permanent establishments in Spain for tax purposes, branches must keep their own accounts with respect to the transactions they perform and their assets. Moreover, branches must deposit their parent company’s financial statements at the Commercial Registry or, in certain cases, the statements prepared in relation to the branch’s activity.
Dividend distributionShould the profit be distributed as dividends, such distribution shall be made to the shareholders in proportion to the capital they have contributed. Payment of interim dividends is also possible.Dividends do not exist, since profits pertain strictly to the parent company.

9See section 4 of Chapter 2 for more information.