What is the main source of law authorising this entity form?

Corporate Enterprises Act (Real Decreto Legislativo 1/2010, de 2 de julio, por el que se aprueba el texto refundido de la Ley de Sociedades de Capital).

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

The S.L. has a separate legal personality.

(Maximum) period of existence

Unless otherwise set forth in the by-laws, the S.L. is incorporated for an indefinite period.

Governing document(s)

The S.L. is governed by its by-laws.

Liability of incorporators / shareholders

The shareholders are not personally liable for the debts of the company, their liability is limited to their contribution to the share capital. There are certain circumstances (liquidation, share capital reductions etc.) in which the shareholders may be personally liable for the company´s debt.

(Governing) bodies

The S.L. may be governed and represented by a sole director, two (2) or more directors acting jointly or jointly and severally, or by a Board of Directors. The organisation schemes must be established in the by-laws.

Other particularities

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

There are no limitations as to the involvement of S.L. companies in international restructurings. In the case of conversion of a foreign entity into a Spanish S.L., the foreign entity must comply with the formalities required in Spain.

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

No, only S.A. companies (Sociedad Anónima) and Real Estate Investment Trusts (SOCIMIs) may be publicly listed.

Can this type of entity be used for a non-profit or charitable organization?

No, S.L. companies are commercial companies incorporated for profit purposes.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

• The main document required is the Deed of Incorporation which shall contain at least:

• Company's by-laws;
• Corporate purpose;
• Registered office;
• Appointment of directors;
• Certificate of Corporate name availability issued by the Central Commercial Register; and
• Amount of share capital and Bank Certificate of share capital contribution. It is not necessary to provide this certificate to prove the reality of the contributions if the founding shareholders state in the Deed of Incorporation that they will be jointly and severally liable to the company and to the company's creditors for the reality of such contributions.

Involvement of notary, company register, governmental authorities

• The Deed may be granted by the shareholder(s) and prospective director(s), or by a third party by virtue of a power of attorney.

• The Deed of Incorporation must be granted before a Notary Public and subsequently registered with the corresponding Commercial Registry.

Timing (estimate)

• The process to incorporate a S.L. company takes between three (3) and four (4) weeks (estimate).

Main costs, including registration and similar fees (excluding legal fees)

• The main costs are Notary and Commercial Register fees.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

Minimum number of incorporators / shareholders and residency requirements

There must be at least one (1) incorporating shareholder. There are no residency requirements, but foreign shareholders must obtain a tax identification number “NIF” (if a foreign entity) or foreign identification number “NIE” (if a foreign individual).

Minimum number of directors (or other applicable officers) and residency requirements

There must be at least one (1) director (sole director). If the managing body is a Board of Directors, the minimum number of Directors is three (3). There are no residency requirements, but foreign directors must obtain a foreign identification number (N.I.E.).

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

Since the entry into force of Law 18/2022 (Crea y Crece law), and the corresponding amendment to the Corporate Enterprises Act, the minimum share capital of an S.L. company is €1, instead of the minimum share capital of €3,000 which was applicable before the Law 18/2022 entered in force.

The contribution of the share capital in the corresponding financial institution before the Deed of Incorporation is granted, must be proved through a bank certificate which the authorizing notary shall attach to the Deed of Incorporation. Notwithstanding the foregoing, it will not be necessary to prove the reality of the share capital contributions by means of a bank certificate if the founding shareholders state in the Deed that they will be jointly and severally liable to the company and to the company's creditors for the reality of such contributions.

In addition, the share capital contributions may also be in kind, such as credit rights or real estate, provided that the assets to be contributed have an economic value.

The change in the minimum share capital of the S.L. company, means that the S.L. must fulfil certain requirements.

As long as the capital of the S.L. company is less than €3,000, the following rules shall apply:

• An amount at least equal to 20% of the profit must be transferred to the legal reserve until this reserve together with the share capital reaches €3,000.
• In the event of voluntary or compulsory liquidation, if the company's assets are insufficient to meet the company's obligations, the shareholders shall be jointly and severally liable for the difference between €3,000 and the amount of the subscribed capital.

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

It is not required as the Deed of Incorporation may be executed by a representative by means of a power of attorney granted by the founding shareholder(s) and/or director(s).

Is a tax identification number, or equivalent, required? If so, how is it obtained?

Yes, a tax identification number (N.I.F.) is required. An application for the tax application number must be submitted to the Tax Authorities.

What is the title of the applicable company registry?

Commercial Registry (Registro Mercantil). Please note that there is a Commercial Registry (Registro Mercantil) for each province in Spain (Madrid, Barcelona, Málaga etc.). Yes, the Commercial Registry is a public body which depends on the Ministry of Justice.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles or other formation document, Articles or other formation document, Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)

• By-laws;
• Tax identification number (N.I.F.);
• Company’s share capital denomination
• Incorporation date;
• Registered office;
• Registration details;
• Company's purpose;
• Share capital;
• Administration Body (Director(s), Board of Directors, etc.) and attorneys;
• Annual accounts filed;
• Auditors appointed (if applicable);
• Declaration of sole shareholder (if applicable);
• Liquidation; and
• All registrations made (with a brief description).

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

• The directors (Administradores) can be organised as follows:
• A sole director;
• Several directors acting jointly or jointly and severally; or
• A Board of Directors.

• The directors have the power to manage and represent the company under the terms set out in law.

How are the members of the executive body appointed, dismissed and replaced?

• Appointment: Initially in the Deed of Incorporation and thereafter by the general meeting of quota holders/shareholders.
• Dismissal/revocation: Also by the general meeting of quota holders/shareholders.
• Appointments and revocations must be registered at the Commercial Registry, but nevertheless are effective once they have been passed by the general meeting and the minutes of the meeting have been approved.

Is it possible to appoint corporate directors or must all directors be natural persons?

Yes, it is possible to appoint an entity as a director. In that case, a physical person representing the corporate director must be designated.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

It is not possible to have non-executive directors. There is a division between categories of directors only for listed companies.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The general meeting is vested with the power to discuss and decide the following matters:

• Approval of the financial statements, the distribution of earnings and the approval of corporate governance.
• Appointment and dismissal of directors, liquidators and, where necessary, auditors, and the initiation of liability actions against any of these persons.
• Amendment of the by-laws.
• Capital increase and reduction.
• Removal or limitation of pre-emptive rights in a share capital increase.
• Acquisition, transfer, or contribution to other companies of essential assets.
• Conversion, merger, spin-off or global assignment of assets and liabilities and the transfer of the registered office abroad.
• Company dissolution.
• Approval of the final liquidation balance sheet.
• Any other matters stipulated by law or by the by-laws.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

• In general, corporate resolutions must be adopted by a majority of valid votes cast, provided they represent at least one-third of the votes pertaining to the quotas into which the capital is divided. Abstentions or blank ballots are not counted.
• Exceptions to the foregoing:
• Increases or reductions in capital and amendments to the by-laws require a vote in favour from over half of the votes pertaining to the quotas into which the capital is divided.
• A majority of at least two-thirds of the votes pertaining to the quotas into which the capital is divided are required to: Authorise directors to engage in an activity that is the same as or similar or complementary to the company's corporate purpose; cancel or limit pre-emptive rights in capital increases; convert, merge, spin off or globally assign assets and liabilities; transfer the registered office abroad; or exclude partners.
• For all or some items, the by-laws may require a higher percentage of votes in favour than established by law, though not unanimity, except for the dismissal of directors for which only a simple majority of votes is required.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Under Spanish law there is a special regime for publicly listed companies which, among other issues, affects governance. For example:

• Listed companies can be only managed by a Board of Directors.
• The Board must have regulations (reglamento) which regulate the way that it functions.
• Besides the matters that cannot be delegated in ordinary companies, the law adds some others (for example, approval of the business plan, investments plan etc.)
• Directors must attend board meetings in person, though they can be represented by another director.
• The Board must annually evaluate its own operations and those of its committees and suggest an action plan to correct any deficiencies.
• Directors can be appointed for a maximum period of four (4) years, although they may be re-elected.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

• Within three (3) months of the end of the financial year, the directors of the company must draft the annual accounts, the management report, and the proposed distribution of earnings (the annual accounts).
• The annual accounts must be approved by the general meeting within six (6) months of the end of the financial year.
• The annual accounts and, as appropriate, the auditor's report must be filed with the Commercial Registry within the month following their approval.

Is the entity permitted to determine its own financial year?

Yes, it must be determined in the by-laws.

Is the entity subject to any statutory (external) auditor obligations?

• The annual accounts and the management report must be reviewed by an auditor. However, companies that meet at least two (2) of the requirements listed below during two (2) consecutive financial years are exempt from auditing:
• Total assets do not exceed €2,850,000;
• Net annual turnover does not exceed €5,700,000; and
• Average number of employees during the financial year does not exceed 50.
• Notwithstanding the foregoing, companies may voluntarily submit their annual accounts to review by an auditor.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

No such requirements exist.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Quotas in private limited liability companies (S.L.).

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Yes, different kind of quotas are possible, namely:

• Privileges in the distribution of company earnings.
• The holders of non-voting quotas are entitled to receive a minimum dividend (whether fixed or variable) as set forth in the by-laws.

What documentation is required for the transfer of ownership interests?

For transfers of quotas, a notarial deed of transfer must be executed before a notary.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

• Transfers must be formalized in a public document (Notary).
• Transfers must be recorded in the register of quota holders.
• Transfers must also fulfil the provisions regarding restrictions on transfer under the law or, as relevant, under the by-laws.

Are there any applicable stamp duties imposed when transferring ownership interests?

No, except when purchasing 50% or more of a company with more than 50% of its assets held in real estate not connected with business activity.

How are shares issued? (including information on payment obligations, registration requirements)

• Quotas are not issued but are instead created upon the company's incorporation or by means of a capital increase.
• Quotas must be fully subscribed, and the face value must be fully paid up by the quota holders by the date of incorporation or the date of the instrument recording the capital increase.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

• Non-cash contributions are permitted. No valuation report is needed in this regard for non-cash contributions in private limited liability companies, but they must have economic value. However, the quota holders will be jointly and severally liable to the company and company creditors for such contributions and the value attributed thereto.
• Quotas may be created with a premium.
• The quotas into which the capital of a limited liability company are divided must be fully subscribed for by the quota holders, and the nominal value of each quota must be fully paid up by the date of incorporation or the date of the instrument recording the capital increase.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

• Limited liability companies may only purchase their own shares or parent company shares under the following circumstances:
• When they form part of an estate acquired as a whole or are acquired at no cost, or as a result of a court award in payment of debt held by the company against the owner thereof.
• When the company's own shares are acquired through a capital reduction resolution passed by the general meeting.
• When the company's own shares are acquired as a consequence of the exercise of a pre-emption right by the company within the scope of a seizure of shares.
• When the acquisition is authorised by the general meeting, charged to profits or reserves freely available for distribution, and involves the shares of a shareholder who has exited or been excluded from the company; shares acquired as a result of the application of transfer restrictions; or shares transferred mortis causa.
• Shares in their own capital acquired by limited liability companies must be amortised or disposed of within three (3) years. If the shares are not disposed of within this period, the company must immediately approve their redemption and a capital reduction.
• Shares in the parent company must be disposed of within one (1) year of the purchase year.
• Capital reduction may seek to re-establish the balance between the company's capital and its equity, which may decline as a result of losses, the creation or provisioning of legal or voluntary reserves or the refund of contributions.
• Reductions may be effected by lowering the par value of quotas or redeeming or grouping these equities.
• Reduction through acquisition of treasury quotas for redemption and simultaneous capital reduction and increase.

Any requirements with respect to distributions to shareholders?

The general meeting must adopt resolutions regarding any distribution. However, the Board of Directors may approve interim dividends if certain requirements are met.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, but shareholder agreements are only binding among quota holders and cannot be applied vis-à-vis third parties.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

Approximately €2,000 (filing of annual accounts and corporate tax returns).

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

For 2025: 25%.

Summary of any specific matters, e.g. recent or prospective major legal developments

No imminent major legal developments are expected in 2025.