Understanding the Spanish Limited Company (SL): Formation & Management

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Understanding the Spanish Limited Company (SL)

Legal Framework and Definition

  • The Limited Company (SL) is primarily regulated by Law 2/1995 of March 23 on Limited Companies and Law 7/2003 on New Limited Companies (SLNE).
  • An SL is a company constituted by one or more partners, who can be either individuals or legal entities. It requires a minimum capital of €3,002.06, which is divided into shares, and features limited liability.
  • The Limited Liability Company (SRL/SL) is a common legal form for businesses in Spain.
  • Its regulations are flexible and adapted to current business needs.

Key Characteristics of the SL

  • Limited Liability: The liability of partners is limited to the capital contributed; they are only liable for the capital invested.
  • Capital Division: The capital is divided into shares, which are equally valid and represent indivisible portions of the capital. Shares must be fully subscribed and paid at the time of constitution, preventing the distribution of passive dividends.
  • Share Representation: Shares cannot be represented by physical titles but rather by book entries, which facilitates their transfer.
  • Formal Constitution: This type of company must be constituted before a public notary and registered in the Commercial Registry within two months of its constitution. The company's bylaws must be included in the public deed.
  • Hybrid Nature: The SL is considered a hybrid company, combining elements of both personal and capital companies.
  • Profit Distribution: The company's profits are distributed proportionally to the shares held.
  • Share Transfer: The transfer of shares must follow the procedure established in the company's bylaws and is not freely transferable.

Governing Bodies of an SL

Limited Companies (SL) typically have two main governing bodies:

  • General Meeting of Partners: This body decides on important matters of the company. There are two main types:
    • Ordinary General Meeting: Convened annually to review the company's management, approve annual accounts, and decide on profit distribution.
    • Extraordinary General Meeting: Any meeting that does not meet the requirements of an ordinary meeting. These are convened by the administrators to address specific urgent matters.
    • Universal Meeting: Can address any subject, provided that all capital is present and all attendees unanimously agree to its constitution and agenda.
  • Administrators (Management Body): Management can be entrusted to:
    • A single administrator.
    • Multiple administrators acting:
      • Jointly: Each administrator can act independently.
      • Severally: All decisions require unanimous agreement from all administrators.
      • As a Board of Directors: Decisions are made by majority vote.

Company Name and Taxation

  • Company Name (Denomination): The company name can be:
    • Objective: An invented name.
    • Subjective: Composed of the name and surnames of one or more partners, followed by "and Company" or "Cía.", and then "SRL" or "SL".
  • Taxation: Limited Companies are subject to Corporate Income Tax.
  • Share Trading: Shares are not publicly traded.

The New Limited Company (SLNE)

In 2003, the "Law of the New Limited Company" (SLNE) was created to facilitate the rapid creation of SMEs and support existing ones. Key features of the SLNE include:

  • Rapid Constitution: Often within 48 hours.
  • Partner Type: Only natural persons can be partners.
  • Number of Partners: At the time of constitution, there can be no more than 5 partners.
  • Capital Requirements: Minimum capital: €3,012. Maximum capital: €120,202.
  • Company Name: The company name must include the name(s) of a partner followed by an alphanumeric code and "SLNE".
  • Electronic Processing: All information is processed via a Single Electronic Document (DUE).

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