Driving the Business Transformation in Spain: Draft for a New Law on Structural Modifications of Companies

Published on 26 June 2023

On 14 February 2023, the Spanish Council of Ministers approved the Draft for a New Law on Structural Modifications of Companies (the “Draft Bill”).

The Draft Bill is supposed to transpose the Directive (EU) 2019/2121 of the European Parliament and the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border transformations, mergers and divisions into national, Spanish law.

Undoubtedly, the European Union suffers from a profound “disconnection” in terms of company law, leading to legal uncertainty and fragmentation within the EU. Accordingly, there is a need for harmonising the regulations within the EU in order to strengthen the internal market and the freedom of establishment of companies.

On the national level, the Draft Bill, establishes a clear and predictable legal framework to facilitate and streamline corporate restructuring operations. It seeks to promote competition between businesses, encourage investment and provide legal certainty to the parties involved in such operations. In this article we will discuss the main aspects of the Draft Bill and its potential impact on businesses.

Main Aspects of the Draft Bill on Structural Modifications of Companies

  • International transfers of registered offices of companies shall be referred to as “cross-border conversion”.
  • The Draft Bill introduces new forms of restructuring, such as full or partial division (escisión), the segregation (segregación) of assets and liabilities, the conversion of debt into equity and financial reorganisation.
  • It simplifies and streamlines the procedures necessary to carry out mergers, divisions, conversions and other structural modifications by cutting down administrative requirements and optimising deadlines.
  • Protection of workers: the Draft Bill foresees measures to protect the rights of workers involved in restructuring operations, ensuring the continuity of employment as much as possible and establishing guarantees in the event of dismissals or redundancy procedures.
  • Protection of creditors: the law requires disclosure for these types of operations, as well as guarantees to creditors before initiating the process.
  • Protection of shareholders: the aim is to guarantee transparency in the processes, respect the rights to vote, information and participation in relevant decisions.

Furthermore, the Draft Bill places mercantile registrars in a key position in corporate restructuring processes, further strengthening their role in providing legal certainty and guarantees. Its intention is an exhaustive review of the transaction documents, verifying that the interested and/or affected parties have been duly informed or have given their consent, as well as the prevention of fraudulent operations.

Companies seeking opportunities for internationalisation is not a new development; the most recent example is the Spanish construction and infrastructure company Ferrovial. It argued for its not uncontroversial transfer of offices to the Netherlands with seeking new potential strategic business opportunities. In an increasingly interconnected world, however, business mobility has become a key strategy for seizing opportunities for growth and expansion in foreign markets. Establishing itself in another country, not only gives companies access to new customers and resources, but it can also entail significant competitive advantages. Therefore, this Draft Bill could cause radical changes by setting an undoubtedly valuable strategic framework for international expansion and growth of companies and offering opportunities to access new markets, diversify risks and acquire strategic knowledge and resources.