The Judiciary Closed The Loophole In The Law Of Professional Companies’ Statement Of Reasons Which Allowed Companies To Avoid The Application Of The Law

15 May 2009

A recent ruling from the Valencia Provincial Court has subjected intermediary companies to their first test of jurisprudential viability.

As a result of a December 21, 2007 decision from the General Directorate of Registries and Notaries, subsequently declared null and void by the aforementioned ruling, alleged professional companies adopted the “intermediary company” form in their by-laws to circumvent the Law of Professional Companies (known by the Spanish acronym LSP) and, por ende, dodge the inconvenient requirements imposed on professional companies by said law. This loose interpretation watered down the mandatory nature of the law and left it non-binding.

This decision outlawed the use of the intermediary company status as an avoidance mechanism by companies which are actually professional and, in this specific case, upheld the Registrar’s decision to suspend the registration of an alleged professional intermediary company.

This sentence initiates a period of transition and legal uncertainty for all those companies who had adopted the intermediary company status before December 16, 2008, the deadline for declaring professional company form to avoid dissolution on the commercial registrars’ initiative, especially those who were unable to adapt themselves to the LSP due to the existence of foreign partners.

or further information please contact Sabina Llauger Boix: