Economic Concentration Control and Capital Stock in Spanish Law
Economic Concentration Control in Spanish Law (LDC)
The Law on Defense of Competition (LDC) addresses the control of economic concentrations. The provision refers to any stable change of control of the whole or part of one or more companies resulting from a series of operations, such as a merger or the acquisition of control of the whole or part of another company.
Article 8 LDC delimits the scope of application of the Law to concentrations based on the presence of one of the two following circumstances:
- That, as a consequence of the concentration, a share equal to or greater than 30 percent of the relevant product or service market is acquired or increased (at the national level or in a defined geographical market within the same).
- That the overall turnover in Spain of all participants exceeds 240 million euros in the last accounting period, provided that at least two of the participants have an individual turnover in Spain of more than 60 million euros.
Exemptions from Control Procedure
The following concentrations shall nevertheless be exempt from this control procedure, even if the above market share threshold is met:
- The overall turnover in Spain of the acquired company or of the assets acquired in the last accounting year does not exceed the amount of 10 million euros; and
- The venturers do not have an individual or joint share equal to or greater than 50% in any of the affected markets, on a national basis or in a defined geographical market within the same.
Regime for the Control of Concentrations
The LDC establishes a regime for concentrations of companies. Those included within the scope of application established by Article 8 LDC are obliged to notify their intention to form or incorporate to the National Commission on Markets and Competition (CNMC) in advance. They cannot carry out the concentration until this body grants the appropriate administrative authorization (Article 9 LDC).
This notification obligation will not affect concentrations with a Community dimension. The notification of concentrations subject to the scope of the LDC must be made prior to its execution and will produce a suspensive effect on it. However, the Law generally authorizes the formulation of a Public Takeover Bid (PTB) on a company after notifying the CNMV and the CNMC.
Company Stakes and Shares in Capital Companies (LSC)
Notion and Characteristics of Company Stakes (Participaciones)
The company stake assumes the function of being one of the defining elements of the limited liability company (SL). Article 90 of the Law on Capital Companies (LSC) indicates their characteristics, stating that “the company holdings… are indivisible and accumulable parts of the share capital.”
While these characteristics bring them closer to shares (*acciones*), Article 92 of the LSC specifies that stakes will not have the character of securities, nor can they be incorporated into negotiable securities or represented by book entries, nor be called shares.
- Aliquot Part: Company stakes are an aliquot part of the share capital and must be numbered. Although the LSC has omitted the characteristic that stakes must be equal, they must have a certain nominal value. Stakes belonging to different series may have a different nominal value.
- Unequal Rights: Inequalities can be seen not only in the content of the rights conferred (e.g., a holding of 10 euros has the right to one vote, and other holdings of the same nominal value have the right to 50 votes), but also in the fact that non-voting holdings are admitted, which have a regime similar to that of non-voting shares. If the rights attributed to the shareholders by each holding are unequal, the bylaws must express the content and extent of those rights.
- Cumulative: The stakes are cumulative, meaning that one partner, as in the case of the joint-stock company, may have several stakes, or even all of them (in the case of a single partner).
- Indivisible: The stakes are indivisible; consequently, they cannot be split.
The Share (Acción) as Part of the Capital Stock
The LSC states that the capital of the corporation (SA) “shall be divided into shares,” highlighting a characteristic note of the corporation. It insists on this idea by declaring that the “shares are indivisible and cumulative aliquots of the share capital.”
The nominal value of a share indicates the minimum amount that must be contributed to achieve the status of partner. There must be an exact relationship between the number of shares held by the company, their nominal value, and the share capital, such that the amount of the latter is the result of multiplying the number of shares by their nominal value.
The share must have as its counterpart an effective contribution to the company’s assets, which can be made at the time the share is subscribed or at a later date (in which case the shareholder is obliged to pay passive dividends). The Law states that the issue of shares that do not correspond to an effective contribution to the company’s assets is null and void (Article 59.1 LSC). Only assets or rights that can be economically valued can be contributed (Article 58.1 LSC).
In addition, the prohibition established by Article 59.2 LSC must be taken into account: “shares may not be issued for less than their nominal value.” It is lawful, however, to issue shares with a premium in the context of a capital increase.
Nominal Value vs. Effective Value
The nominal value of the shares is different from their real or effective value. If the shares are listed, their real value will be the stock market price, which is influenced by many circumstances, such as:
- The value of the company’s assets;
- Its possibilities of increasing due to the good progress of the company’s economic activity;
- The policy of distributing dividends and that of capital increases;
- The liquidity or mass of money held by investors at a given moment; and
- Different psychological motivations which affect the supply and demand for the shares.
If the shares are not listed, it is more difficult to determine their effective value. The Law provides for the incidental determination of the share price in the event of the separation or exclusion of the shareholder from the company. In the absence of agreement, the price is determined by an independent expert appointed by the commercial registrar at the request of the company or the shareholder (see Article 353.1 LSC).