Spanish Business Law: Legal Hierarchy and Corporate Structures

Posted on Jan 31, 2026 in Law

Legal Hierarchy and Normative Framework

The legal framework in Spain is structured hierarchically:

  • Primary Legislation (EU): EU Treaties.
  • Secondary Legislation (EU): EU Directives, Regulations, and Decisions.
  • National Level: Spanish Constitution (Article 38 establishes freedom of enterprise), Organic Laws (fundamental rights), Ordinary Laws (general topics), and Royal Decrees/Legislative Decrees (National Regulations/bylaws).
  • Regional Level: Catalonian Estatut d’Autonomia, Catalonian Laws, and Regulations.
  • International Treaties.

Powers and Jurisdiction

Legislative Power

Approves laws.

  • Spain: Parliament (Congress + Senate).
  • EU: European Parliament + Council (based on Commission proposals).

Executive Power

Applies laws.

  • Spain: Government, ministries, city councils.
  • EU: European Commission.

The applicable rule is determined by the hierarchy of norms (EU law > national > regional), the competence of the authority, and the principle that specific and newer laws prevail over general and older ones.

Court Application of Law

  • EU courts apply EU law and override national courts in EU matters.
  • Spanish Supreme Court applies national law.
  • Catalonian courts apply regional law, but cannot contradict the Spanish Constitution or EU law.

The competent court is determined by subject matter jurisdiction, territorial jurisdiction, the hierarchy of courts, and any jurisdiction clauses in contracts, always respecting the principle of legal competence and hierarchy.

Types of Business Persons

Personalist Entities (Code of Commerce)

  • General Partnership (GP): GP invests, unlimited liability, GP decides.
  • Limited Partnership: GP + Limited Partners (LP). GP has unlimited liability; LP liability is limited.

Capitalist Entities (Corporate Enterprises Act)

  • Limited Share Partnership: GP + shareholders, minimum capital of €60,000.
  • Joint Stock Company (S.A.): Shareholders, minimum capital of €60,000, liability is limited.
  • Limited Liability Company (S.L.): Stakeholders, minimum capital of €1, liability limited (up to €3,000).

Company Constitution and Governance

Constitution Process Requirements

Requirements include Capital, Name, and Nationality.

  • Deed of Incorporation (art. 22): Must detail founders, capital, shares, and bylaws.
  • Bylaws (art. 23): Define name, purpose, capital, and governance structure.
  • Commercial Register: Ensures publicity and legal certainty.

Social Contributions can be cash or non-cash (art. 58). Shares/Stakes include voting and non-voting types (art. 90). Shareholders have rights to attend meetings, receive dividends, and access information (art. 93). Transmission may have restrictions, especially for S.L. (art. 107).

General Meeting

Types (art. 159…): First, Ordinary, or Extraordinary General Meeting.

Notice (art. 172): Must specify place, date, hour, and agenda.

Calls: A second call is made if the quorum is not met after the first call.

Agenda Points (art. 160): Approval of accounts, appointment/removal of directors, and major decisions.

Quorum: 25% of capital must be present at the first call.

Decision Process: Majority vote (varies by topic). Shareholders have rights to attend, vote, and be informed. Minutes (art. 202) record decisions.

Board of Directors

  • Composition: Can be a single director or a board.
  • Requirements: Must possess legal capacity and have no conflicts of interest.
  • Duties: Due diligence, loyalty, and conflict avoidance.
  • Liability: Directors have unlimited liability.
  • Quorum: Minimum attendance required for valid decisions.
  • Delegation of Powers: Certain powers may be delegated.
  • Minutes: Record board decisions.

Financial Reporting and Capital Management

  1. Financial Statements: Includes Balance Sheet, Income Statement, Statement of Changes in Net Worth, and Cash Flow Statement.
  2. Approval: Prepared by directors and approved by the General Meeting.
  3. Social Capital & Legal Reserve: Capital Increase/Decrease requires General Meeting approval. The Legal Reserve is a mandatory reserve, usually a percentage of profits retained until a threshold is met.

Key Financial Articles:

  • 273–274: Profit distribution and legal reserve rules.
  • 296: Capital increase methods.
  • 303: Capital reduction rules.
  • 321–322: Issuance of new shares/stakes.
  • 327: Shareholder rights during capital changes.
  • 362–363: Causes for dissolution (losses, inactivity, capital below minimum).

Dissolution vs Liquidation vs Extinction

  • Dissolution: The decision to end the company (by General Meeting or court).
  • Liquidation: The process of selling assets, paying debts, and distributing remaining funds.
  • Extinction: Final removal from the Mercantile Register; the company ceases to exist legally.

Intellectual and Industrial Property Rights

Types and Differences

  • Industrial Property: Protects creations applied to industry (patents, trademarks, designs, utility models).
  • Intellectual Property (Copyright): Protects original literary, artistic, and scientific works (expression, not ideas).

Industrial Property Types

  • Commercial Name: Reputation.
  • Trademark: Sign.
  • Design: Protects appearance.
  • Patent: Protects new inventions globally (20 years).
  • Utility Model: Protects minor inventions (10 years, cheaper).

Registration and Legislation

Registration Bodies

  • Spain: OEPM (Oficina Española de Patentes y Marcas) for industrial property; Intellectual Property Register for copyrights.
  • European Union: EUIPO for trademarks & designs; EPO for patents (Spain is not in the Unitary Patent System).
  • International: WIPO systems (Madrid System for trademarks, PCT for patents, Hague System for designs, Lisbon System for appellations of origin).

Applicable Legislation

  • Spain: Trademark Law (Ley 17/2001), Patent Law (Ley 11/1986), Design Law (Ley 20/2003), Intellectual Property Law (RDLeg 1/1996).
  • EU: EU Trademark Regulation and EU Design Regulation.
  • International: WIPO treaties (Madrid, PCT, Hague, Berne Convention).

Courts for Protection

  • National: Spanish Courts of Justice; OEPM for registration.
  • EU Level: EUIPO; EU Courts for enforcement.
  • International: WIPO (global registration/dispute resolution).

Copyright Specifics (RDLeg 1/1996)

  • Author (arts. 5, 7, 8, 9): Natural person who creates the work (Art. 5). Joint authorship (Art. 7); collective works (Art. 8); derivative works (Art. 9).
  • Protected Content (arts. 10, 11): Literary works, music, films, software, databases, and derivative works.
  • Unprotected Content (art. 13): Ideas, procedures, methods, official texts of laws, and judicial decisions.
  • Rights: Moral Rights (recognition, integrity; inalienable, perpetual) vs. Financial Rights (economic exploitation; transferable).
  • Duration (art. 26): Life of author + 70 years, after which the work enters the Public Domain (art. 41).
  • Registration (art. 144): Registro de la Propiedad Intelectual.
  • Conflict Courts: Juzgados de lo Mercantil (Commercial Courts), Audiencia Provincial, and Tribunal Supremo.

Advertising Law

Legislation and Definition

  • Key Laws: Ley 34/1988 (General Advertising Law), Ley 3/1991 (Unfair Competition Law), Ley 7/2010 (Audiovisual Communication Law).
  • Constitutional Basis: Arts. 14, 18, 20 (dignity, honor).
  • Definition (art. 2, Ley 34/1988): Any communication promoting the acquisition of goods, services, rights, or obligations in commercial activity.

Types of Advertisement

  • Illegal: Against constitutional rights (discrimination, denigration).
  • Misleading (art. 5 UCL): Deceives consumers.
  • Unfair/Aggressive (arts. 7–8 UCL): Harms competitors.
  • Subliminal (art. 4 SAL): Hidden stimuli.
  • Comparative: Allowed if objective (art. 10 UCL).
  • Product Placement: Legal if disclosed (Ley 7/2010).
  • Surreptitious: Hidden promotion; prohibited.

Contracts and Remedies

Types of Contracts

  • Creation contract: To design the ad.
  • Broadcast contract: To publish in media.
  • Sponsorship contract: Promotes reputation, not direct product sale.

Actions Requested (art. 32 UCL)

Cease or prohibit unfair advertising, remove illegal ad effects, rectify misleading information, and claim damages.

Courts

Juzgado Mercantil (First Instance), Audiencia Provincial, and Tribunal Supremo.

Antitrust and Competition Law

Goals and Market Definition

  • Goals: Consumer Welfare and Efficient Competition.
  • Relevant Market Criteria: Product substitutability, Barriers to entry (legal/natural), and Agents (number/power of competitors).

Market Structures

  • Monopoly: 1 agent, strong barriers.
  • Oligopoly: Few agents, some barriers, monopolistic power.
  • Monopolistic Competition: Many agents, product differentiation.
  • Perfect Competition: Many agents, homogeneous products, no barriers.

Regulated Behaviors

  1. Agreements: Between companies that restrict competition (e.g., price fixing). Law: Art. 101 TFEU / Art. 1 Spanish Antitrust Law.
  2. Abuse of Dominant Position: Misuse of market power harming competitors/consumers. Law: Art. 102 TFEU / Art. 2 Spanish Antitrust Law.
  3. Mergers: Controlled combinations. Law: EU Merger Regulation / Arts. 7–10 Spanish Antitrust Law.

Legislation and Authorities

  • EU Legislation: Arts. 101–102 TFEU; EU Merger Regulation.
  • Spanish Legislation: Ley de Defensa de la Competencia (Arts. 1–10).
  • Authorities: European Commission (EU); CNMC (Spain); Autoritat Catalana de la Competència (Regional); National Courts of Justice.

Insolvency Process Structure

Process Stages and Legitimacy

  • Opening: Petition to Mercantile Court (art. 44). Publicity in Insolvency Register & BOE (arts. 35, 560).
  • Phases: Declaration, Administrator appointment, Report, Creditor list, Composition proposal/approval, Fulfillment or liquidation, Possible reopening.
  • Legitimacy: Voluntary (Debtor: arts. 3, 5–12) or Compulsory (Creditor: arts. 2, 13).
  • Court Resolution: Mercantile Court declares insolvency (art. 24, 28, 32).

Insolvency Administrators

Appointed by court (arts. 28, 57, 58). Must meet conditions (arts. 60–65) and adhere to duties of diligence (art. 80) and liability (arts. 94–95).

Administrator Report

Issued within 2 months (arts. 290–293). Includes aggregate assets (art. 192) and classification of claims: special, ordinary, subordinated (art. 269). Creditor list requires publicity (art. 294).

Director’s Liability: Can be classified based on fortuitous or tortuous insolvency (art. 446).

Composition

Involves an advanced proposal (art. 333), proposal/payment plan (arts. 315–331), and final approval (arts. 351–381) via a creditors meeting (arts. 362–370), distinct from the General Meeting of investors.

Creditor Types: Special preference, ordinary, subordinated.

Insolvency Types: Present (already insolvent) or Imminent (will be insolvent soon).

Legal Consequences and Conclusion

  • Voluntary Insolvency: Debtor petitions; generally less severe consequences.
  • Compulsory Insolvency: Creditor petitions; possible director liability.
  • Liquidation: Occurs if composition fails (art. 406).
  • Reopening: Possible if new assets appear or a breach occurs (arts. 465, 503).