Spanish S.L. Company Formation and Key Features

Posted on May 19, 2025 in Law & Jurisprudence

Spanish Limited Liability Company (S.L.)

Regulated by CCL. Their origin dates back to the end of the nineteenth century.

Typical Features of an S.L.

  • No minimum number of partners is required by Spanish law to incorporate an S.L.
  • Their capital is divided into “participaciones” (instead of shares or “acciones”) and their members are called partners or “socios” (instead of shareholders or “accionistas”). (Article 1 CCL)
  • The capital is composed of investments made by partners comprising goods and rights but not industry, work, or professional services. Contributions of work, industry, or professional services are not permitted, except as ancillary obligations (prestaciones accesorias, Articles 86-89 CCL).
  • The minimum capital requirement is fixed at 3,000 euros. (Article 4.2. CCL).
  • “The stakes into which the capital of limited liability companies is divided shall be fully subscribed and the par value fully paid by the partners by the date of formalization of the company’s deed of incorporation or instrument on capital increase” (Article 78 CCL).
  • Partners are neither personally nor unlimitedly liable for company debts.
  • Hybrid character (interweaving personal and capital elements).
  • Flexibility and wide autonomy for members to configure the company structure and operation.
  • Protection of partners and minorities.
  • The registered name of the company is to be accompanied by the abbreviation S.L. or S.R.L. or S.R.L.U. for a one-person S.R.L.
  • The incorporation process and formal requirements are common for S.A. and S.L.

S.L. vs S.A. Comparison

  • The close nature and frequent family bonds among partners work toward generously admitting the establishment of limiting conditions on interest transferability in the articles of association.
  • Certain financing sources are unattainable for S.L.s that cannot be quoted on the Stock Exchange and are banned from issuing debentures to the public.
  • Partners’ autonomy to configure the company is wider than in S.A.

Company Formation Process (S.A. / S.L.)

  • The shareholders or their representatives must appear before a notary public in order to execute the public deed of incorporation. Subsequently, the public deed of incorporation has to be registered in the Mercantile Registry. Upon registration, the company acquires legal personality and capacity.
  • S.A. shows certain peculiarities. There is an alternative procedure for incorporation called “successive formation”. Essentially, this procedure involves an offering to the general public by the promoters to subscribe shares before the execution of the public deed of incorporation. To this end, means may be used such as publicity or financial brokers. This system is rarely used in practice and much less so for foreign investors.

Memorandum of Association (Escritura de Constitución)

  • It gives expression to parties’ consent to establish a company.
  • Must contain minimum contents that are not subject to waiver: founders’ identification data, company’s purpose, investments, number of shares issued, and articles of association (Articles 20-22 CCL).
  • The requirement for a public instrument (deed) is an ad solemnitatem formal requisite, not merely a prerequisite.
  • If the purportedly incorporated company begins operating in the market before registration, collective company rules shall apply.

Articles of Association (Estatutos)

  • The Articles of Association represent rules governing the structure, organization, and functioning of the new legal entity.
  • Minimum provisions: registered name, address, scope of business, term of the company, date of beginning operations, capital, details on shares (or participaciones for S.L.), structure and composition of the management body, decision-making process, and if applicable, limitations on transferability and ancillary obligations (Article 23 CCL).

Registration Requirements and Effects

Legal personality, distinct from their members, is acquired by the incorporated company upon registration in the competent Mercantile Registry.

Company in Formation

Arises from the time the memorandum of association has been executed before the public notary until it is registered in the competent Mercantile Registry. (Articles 36-38 CCL).

  • The time gap between the deed execution and registration shall not exceed one year.
  • A special legal regime applies during this period:
  • (i) Acts, contracts, and transactions directly and indispensably aimed at registering the company shall be automatically assumed by the company in formation.
  • (ii) For acts and contracts other than the foregoing, the persons who entered into them are personally and jointly and severally liable.