Structural Changes in Companies: Transformation, Merger & Division
Structural Changes in Companies
Structural changes refer to significant alterations in a company’s configuration, going beyond simple changes in statutes affecting capital structure or personnel. The regulation of transformation, merger, and division of companies has undergone a major overhaul with the adoption of Act 3/2009 on structural modifications of commercial companies. This rule unifies and expands the legal regime of structural changes, introducing regulations for cross-border mergers and international transfers of registered offices.
15.2 Transformation
a) Concept and Types of Transformation
Transformation is a structural change that replaces the corporate form without dissolving the company’s legal personality. It involves abandoning one legal regime for another that better aligns with the interests of the members. This change in the contractual aspect of the corporation simplifies the transition from one form to another, avoiding the costs of dissolution, liquidation, and reconstitution.
Two specific types of transformation exist:
- Homogeneous: Transition from one type of capitalist society to another.
- Heterogeneous: Transition from a personalistic company (e.g., partnership) to a capitalist company (e.g., corporation) or vice versa.
Possible transformation combinations include:
- SA (corporation) can be transformed into any other corporation (collective, partnership, or limited), SIA (simplified joint-stock company), European company, cooperative society, or civil society.
- SL (limited liability company) can transform into any commercial company, SIA, civil society, or cooperative society.
- Partnerships can transform into any form of capitalist society, cooperative, or civil society.
- Cooperative societies can be transformed into a European Cooperative Society and vice versa.
- European Economic Interest Groupings (EEIG) can become European Companies and vice versa.
b) Procedure
1. Agreement
Transformation requires an agreement, with the specific requirements depending on the social type:
- Civil society or collective partnership: Agreement of all partners.
- EEIG: Agreement of all partners unless otherwise specified in writing. Limited partners’ agreement will be as specified in writing.
- Capitalist societies: Agreement of the majority of the members. In an SA, the agreement follows the requirements of the Spanish Corporations Law (LSA) for statutory modifications. In an SL, the requirements for statutory amendments apply, along with an enhanced supermajority (two-thirds).
2. Advertising the Agreement
The transformation agreement must be published once in the “Boletin Oficial del Registro Mercantil” (Official Gazette of the Mercantile Registry) and in a widely circulated newspaper in the province where the company is domiciled. Publication is not required if the agreement is individually communicated in writing to all members.
3. Protection of Partners
Transformation can significantly alter a partner’s status. Therefore, protective mechanisms are necessary:
- Transformation of a partnership into a personalistic company: Partners who would assume personal liability for social debts due to the transformation and who did not vote for the agreement can automatically separate from the company if they do not adhere to it within one month of its adoption or communication.
- Transformation between capitalist societies:
- Transformation from SL to SA: Shareholders who did not vote for the agreement are not subject to the share transfer restriction system for three months from the announcement of the change in the BORME (Official Gazette of the Mercantile Registry). The future of bonds and capital calls must also be determined.
- Transformation from SA to SL: A right of separation is recognized for those who do not vote in favor.
- Transformation of limited capital partnerships into partnerships: This primarily affects social creditors, who have reduced guarantees for their credit rights due to the establishment of a separate accountability system. Therefore, safeguards are established to protect creditors, mainly maintaining the personal, joint, and unlimited liability of general partners for company debts prior to the transformation, unless creditors expressly consent to the transformation.
The law also regulates the situation of industrial partners in these cases. Their shareholding in the new company will be transformed according to their share assigned in the articles of incorporation or as agreed upon by all partners. The industrial partner’s personal obligation in the transformed company requires their consent and will be implemented as ancillary services under the conditions established in the statutes.
4. Execution of a Public Deed
5. Effects
Transformation does not alter the company’s legal personality, which continues to exist under the new form. This means that transformation does not imply a novation or a change of debtor for creditors. The debtor remains the same but under a new social form.