The Status of the Employer and Business Structures

Posted on Oct 28, 2024 in Law & Jurisprudence

Theme 1: The Status of the Employer

1. Introduction

There are two types of entrepreneurs:

  • Businessmen individuals: Those who, as adults, have free disposal of assets, ordinarily engaged in the practice of commerce and also do so on their own behalf.
  • Entrepreneurs entities: One that adopts a specific legal form, any of the corporations’ legal forms.

Both share the following characteristic: “Every employer is subject to a special system of advertising that does not affect people who have no employer provided. Employers should register with the Commercial Register.”

Solo entrepreneurs are affected by rules governing market competition. “Only employers are required to keep proper accounts of its business.”

2. The Commercial Accounts

a) Liability to Duty of Keeping the Accounts

Entrepreneurs are required to keep proper accounts of their business activity. Article 25 of the Commercial Code requires that “Every employer shall keep proper accounts, appropriate to the activity of your company, to allow chronological tracking of all operations and preparing periodic reports and inventories. Will necessarily, without exception as provided in laws or special provisions, a book of inventories and annual accounts and other official…”

b) Formal Accounting Standards and Accounting Material

Formal accounting refers to the records that an employer is required to maintain in specific books. Article 25 mandates:

  • General Journal or higher: One in which the employer notes daily operations. The law allows daily entries to be replaced by monthly records if supporting documents are kept.
  • Book of Inventories and Annual Accounts: The inventory book contains an annual list of company assets. The annual accounts reflect the company’s financial situation and consist of:
    • Balance sheet: A ratio of assets and liabilities, showing a static image of the company.
    • Profit and loss account: Relates income and expenses, reflecting a dynamic image of the company.
    • Memory: A document evaluating the year’s economic performance and explaining items requiring further detail.

Stock records refer to the principles governing how an employer must submit annual accounts (e.g., unity, prudence, clarity).

c) The Confidentiality of the Accounts

Accounting is generally secret. An employer is not obligated to disclose accounting information except in specific situations (Article 32 of the Commercial Code):

  • Court proceedings where the judge deems it necessary.
  • Upon the employer’s death, for estate division.
  • For legal entities, commercial companies must deposit their accounts in the public Commercial Register.

3. The Commercial Register

This public office contains information on employers.

a) The Functions of the Registry

  • Publishes data on employers.
  • Deposits annual accounts.
  • Appoints auditors and independent experts (who value non-monetary assets).

Registration requires submitting an application and relevant documents. The registrar qualifies the request. If compliant, registration is finalized. If not, corrections are required.

Not all employers must register. Commercial companies must, while individual entrepreneurs may choose to do so.

b) Principles of the Registry

These rules (Articles 5 and 12 of the Commercial Registration Regulations) govern the Commercial Register:

  • Public Ownership: Most entries require public documents.
  • Legality or Trade Qualification: Documents must be qualified by the registrar.
  • Legitimacy: Registered information is presumed accurate and valid.
  • Enforceability: Information published in the Official Gazette (BORME) is effective against third parties.
  • Successive Treatment: Registrations must follow a logical order.
  • Formal Advertising: Registry content is public (accessible via literal certification or simple note).

4. The Status of Competition

Competition is governed by:

  • The Law of 3 July 2007 (Antitrust), ensuring fair competition.
  • The Law of 10 January 1991 (Unfair Competition), preventing practices contrary to good faith.

Theme 2: The Companies

1. Partnership Agreement, Distinctive Features: The Commercial Societies

Article 1665 of the Civil Code and 116 of the Commercial Code define a society as “a contract whereby two or more persons are obliged to pool money, goods, or industry to profit from each other.” However, not all societies originate from a contract; sole proprietorships arise from unilateral legal transactions.

Elements of the Partnership Agreement

  • Consent: The agreement of multiple parties. Unlike bilateral contracts, partnership agreements are plurilateral.
  • Object: The benefits each party is obligated to perform (also called input). The object of society is the business itself.
  • Cause: The spirit of mutual profit.

Traits of the Partnership Agreement

  • Plurilateral Agreement: Even if some consents are void, the society can still be formed with the remaining valid ones.
  • Non-Application of Article 1124 of the Civil Code: If one partner fails to fulfill their obligation, other partners are still obligated to comply. One partner’s failure does not allow others to dissolve the agreement.

The Mercantile Societies

Civil societies are governed by the Civil Code, while corporations are governed by the Commercial Code.

  • Some companies (limited liability companies and limited liability limited partnership) are always commercial regardless of activity.
  • Others (partnership, limited partnership) are regulated by the Commercial Code and are commercial only when their business is commercial.

The distinction between commercial and civil activity lies in whether the activity is regulated by the Civil Code or commercial rules.

2. The Typical Characteristics of Commercial Companies

Typical Social Forms. Classification Criteria

Article 122 of the Commercial Code lists typical commercial companies:

  1. Regular collective.
  2. Limited partnership, or by simple actions.
  3. Anonymous.
  4. Limited liability.

Atypical companies are all others not listed, and are governed by the rules for collective societies unless a special law exists.

Classification

  • Partnerships: Personal qualities of partners are essential (e.g., partnership, simple limited partnership).
  • Capitalist Companies: Personal qualities are indifferent (e.g., corporations, limited liability companies, limited partnership).
  • Unlimited Liability Companies: Partners are liable for debts beyond company assets (e.g., limited partnership, partnership, simple).
  • Limited Liability Companies: Liability is limited to company assets (e.g., corporation, limited liability company, limited partnership).

Types of Partnerships

  • General Partnership: Partners have unlimited liability and are involved in administration (Articles 125-144 of the Commercial Code).
  • Limited Partnership: Two types of partners: general (unlimited liability) and limited (limited liability) (Articles 145-150 of the Commercial Code).
  • Cooperative Society: Partners seek to satisfy personal or professional needs, with free input and output.

3. Formalities of Incorporation. Legal Status. Societies in Formation, Irregular, and Void or In Fact

Formalities of Incorporation

Main requirements include a public document of the partnership contract and registration in the Commercial Register.

Legal Status of Companies

Each society has its own legal personality, capable of assuming rights and obligations, with its own heritage and nationality. This separation of heritage means:

  • A partner’s creditor cannot claim company assets.
  • A company’s creditor cannot claim a partner’s personal assets (unless it’s a partnership and company assets are insufficient).
  • Partners cannot dispose of assets already contributed to the company.

Types of Societies

  • Societies in Formation: Capitalist societies not yet registered, within one year of incorporation, with members intending to complete the process (Article 15 of the Corporations Act).
  • Irregular Societies: Capitalist societies not registered or personalistic societies with unlimited partner liability, regardless of type (Article 16 of the Corporations Act).
  • Void or In Fact Societies: Registered companies with a hidden defect in the constitutive process, allowing liquidation (Article 34 of the Corporations Act).

4. The Corporate Groups

A corporate group is a union of companies under the direction of a parent company, each retaining its legal personality. They typically have a pyramidal structure, with the parent company owning majority shares in subsidiaries (directly or indirectly). Each company is independently liable for its business.

Theme 3: The Corporation

1. Current Significance of the Corporation. Subtypes of Society Ano nima

While no longer the predominant form, the corporation (SA) remains economically important, particularly in banking, insurance, and stock exchange sectors.

Subtypes or Types of Corporations

  • Open SA: Large number of partners, free transfer of shares.
  • Closed SA: Few partners, restricted transfer of shares.
  • SA Education: Governed by the Act of 24 March 1997, covering labor associations (SAL, SLL).
  • European SA: Governed by the Act of 14 November 2005, for European SAs established in Spain.

A labor society (SAL or SLL) is one where most capital belongs to employees serving indefinitely. The European company (SE) has not had a significant impact.

2. Fundamental Characteristics: Social Capital, Shares, and No Liability of Partners for Social Debts. Commercial Character of the Corporation

A corporation is a capitalist society where social capital is divided into shares, shareholders are not personally liable for debts, and it is always commercial in nature.

  1. Capital Represented by Shares: Minimum capital is €60,000, divided into shares. Shares are easily transmissible securities. Capital (partners’ contributions) is fixed, while heritage (assets, rights, and obligations) is variable.
  2. No Personal Liability for Debts: Partners only risk their contributions; personal assets are separate from company assets.
  3. Commercial Character: Corporations are always commercial, regardless of activity.

3. Foundation of the Corporation. Anonymous Society Unipersonal. Foundation of SA

Requirements for an SA

  1. Public deed of constitution, including the Articles of Association (rules governing the company’s operation).
  2. Registration in the Commercial Register.

The deed must contain specific data (Article 8 of the Corporations Act), while the statutes detail company-specific rules (Article 9).

Types of SAs during Formation

  • SA in training: Not yet registered, but not considered irregular if founders express intent not to register or one year has passed since the public deed (Article 15 of the Corporations Act).
  • SA irregular: Not registered, with partners having unlimited liability until registration (Article 16 of the Corporations Act).
  • Nil or Done Company: Properly constituted but with a hidden defect, allowing liquidation (Article 34 of the Corporations Act). Grounds for invalidity include illegal purpose, missing information, incapacity of founders, or lack of valid consent.

Anonymous Society Unipersonal

This type of company has a single partner, originating from a unilateral legal transaction (Article 311 of the SA Law).

4. Social Benefits: The Regime of Capital Calls

Input refers to partners’ contributions to the capital, which also forms part of the company’s assets. It can be any good of economic value (excluding work or services).

Types of Inputs

  1. Monetary investments: Providing money (any currency with a euro equivalent).
  2. Non-cash: Any asset with economic value (excluding work or services). Requires valuation, with founders liable for incorrect valuations. An independent expert report is required.

Regime of Capital Calls

  • Subscribed capital: Amount partners have pledged to contribute (minimum €60,000).
  • Paid-up capital: Amount actually disbursed (at least 25% of nominal value per share).

Dividend liabilities represent the unpaid portion of the nominal value. Shares with outstanding liabilities have restricted voting and profit distribution rights. Defaulting shareholders may be required to pay with interest and damages, or their shares may be sold.

5. Action

a) The Action as Part of the Capital

  • Nominal value: Capital divided by the number of shares.
  • Real or fair value: Company assets divided by the number of shares.
  • Book value: Assets from annual accounts divided by the number of shares.
  • Market value: Stock price on the exchange (for listed companies).

b) The Holder’s Rights

  • Minimum rights: Held by all shareholders.
    • Participate in profit distribution (dividends).
    • Participate in assets from liquidation.
    • Pre-emptive right to new shares.
    • Attend General Meetings.
    • Voting rights.
    • Challenge General Meeting agreements.
    • Right to information.
  • Minority rights: Held by shareholders with a specific percentage of equity.

c) Documentation and Reporting of Actions

  • Hardware representation:
    • Bearer shares (no holder name).
    • Registered shares (holder name indicated, mandatory in some cases).
  • IT support: Book entries (mandatory for listed companies).

Transfer of Shares

  • Bearer shares: By delivery.
  • Registered shares: By endorsement and entry in the share log book.
  • Book entries: By computer entry.

Statutes may impose restrictions on share transfers, requiring notification and compliance with specific requirements.

6. Social Bodies

a) The General Meeting

This body adopts agreements by absolute majority. It has all powers not held by the board. Meetings are convened by managers or shareholders (5% of capital), or annually to approve accounts and discharge managers. Judicial or universal joint meetings are also possible.

Convening requires publication in the BORME and a newspaper. First call requires a minimum capital present, while second call generally allows any portion. Shareholders may attend or be represented.

Agreements can be challenged if contrary to law, statutes, or society’s interests. Challenge periods vary (40 days or 1 year).

b) The Management Body

Responsible for daily management. Appointed by the General Meeting (except for proportional representation or filling vacancies). Structures include sole administrator, joint administrators, several administrators in solidarity, or a board.

Term is up to 5 years, renewable. Dismissal is possible at any time. Remuneration may be free or paid. Administrators are liable for acts contrary to law or statutes, with due diligence of a computer entrepreneur.

Liability actions include social action (by the company, shareholders, or creditors) and individual action (by shareholders or creditors).

7. Amendment of the Articles of Association

a) Special General Scheme and Assumptions

Modifying the bylaws requires (Article 144 of the Companies Act):

  1. A report outlining reasons and proposed text.
  2. Convening the General Meeting.
  3. Approval by absolute majority (or enhanced majority).
  4. Public document and registration in the Commercial Register.
  5. Publication in the BORME and newspapers.

Special cases (e.g., restricting share transfers, altering social order, relocating headquarters) require additional publicity.

b) Capital Increase

This modification can be achieved by increasing share nominal value or issuing new shares. Purposes include raising funds, restoring capital-asset balance, or accommodating investors. Requires compliance with Article 144, with possible statute-defined exceptions.

c) Reduction of Capital

This modification aims to restore capital-asset balance, return inputs, or establish reserves. Achieved by reducing nominal value or amortizing shares. Requires compliance with Article 144, with creditor protection provisions.

8. Determination and Application of Results

Results are determined by subtracting expenses from revenue. The General Meeting decides how to allocate profits (distribute to shareholders or reinvest).

9. Conversion, Merger, and Divisions of the Company

  • Transformation: Changing company type without extinction.
  • Merger: Consolidating two or more companies (by absorption or formation of a new company).
  • Division: Dividing a company into multiple new companies.

All three require a General Meeting agreement (2/3 majority) and a public deed registered and published.

10. Dissolution, Liquidation, and Termination of Corporations

Dissolution (Article 260 of the SA Act) leads to liquidation, where liquidators settle assets and pay debts. The company retains legal personality until registration cancellation. Accounting records must be kept for 12 years after cancellation.

Theme 4: Limited Liability Company

1. Limited Liability Company in the Current Traffic. Concept and Characteristics

The limited liability company (SL) is a capitalist society with restricted share transfer, defined in Article 1 of the LSRL. Characteristics include:

  1. Capital divided into shares (minimum €3,005, fully paid).
  2. No personal liability for debts (beyond contributions).
  3. Always commercial, regardless of activity.

2. Foundation of the Company. The Limited Liability Company Unipersonal

Formation requires a public deed (or unilateral business for single-partner SLs), registration, and publication. Void SLs may arise from incomplete contributions. Statutes contain SL-specific information (e.g., name, administration, ancillary services, share transfer restrictions, General Meeting procedures).

Unipersonal Limited Liability Company

An SL with a single partner (Articles 125-129 of the LSRL). Requires statute modification to indicate single-member status. General meetings and administrative bodies are still required.

3. Contributions to Capital and Ancillary Services

Contributions must be fully paid upon founding. Valuation of non-cash contributions may be done by founders (with personal liability) or independent experts.

Ancillary Services (Articles 22-25 of the LSRL)

Services agreed upon by partners, not considered capital contributions. May be free or paid, and may be linked to the partner or specific shares. Transfer of shares with ancillary services requires General Meeting involvement.

4. Social Contributions

a) Concept and Nature of Social Participation

Shares are aliquots of social capital, not easily transmissible securities. Shareholders have similar rights to SA shareholders, with differences in voting rights and separation rights.

b) Documentation and Transfer of Shares

Shares are documented in a members’ book. Transfers are governed by statutes (which may allow free transfer in specific cases or impose restrictions) or the law (requiring partner communication and manager deliberation).

Forced transmission (due to debt) involves auctioning shares, with possible right of first refusal for existing members. Mortis causa transmission (inheritance) also allows for right of first refusal.

5. Bodies of the Company

a) The General Meeting

Similar to SA, with differences in functions (Article 44 of the SRL law), meeting procedures (single call, no minimum attendance), convening methods (newspaper or written notice), and agreement adoption (majority based on votes per share).

b) The Management Body

Similar to SA, with differences in administrative structures (modifiable without statute changes), appointment (always by General Meeting), term (indefinite possible), and liability.

6. Statutory Changes

Similar to SA, with exceptions for registered office relocation within the same municipality and capital reduction due to withdrawal.

a) General Requirements

Identical to SA.

b) Increase of Capital

Identical to SA.

c) Reduction of Capital

Similar to SA, with additional liability protection for members receiving returned contributions (for 5 years).

7. Determination and Application of Results

Identical to SA.

8. Processing, Mergers, and Splits

Similar to SA, with differences in transformation options (partnerships, limited partnerships, corporations, cooperatives, civil societies, economic interest groupings) and required majority for agreement (2/3 of votes per share).

9. Separation and Social Exclusion

9.1 Separation from Partner

Voluntary departure due to legal or statutory reasons, with return of contributions. Legal reasons include changes in social order, headquarters relocation, transformation, share transfer system, ancillary services, or extension/reactivation. Statutory reasons are defined by partners.

9.2 Exclusion from Membership

Forced separation due to legal (failure to fulfill ancillary services, breach of competition prohibition, conviction for liability) or statutory reasons. Procedure is similar to separation, with enhanced majority required for partners holding at least 25% of capital.

10. Dissolution, Liquidation, and Termination of the Company

10.1 Dissolution

Causes are the same as SA.

10.2 Termination of Society

Identical to SA, with the possibility of reactivation if dissolution cause is resolved, assets exceed capital, final settlement has not occurred, and creditor claims are secured.

11. The New Company Limited Liability Company (Articles 130-144 of the LSRL)

A special type of SL with specific regulations regarding naming, partner type (natural persons only), constitution (electronic deed), contributions (cash only), capital limits (€3,012-€120,202), accounting (simplified), and conversion to general SL type.

Theme 6: Obligations and Commercial Contracts: The Specialties of Your System

1. Specialties Contained in Articles 50 to 63 of the Code of Commerce

Commercial contracts are governed by commercial standards, commercial custom, and civil law. Peculiarities include:

  1. Status: Governed by commercial standards, custom, and civil law.
  2. Form: Freedom of form (Article 51 of the Commercial Code), with exceptions for formal contracts (e.g., surety bond, marine insurance).
  3. Evidence: Includes books, witness testimony, correspondence, notarized documents, account books, bills of lading, and bills.
  4. Interpretation: Presumption of good faith (Article 57), literal interpretation, most appropriate meaning, natural effects. Article 59 provides additional rules for resolving uncertainties.
  5. Penalty Clause: Specifies amount payable by defaulting party (Article 56).

2. Recruiting Distance: Concept, Ethos, and Procedures: Special Reference to the Regulation of Electronic Procurement

Distance contracts are those where parties are not physically present, using communication techniques like telephone, email, or fax.

  • Standard letter/fax: Governed by Article 54 of the Commercial Code. Perfected when offer/acceptance is known.
  • Telephone: Governed by Article 54. Consent is automatic.
  • Electronic/telematic: Governed by Law 34/2002. Electronic writing is equivalent to written form. Special information obligations apply. Venue is consumer’s domicile or service provider’s domicile.

3. The Protection of Customers in the Trading Process. Terms of the Recruitment and Protection of Consumers and Users

Article 51 of the Spanish Constitution mandates consumer protection, developed by laws like Law 7/1998 (general conditions) and TRLGDCV (consumer protection).

TRLGDCV

  • Consolidates previous consumer protection laws.
  • Defines consumer/user and entrepreneur (Articles 3-4).
  • Incorporates advertising content into contracts (Article 61).
  • Defines individually negotiated and unfair terms (Articles 80-82).

LCGC

  • Protects consumers against unfair terms in general conditions.
  • Defines unfair terms and provides examples.

Theme 7: Collaboration Contracts

7.1 The External Collaboration with the Employer and the Leasing Business, Service, and Work: Distinctive Features

  • Rental Service: Lessor provides services, tenant pays.
  • Leasing work: Lessor performs work for a result, tenant pays.
  • Collaboration contract: Employee performs a commercial transaction, employer pays (often contingent on result).

Collaboration contracts differ from leases in their regulation (commercial code or special laws), involvement of entrepreneurs, and potential subordinate relationship.

7.2 Special Reference to Some Forms of Collaboration Contracts

1. The Contract Committee (Articles 244-280 of the Commercial Code)

Commission agent conducts a commercial operation on behalf of the principal, who pays a price. It is a mandate, involving a commercial transaction, and at least one entrepreneur. It is consensual, bilateral, onerous, and short-term.

Obligations
  • Commission: Fulfill the order personally, follow instructions (imperative, stated, or optional commission), act in good faith, report to principal, settle accounts.
  • Principal: Provide funds, pay remuneration, reimburse expenses, assume contract effects.
Termination
  • Course of stipulated period.
  • Achievement of result.
  • Other grounds for contract termination.

2. The Commercial Agency Contract (Law 12-1992)

Agent promotes trade acts on behalf of the principal, who is the business owner. Agent is a freelancer, entrepreneur, with no subordination. Contract includes terms regarding exclusivity, remuneration, and compensation.

Termination
  • Course of deadline.
  • Agreement of parties.
  • Fulfillment of obligations.
  • Agent’s death.
  • Declaration of contest.
Compensation
  • For customers.
  • For damages due to unilateral resolution.

3. Concession Contract or Commercial Distribution (1983 Community Regulation)

Dealer resells goods supplied by the licensor, profiting from the difference. Dealer is part of a distribution network, resells branded products, and acts on their own behalf. Contract is typically indefinite and includes exclusivity agreements.

Distribution Methods
  • Exclusive distribution.
  • Selective distribution.
  • Intensive care distribution.
Obligations
  • Licensee: Maintain stock, buy at fixed price, respect exclusivity.
  • Grantor: Supply products, ensure product quality, respect exclusivity.
Termination and Allowances

Similar to agency contract, with allowances for unsold products and damages.

Franchising (Article 62 of Law 7/1996, Royal Decree 2485/1998, Royal Decree 419/2006)

Franchisee operates a marketing system under the franchisor’s brand, with assistance. Franchisor must provide comprehensive information 20 days before signing.

Obligations
  • Franchisor: Assign franchise operation, promote product/service, respect exclusivity, ensure quality and uniformity.
  • Franchisee: Pay salary, apply marketing techniques, maintain image, comply with pricing, respect exclusivity.
Extinction

Similar to other collaboration contracts.

4. The Factoring Contract

Factoring company manages recovery of receivables for the employer, sometimes providing financing and other services. It is an atypical contract, drawing on commission contract rules.

Obligations
  • Factoring company: Manage receivables, perform ancillary services.
  • Employer: Assign receivables, pay remuneration, pay interest (if financing is provided).
Termination

Similar to other collaboration contracts.