How to establish a subsidiary

Are you a foreign businessman and want to establish a subsidiary in Spain? Many foreign businessmen consider this same challenge for different reasons, such as opening the doors to the Hispanic market, the opportunity for expansion, the good climate in Spain or the lifestyle. We tell you what steps to follow.

What is a subsidiary company?

The first thing you should be clear about is the concept of a company subsidiary. A subsidiary company is an entity with its legal personality that is established and controlled, directly or indirectly, by a parent company. Control is usually carried out through the ownership of the majority of the shares, representing more than 50% of the voting rights.

The degree of control marks the subsidiary’s independence, which can also have different degrees, from absolute control, so that the subsidiary does not decide anything, to total freedom, in which the subsidiary decides for itself and its relationship with the company. Matrix is ​​limited to presenting results.

In the case of a subsidiary of a foreign company, although the capital is foreign, the company is Spanish because it was created in Spain in compliance with Spanish regulations.

What steps should I follow to establish a subsidiary?

The steps for the constitution are as follows:

• Agreement of the administrative bodies of the parent company agreeing to the constitution of the subsidiary.
• Preparation of the Social Statutes according to Spanish laws. The minimum content is the following:
  • Company name.
  • Corporate purpose (activity of the company).
  • Share capital.
  • Manner of organizing the administration (sole administrator, joint or several administrators, or board of directors).
  • Manner of deliberating and adopting agreements.
• Request for negative certification of name in the Commercial Registry to be certain that there is no other company with the same name.
• Opening of a bank account in the name of the company and deposit of share capital.
• Execution of the deed of incorporation of the company before a Notary. The documentation that must be provided is the following:
  • Bylaws.
  • Certification of company name.
  • Bank certification relating to the deposit of share capital.
  • DNI, NIE and each partner’s power of attorney deed (if applicable).
  • Declaration of foreign investments, as they are non-Spanish partners.
• Obtaining the provisional NIF, registering the Economic Activities Tax and census declaration.
• Registration in the Commercial Registry.
• Request for definitive NIF.

Another way to open a foreign company in Spain: establish a branch

If you want to create a company linked to yours abroad, another option is to establish a branch. In this case, the big difference is thatthe branch is like a delegation, which does not have its legal personalityand is a simple extension of the parent company. However, it also has to be registered in the Commercial Registry.

Many foreign companies, before create more complex corporate structures, what they do is open a branch and if, over time, the business prospers in Spain, create a subsidiary.