Transfers of shares in Spanish private limited liability companies must be registered with the Commercial Registry for them to be effective against third parties and for shareholders to exercise their rights.

The Preliminary Bill for an Organic Law on Public Integrity introduces a far-reaching reform of Spanish corporate law. Among its most relevant measures, the draft provides that the original ownership of equity interests in Spanish private limited companies (sociedades limitadas or SLs), their subsequent transfers, as well as certain encumbrances and attachments, must be recorded in a special section of the Commercial Registry, which is not currently the case.

At present, ownership of equity interests is recorded in the shareholders’ register book, an internal corporate document kept under the responsibility of the management body. This model has long been criticised for its limited transparency, for the practical difficulties it may create in attachment proceedings, and for the obstacles it may pose when seeking to verify the beneficial ownership of companies more easily.

The draft text envisages amendments to the Commercial Code and the Capital Companies Act in order to create a Special Section within the Commercial Registry, separate from the company’s general registration sheet.

According to the preliminary bill, this section must include:

• the original ownership of the equity interests;
• subsequent transfers, whether voluntary, compulsory or by succession upon death;
• the creation of certain rights in rem and encumbrances;
• attachment entries;
• and the identification of the natural persons who qualify as beneficial owners, in accordance with anti-money laundering regulations.

If enacted in these terms, once the incorporation of a private limited company has been registered, the commercial registrar would open this special section to reflect the company’s shareholders’ register.

One of the most significant aspects of the reform is that registration would cease to be merely declaratory and would instead become, vis-à-vis the company and third parties, constitutive in nature.

In practice, this would mean that any person acquiring equity interests, or creating an encumbrance over them, would not be entitled to assert their position against the company or against third parties until the relevant transaction has been registered with the Commercial Registry.

From that perspective, the preliminary bill reinforces the principle that, for the purposes of corporate standing and enforceability against third parties, the relevant position will be the one reflected in the registry. In doing so, the future rule seeks to strengthen legal certainty and reduce opacity in the ownership structure of private limited companies.

Likewise, the draft text provides that any provisions in the articles of association seeking to exclude, condition or weaken the constitutive effect of registration in connection with transfers of equity interests, attachments or other encumbrances would be deemed null and void as a matter of law.

The legislative proposal also introduces a new digital system for documenting transfers of equity interests and the creation of certain encumbrances.

In this respect, the preliminary bill provides that such transactions may be formalised through an electronic private document, with standardised content and format to be approved by the Directorate-General for Legal Certainty and Public Faith (DGSJFP). That document must be signed by the parties involved using qualified electronic signatures.

In addition, registration may also be based on judicial or administrative documents, where appropriate under the applicable regime.

If the rule is ultimately enacted in its current wording, the procedure would be handled entirely online. The acquirer of the equity interests, or where applicable the company’s director acting on their behalf, would have to complete the relevant steps through the platform made available on the electronic headquarters of the Spanish Association of Property, Commercial and Movable Asset Registrars.

Once the transaction has been verified and the registration has been made in the relevant special section, the registrar would issue an electronic certificate with a secure verification code (CSV) evidencing that the registration has been entered. This certificate would serve as proof of registration, and notice of the entry would be given to the company in accordance with the terms envisaged in the preliminary bill.

The proposed reform also increases the duties of the management body. In transactions such as the incorporation of the company, capital increases or reductions, and other events affecting ownership of equity interests, directors must promote the corresponding registry entry without delay.

According to the draft, any unjustified delay in doing so could give rise to personal liability vis-à-vis shareholders and creditors for the losses and damages caused.

In addition, the shareholders’ register book would have to be kept in electronic format and filed annually with the Commercial Registry within the same period applicable to the filing of the annual accounts. That filing must reflect the record of transfers, encumbrances and beneficial ownership entries corresponding to the relevant financial year.

Another key point of the preliminary bill concerns the attachment of equity interests in private limited companies, an area that has so far raised difficulties precisely because these holdings are not publicly registered.

Under the new model, attachments ordered in judicial or administrative proceedings could be entered directly in the Commercial Registry where the relevant equity interests are already recorded in the special section.

Where they have not previously been registered, the registrar could verify ownership against the shareholders’ register book filed by the company and act in accordance with the system set out in the preliminary bill. The aim is to facilitate traceability of ownership and improve the effectiveness of attachment measures.

In any event, the attachment would take effect against the company and against third parties from the time it is entered in the registry, in the terms envisaged by the draft rule.

The reform is not limited to voluntary transfers. It also extends to the creation of pledges and other encumbrances over equity interests, which, if the draft is enacted in these terms, would have to be properly documented and registered with the Commercial Registry in order to take effect against third parties.

In the event of auction or compulsory award following an attachment, any pre-emption or preferential acquisition rights applicable under corporate law and, where relevant, the articles of association, would in principle continue to apply. In any case, the new holder’s full standing vis-à-vis the company and third parties would remain linked to the corresponding registry entry.

The preliminary bill seeks to ensure closer alignment between corporate reality and its registry record.

Accordingly, in transactions such as:

• incorporations;
• capital increases and reductions;
• structural modifications;
• dissolution and liquidation;
• or situations of sole shareholder status,

the documents submitted must accurately identify the holders of the affected equity interests.

Thus, in a capital increase, the deed must specify to whom the new equity interests are allotted and their numbering. In a capital reduction, registration may be affected if the holders referred to in the transaction do not match those shown in the special section. Likewise, in the event of liquidation and winding-up, the deed must include the list of shareholders and their liquidation quota in accordance with the proposed regime.

The reform also defines access to the information contained in this new registry section.

The following would have access to the full content, within the limits established by law:

• the company itself;
• the shareholders;
• holders of rights in rem or encumbrances over the equity interests;
• and public authorities and competent public bodies.

Third parties unrelated to the company could access the current data if they prove a legitimate interest to the commercial registrar. For the general public, access would be limited to essential information, in compliance with personal data protection rules.

The preliminary bill is not limited to corporate law. It also introduces public integrity measures and extends the use of Minerva, the data analytics and artificial intelligence tool hosted by the Spanish Tax Agency (AEAT).

Until now, this tool had mainly been used in connection with oversight of European funds. Under the new proposed regime, its use would be extended to the ordinary management of public expenditure procedures in the Spanish state public sector.

Its purpose would be to detect potential conflicts of interest automatically in particularly sensitive cases. To this end, those involved in decision-making processes would be required to sign a Declaration of Absence of Conflict of Interest (DACI).

The automated analysis would cover, among others, members of procurement bodies, evaluation committees, officials responsible for grants, selection boards and bodies involved in public employment procedures.

Another of the measures included in the preliminary bill is the institutionalisation of institutional integrity committees in the state public sector.

Each ministry or department would have its own committee, tasked with promoting measures and action plans aimed at strengthening institutional integrity within its area of responsibility. These bodies would operate in coordination with the future Independent Public Integrity Agency, to which they could submit proposals and ethical queries.

In addition, coordination among the different ministerial committees would be entrusted to an interdepartmental collegiate body, with the aim of reinforcing the consistency of the overall system.

If ultimately approved, the reform would represent a significant change for private limited companies in Spain. Registry recording of ownership of equity interests, as well as their transfers, attachments and encumbrances, would strengthen corporate transparency, facilitate the identification of beneficial owners and potentially provide greater legal certainty for this type of transaction.

At the same time, the new model would entail greater formal burdens and increased responsibility for the management body, which would have to adapt to a more demanding, digitalised and closely supervised system.

Ultimately, if enacted in these terms, the Preliminary Bill for an Organic Law on Public Integrity would create a new landscape for private limited companies, in which registry publicity of corporate ownership would come to play a central role.

In this context, specialised advice on corporate matters becomes even more important, particularly in due diligence, M&A transactions or capital structure reorganisations. At ILIA ETL GLOBAL, we support companies and shareholders in these types of transactions with an approach that combines the capabilities of an international group with the closeness and agility of an independent firm.

Article reviewed by Xavier Vilalta, specialist in the preparation of tax returns, international taxation, tax audits, due diligence and corporate.