How to create a joint venture in Spain

Let us remember that the creation of a joint venture can be part of a brand's international strategy to expand into international markets.

While a joint venture is a legal structure that creates a business alliance to carry out a specific commercial operation, it is largely formed between foreign and local companies to overcome the barriers that the foreign company may encounter when trying to position itself in another market.

Also to combine technology and know- how with the intention of forming an organization with greater potential.

These reasons are also the basis for the creation of joint ventures in Spain.

Spain's idiosyncrasy is complex, but its market is attractive internationally. There are many companies from Latin America or the United States that land in Spain and then continue their expansion throughout Europe. 

Let's see, then, how to create a joint venture in Spain 

Corporate type for the Joint Venture

We already know that a joint venture can be created through a contract, or through the formation of a company.

This time, we're going to focus on the second one, the equity joint venture.

The legal structure of the equity joint venture responds to the need to adequately regulate the complex relationships of dependence and cooperation that the participants intend to establish among themselves , on the one hand, and with the common company , on the other.

The partnership agreement and the company are the typical legal instruments for the joint exercise of an economic activity in the form of a business. 

Thus, the partnership is a contract by which two or more people are obliged to pool money, goods or industry to distribute the benefits among themselves in the typical framework of associative relationships. 

In the legal catalogue there are some general types that operate in the commercial field.

The criteria for choosing one type of company over another are very varied, and will depend on the liability sought, taxation, legal requirements or the prospects according to the business plan.

Traditional commercial companies include the general partnership, the limited partnership, the limited partnership by shares, the public limited company and the private limited company; although there are other types such as cooperatives or mutual guarantee companies, among others.

In this case, the joint venture is usually a capital company (limited or public limited company) whose shares or holdings can be transferred, with greater or lesser freedom, in accordance with the provisions of the company's governing law.

While the Public Limited Company (SA) is the preferred legal structure for large corporations because it allows them to pool a large number of investors and significant sums of money in its capital, the Limited Liability Company (SL) historically emerged as an alternative for SMEs . Both are fully compatible with joint ventures , as they allow for the establishment of a base agreement plus additional contracts.

For its part, the SL allows for ample possibilities for incorporating the cooperative element into the company, which can serve to give social prominence to the agreements that are more frequent in the joint venture.

Therefore, a limited liability company will be the recommended option in this case.

Process and requirements for the constitution of a company in Spain (step plan)

To establish a limited liability company in Spain, which will be the legal structure under which our joint venture will be formed , we will have to follow certain steps established in the country's legal system. These steps are:

1. Issuance by the Central Mercantile Registry Spanish for a certificate of authorization for the use of the name of the new company. 
2. Subscription and minimum capital disbursement. The minimum amount of subscribed capital for an SL is €3.000; although, due to the Law 14/2013, of September 27, to support entrepreneurs and their internationalization, may initially be lower. However, the capital, which is divided into shares, must be fully subscribed and paid up; and both the articles of incorporation and the articles of capital increase will express the contributions made by partners. 

1. Drafting of the company's statutes; which will include:
   • Registered office in Spain.
   • Social object of the company.
   • Number of shares/participations.
   • Type of governing body: Sole Administrator or Board of Directors, among others.
   • Restrictions on the transfer of shares/participations.
   • Quorum (only applies to the SA) and majorities necessary to approve resolutions at general meetings of shareholders and, where applicable, at meetings of the board of directors.
2. Name of the company's administrators.
3. Granting of the public deed of incorporation before a Spanish notary. 
4. Assigning a tax identification number to the new company. This is a necessary step for the registration of the company in the Commercial Registry, and consists of submitting a special form (also used for VAT purposes) to the competent tax authorities; with which a provisional number is automatically granted. Once the company is registered in the Commercial Registry, it must obtain the definitive tax identification number within a maximum period of six months from the issuance of the provisional number.
5. Registration in the Commercial Registry. Once the previous steps have been completed, the public deed of incorporation of the company will be submitted to the Commercial Registry for its formal registration. This requirement must be met for the company to be legally established.
6. In addition to the above procedures, the new company must take the following steps before starting its activities:
   • Registration for the purposes of the tax on economic activities.
   • Company registration for VAT purposes.
   • Payment of the opening license tax.
   • Registration of the company in Social Security and work accident insurance.
   • Compliance with certain procedures at the local office of the Ministry of Labor. 

As we can see, it is not an excessively complex process, but it must be done correctly, especially with regard to the statutes, because these will determine the possibilities of action that we will have at a business level later on.

For example, if your bylaws do not include the contribution of own funds, it will be difficult to regulate it later at a tax level. 

Other questions about the Joint venture in Spain

If we establish a Joint Venture , we must bear in mind that it is a commercial partnership between foreign companies that therefore have completely different customs.

Therefore, the contract and the statutes must be very clear.

They must collect all possible cases during the course of the corporate operation, as well as once established, to prevent the different risks that may arise due to the cohabitation of the partners, and that could affect the normal activity of the company. 

Furthermore, a company is not an unchanging entity.

Depending on the business strategy and the social and economic reality, it will be necessary to establish new agreements or other legal actions.

Therefore, the appropriate foundations must be laid to enable normal operation, being aware of the uncertainty to which any company is subject. 

RRYP is a law firm and consultancy specializing in international trade. Contact us if you think we can help you: [email protected]

RRYP Global, lawyers specializing in international commercial law.