Temporary Joint Ventures ( UTEs ) are created to carry out specific projects or services.
In other words, it is a system of cooperation between entrepreneurs for a specific period of time that must be formalized in a public deed that includes the identity of the constituent companies and the statutes or agreements that govern its operation in accordance with the provisions of Law 18/1982.
What are UTES used for?
Temporary Business Associations (UTEs) are used to carry out specific projects in collaboration with other entrepreneurs.
They are usually formed when a single entrepreneur, with his economic, personal and material resources, cannot face a particular contract.
As a result, it joins forces with other companies to jointly tackle the project.
The main advantage of participating in a joint venture lies in the reduction of costs and the distribution of risks , avoiding assuming the burden on one's own.
Who can create a UTE?
The participants in the joint venture can be individual entrepreneurs or companies, who will continue with their activity normally , regardless of what is carried out with the Temporary Business Association.
This aspect is fundamental and establishes a distinction with economic interest groupings , similar legal structures that do have their own legal personality.
The companies participating in this union will be subject to a regime of joint and several liability to third parties , which will be limited exclusively to the operations carried out jointly.
How to create a UTE
The Temporary Business Association (UTE) is distinguished by the existence of a single corporate purpose, which implies the joint execution of a work or service.
The creation of a joint venture requires the participation of a notary , who will formalize the founding or statutory agreement in a public deed.
These statutes must contain, at least:
- Name, corporate purpose, duration and tax address.
- The partners that make it up.
- Percentage of participation of each company or entrepreneur in the UTE, along with the possible distribution of losses or profits in the future.
- The details of the initial contributions (if any).
- Liquidation of the Temporary Union.
How is a UTE managed?
Through this business association agreement, a new autonomous entity is created that operates under a single management and adopts a name that may be that of one, several or all of the participating companies, followed by the expression "Temporary Union of Companies".
The management of this entity falls to a single manager, who has sufficient powers to carry out and develop the functions of the UTE, such as signing contracts, performing acts and assuming obligations.
This manager must have powers granted by all members.
In addition, the UTE will organize and manage the following bodies:
- Board of Entrepreneurs: This higher body is made up of a representative of each of the participating companies.
- Management Committee: Made up of a representative from each of the UTE member companies, this body is responsible for designing the project management policy.
Tax aspects of the UTE
It is important to note that, in order to take advantage of the tax benefits provided by law, the Temporary Business Association (UTE) must be formalized through a public deed before a notary and registered in the special register of the Ministry of Finance and Public Administrations.
If you would like to know the specifics of these tax advantages, we recommend consulting with one of our lawyers: RRYP Global.
It is crucial to note that the returns generated by companies that are part of the UTE must be established under the direct estimation regime in order to be subject to taxation in the Personal Income Tax (IRPF).
In addition, the members of the joint ventures have the obligation to make withholdings for Personal Income Tax or Corporate Income Tax , as well as for the indirect taxes that the joint venture must pay as a result of the activity it carries out.
How to proceed when concluding the work or project that motivated the formation of the Temporary Business Union (UTE)
Temporary Business Associations (UTEs) will be established for the same duration as the work or service for which they were established.
The maximum permitted duration is 25 years , except in cases related to contracts linked to the operation of public services, where the duration can be extended to 50 years.
Once the work or supply that led to the creation of the UTE has been completed, it will be extinguished.
The dissolution process must be formalized through a public deed and subsequently notified to the Ministry of Economy and Finance , who will proceed to deregister the joint venture in the special register.
Example of a UTE in Spain: Prosan Medicare
A notable case of Temporary Business Association (UTE) in Spain took place in 2020 , in the midst of the health crisis caused by COVID-19.
Faced with the urgent need for medical supplies, five Valencian companies, including one from Elche, joined together to create Prosan Medicare , a strategic alliance with the aim of producing quality medical supplies in a short period of time.
The Prosan Medicare joint venture emerged with a clear vision: to strengthen the health sector and guarantee the supply of essential products in a critical context.
According to its proponents, business collaboration is key to responding to society's challenges and providing quick and efficient solutions.
The companies that formed this joint venture are Mila-Rosa SA and Casa Mediterránea 1967 SL (Ontinyent), Pro Safe Plus SL of the Ferrotall Group (Elche), Aupa Hogar SL (Albaida) and Uniformidad Laboral Barbera SL (Ayora).
Their commitment focused not only on the production of medical supplies, but also on job creation , with thousands of direct and indirect jobs, contributing to economic and social development.
Furthermore, the entire production complied with rigorous quality controls and the standards required by European regulations, and was authorized by the Spanish Agency for Medicines and Health Products.
This case exemplifies how Temporary Business Associations can play a crucial role in times of crisis, facilitating cooperation between companies to address major challenges and contribute value to society.
RR YP Global , lawyers specializing in commercial law.
