The document provides an overview and summary of the key changes and innovations introduced by the new Capital Company Act in Spain. Some of the major changes include consolidating previous laws governing corporations, limited liability companies, and joint stock companies into a single law. The new law also harmonizes and standardizes provisions across different company types, expands directors' duties, and creates a new title specifically governing listed companies. The changes aim to bring more clarity and consistency to Spanish commercial company law.

1. Capital Company Act
A short essay in Spanish New legislation
on Commercial companies
English
Version

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Index
Bibliography ........................................................................ 3
Explanatory Memorandum .................................................. 4
Introduction. Legislator’s targets ......................................... 5
Capital Company Act. What’s new? ..................................... 7
Remarkable issues ............................................................... 9

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Bibliography
J&A GARRIGUES S.L.P. Folleto de novedades en Derecho Mercantil. La Ley de
Sociedades de Capital, Madrid: J&A Garrigues S.L.P., 2010.
JOSÉ ÁNGEL GARCÍA VALDECASAS Aproximación al Texto Refundido de la Ley de
Sociedades de Capital, Madrid: Notariosyregistradores.com, 2010.
ADOLFO SORIA Ley de Sociedades de Capital, Madrid: Diariojuridico.com, 2010.
REAL DECRETO LEGISLATIVO 1/2010, DE 2 DE JULIO, POR EL QUE SE APRUEBA EL TEXTO
REFUNDIDO DE LA L EY DE SOCIEDADES DE CAPITAL. Madrid: BOE de 3 de julio de
2010.

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Explanatory memorandum
This research aims to explore the major changes and innovations that have led to the
promulgation of the Capital Company Act. The current framework for change that is living
company law in Spain, driven largely by the legislative activity of the European Union
institutions and government bodies, is
faithfully reflected in the consolidation of all
the old company acts in only one.
With more systematized than innovative
spirit, the Capital Company Act was created
with a provisional basis, waiting for the
expected enactment of more comprehensive
legal texts as a Code of Corporate Law, or even
a new Trade or Commercial Code.
The current regulatory dispersion caused by the legislative activity of the Autonomous
Communities, is endangering the consistency and unity of the Spanish market. The
enactment of laws such as those quoted above, is one possible solution to this problem.

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Introduction. Legislator’s targets.
The Spanish Official Gazette of July 3, 2010, published the Consolidated Text of the
Capital Companies Law –Texto Refundido de la Ley de Sociedades de Capital- (hereinafter
TRLSC), approved by Royal Decree 1 / 2010, enacted under the 7th Final Provision of Law
3/2010 of April 3, 2010, on Structural Modifications of the Capital Companies Law –Ley
sobre modificaciones estructurales de las sociedades mercantiles- (LME), which granted the
Government an authorization to recast in a single text, entitled Capital Companies Act –Ley
de Sociedades de Capital-, the laws governing capital corporations, regularizing, clarifying
and harmonizing the following legal texts:
 Section IV, Title I, Book II, of the Commercial Code of 1885 –Código de Comercio de
1885- relating to companies limited by shares.
 The Royal Decree 1564/1989 of 22 December, approving the Consolidated text on
Corporations Law (TRLSA) –Texto Refundido de la Ley de Sociedades Anónimas-.
 Law 2 / 1995 of March 23, on Limited Liability Companies (LSRL) –Ley de Sociedades
de Responsabilidad Limitada-.
 Title X of Law 24/1988 of 28 July on Regulation of the Securities Market Law –Ley del
Mercado de Valores-, on listed companies.

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As a result, the new TRLSC supersedes the following provisions:
 Articles 151 to 157 of the Commercial Code of 1885, relating to the companies
limited by shares.
 The Consolidated Text of the Companies Law approved by Legislative Royal Decree
(RDL) 1564/1989 of 22 December.
 Law 2/1995 of March 23 on Limited Liability Companies Law.
 Articles 111 to 117 of Law 24/1988, of July 28, on Regulation of the Securities Market
Law, with the exception of paragraphs 2 and 3 of art. 114 and Art. 116 and 116 bis.
The TRLSC entered into force on September 1, 2010, with the exception of art. 515, which
will do so on July 1, 2011.

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Capital Company Act. What’s new?
As noted in their Preliminary recitals, the TRLSC "must be the result of the adjustment,
clarification and harmonization" of the different legal texts regulating capital companies, and
cannot therefore be limited to a mere
recasting transcription of articles. Accordingly,
the purposes of the rule have been:
 Impose order, sometimes modifying
the scheme while it has tried to reduce
the imperfections of the normative
propositions.
 Clarify and eliminate, as far as possible,
questions of interpretation that could
raise legal texts by determining the exact scope of the rules.
 Suppress differences of legal expression, unifying and updating the terminology and
how to proceed with a major extension rules of solutions which originally affected a
single social type, which avoids going to referrals and in some cases, through analogy
when there is identity of reason.
In the TRLSC is intended to achieve a generalization of the existing rules for a particular
social type to all capital companies, provided it has been appreciated identity of reason.
Thus, cases that were previously covered for a particular social type (corporations, limited

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liability companies or companies limited by shares) now are regulated either for any of
them. And when they have tried to establish differences or to provide different solutions in
response to the corporate form, it is stated explicitly.
However, it should be noted that fall outside the scope of the recast operated by the
TRLSC, the rules included in the LME which while affecting corporations, also refer to other
societies, "societies of individuals" , so its inclusion in the new revised text might have
caused some inconsistencies.
Finally, it is noteworthy that the TRLSC has been enacted on an interim basis. On the
one hand, be warned by the legislature of the need to address short-term significant reforms
of the matter, with the revision of some traditional legal solutions, with the expansion of the
dynamics of the fiduciary duties of directors, with a more detailed regulation of listed
companies and the creation of a substantive law on corporate groups. On the other hand,
we see the desire that all of the general law of commercial companies, including those
applicable to partnerships, is contained in a legal body unit.

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Remarkable issues
As noted, the TRLSC does not intend, nor the Government was entitled to it, be
innovative in including legal remedies other than those that existed in the different rules
governing corporations, limited liability companies or companies limited by shares. Thus,
most "innovations" consists in the extrapolation which has been made of the different rules
that exist to date, so that, what once could lead to analogical interpretations of the law, due
to a lack of specific regulation, and therefore, generate doubt if it really was to assumptions
with identity of reason, now it is resolved because the most of the cases are specifically
regulated.
Here are some things that most, though not novel, strictly speaking, we consider
noteworthy.
General provisions
Is created a new legal category of "Capital Company", which includes corporations,
Limited Liability Company and companies limited by shares.

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The minimum capital to establish a corporation is 60,000 Euros, and 3,000 Euros for
limited liability companies. Previously, the minimum capital required was slightly higher,
because when it was practiced the conversion of Pesetas (Pta.) to Euros (€), the resulting
amounts had decimals, which has now seen fit to remove.
In the TRLSC is includes an explicit definition of Corporate Groups, by reference to
Article 42 of the Commercial Code, defining "Holding Company" as one who holds or may
have direct or indirect control of another or others. This definition applies throughout the
TRLSC.
Shares
Partner's rights, traditionally covered in corporations, are from now regulated under
the same conditions for the rest of the corporations.
In regard to the transfer of shares, section 107.3 of the TRLSC is expressly prohibited
that the Company Bylaws confer the auditor of the company the ability of setting the value
of the shares transferred.
Business in own shares
Regarding of indirect treasury stock matters (subscription or purchase of own shares
through a subsidiary company), in the TRLSC is clarified that in the event that a parent
Company and the subsidiary company, owner of the shares of their Parent Company, were
of different nature (for example, one is a corporation and the other is a limited liability
company), it must be applied the rules of the subsidiary company.
Moreover, under an international scope, it becomes clear that the point of connection
is the parent company, so that while if it is Spanish, it must be applied the Capital Companies
Act, although the subsidiary company which have made the acquisition is foreign.
General Meetings
This is one of the areas where the TRLSC has put more emphasis on their desire to
harmonize the provisions, so far applied to different social types, extending those rules
provided for a single type of society, to all classes of capital companies.

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Examples of this could be:
 Extension to limited liability companies of the two different kind of General Meetings
(regular/extraordinary).
 The application for limited companies of the system of judicial notice previously
expected for limited liability companies.
 The systematic enumeration, for corporations, of the
business competence of the general meeting which
were previously only provided for limited liability
companies.
 The obligation of managers of Limited liability
companies to attend general meetings (expressly
provided for corporations only before the TRLSC).
In terms of challenges to agreements, now is authorized, whenever possible, that the
judge allow the defendant company to remedy the cause of objection.
The management of the company
The TRLSC brings the legal regime applicable to the board of limited liability
companies, strengthening the rules that were previously applicable to corporations and
limited liability companies, marking in any case, the remaining differences.
In general, when the remuneration of the directors have no basis of a profit-sharing,
such remuneration shall be fixed for each year by agreement of the general meeting in
accordance with the provisions of the bylaws.
In TRLSC is explicitly recognized in the TRLSC the possibility of appointing alternate
directors in the corporation, so far only contained in Rule 146 of the Companies Registry.
It is rearranged and unified the duties of directors for all types of companies,
expanding the limited liability companies the duties hitherto existing on corporations. In the
TRLSC there isn’t any reference to the duty of fidelity, which is subsumed in the duty of
loyalty, and will be consolidated into a single concept of conflict of interest cases so far
referred to in paragraphs 3 (conflict of interest) and 4 (participation and positions entities
with similar or complementary targets) of Article 127ter of the Capital Companies Act.
With the new TRLSC is obliged to include in the memory of all limited liability
companies:

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 Any conflict, direct or indirect, of directors with the interests of the Company.
 The direct or indirect, both managers, as persons linked to them, could take into the
capital of companies with similar or complementary activity that constitutes the
corporate purpose as provided for corporations.
Amendment of Capital Companies’ Bylaws
With the TRLSC, It has been extended to limited liability companies the information
rights of members in the bylaw amendments currently provided on corporations: with the
TRLSC, partners will have the same rights as shareholders of a corporation to request the
delivery or free shipping documents relating to such modifications.
In the area of the capital
increase operations against
reserves, is now required for
limited liability companies the
auditor verification of balance as a
basis for the operation, as required
for corporations.
It is taking away the right of
preferential capital gains in non-
cash contributions in limited
liability companies, thus equating
the system of preferential taking pre-emptive corporations after the amendment made by
the LME.
Reductions are allowed for capital formation or expansion of the legal reserve or
voluntary reserves in limited liability companies (with the current system, they could only
reduce capital corporations such purposes).
Between the balance sheet date and the capital reduction agreement, in case of
reduction of capital to offset losses or to provide legal reserve may not take more than 6
months (this time requirement is applied only to limited liability companies).
If a limited liability company wants to pay dividends once reduced the capital, it will be
required that the legal reserve reaches, at least, 10% of new capital. To date, this restriction
operated only for corporations.

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Corporate breakup
For the first time is provided for, in Article 347 TRLSC, the possibility that in joint stock
companies and in companies limited by shares, the bylaws may provide other causes of
breakup than those provided in the Act.
With the TRLSC is also applied to corporations, the legal reasons for breakup that
existed in limited liability companies, so the number of corporate breakup situations, in the
case of corporations and companies limited by shares, has been expanded. According to the
State Council, the Government has exceeded its empowerment rules to allow these other
causes of corporate breakup.
As regards the valuation of stocks and shares, in case of separation and exclusion of
members, is generalized to all capital companies, the system provided before only for
limited liability companies.
Dissolution and liquidation
Is generalized and unifies for all capital companies the system that existed in these
matters. Thus, extending to corporations the system of dissolution and liquidation of the
existing limited liability companies as regards:
 The need for a full report on the process of liquidation and a proposed division of the
resulting asset,
 Deadlines for contesting the resolutions approving the settlement,
 And the system applicable to extraordinary assets and liabilities
Listed companies
The TRLSC creates a specific title on
the listed company, whose system was
far basically in the title X of the Securities
Market Law. Since the entry into force of
the TRLSC, the corporate aspects of such
companies are governed in Title XIV while
those aspects related to the condition
that these companies are issuers of
securities admitted to trading on
regulated markets remain in the
Securities Market Law.

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 Is Introduced the inability of the bylaws to alter the obligation of preferential
dividend distribution if any distributable profits.
 Article 499 of the TRLSC states that the legal system of preferential dividend of
preference shares issued by listed companies will be established by non-voting
shares in Section 2 of Chapter II of Title IV. The State Council believes that this
reference is incorrect and should be made to Section 1 of Chapter II of Title IV, where
are regulated preference shares are entitled to a dividend.
 Regarding non-voting shares, the TRLSC does not seem to have picked up the
flexibility that the Corporations Law gave listed companies regarding the possibility of
regulating the statutory recovery of the right to vote in case of a failure of the
dividend minimum and cumulative or not the same may be an error in the
consolidation.
 It is established the obligation of disclosure by the National Securities Market
Commission, the rules of the general meeting of shareholders and the board rules,
once enrolled in the Registry.
 It also have been incorporated into the TRLSC, the recent amendments to the
Companies Act and Securities Market Act, approved by Law 12/2010 of reform of the
Audit Act and in particular the rules on the forums and shareholders associations,
and the ban on listed companies to limit the maximum number of votes it can cast a
single shareholder, provision incorporated in Article 515 of the LSC and will not take
effect until July 1, 2011.