Incorporating a Spanish limited company (sociedad limitada, SL) is now a quick formality, and with standard articles of association the paperwork is minimal. The problem is that standard articles are designed for the company to be born, not for it to work when there is more than one shareholder and each has a different idea of the business.
Someone incorporating alone has almost nothing to decide. Someone incorporating with others is signing, whether they realise it or not, the rules of a long relationship. These are the decisions worth settling before signing, in the order in which they usually cause trouble.
1. Share capital: how much, and what happens if it is very little
Since Law 18/2022, an SL can be incorporated with one euro of share capital. It is lawful and sometimes sensible, but it is not free. While the capital is below 3,000 euros, article 4 of the Spanish Companies Act requires at least 20 % of profits to go to the legal reserve until that figure is reached, and if the company is wound up without sufficient assets, the shareholders are jointly and severally liable for the shortfall up to 3,000 euros.
More important than the amount is the split. Each shareholder's percentage decides who is in charge, who receives dividends and who can block. A 50/50 split between two partners is common, and it is the split that handles disagreement worst, because neither can decide alone. If you choose it, choose it knowing how ties will be broken.
2. Contributions that are not money
It is common for one partner to put in the money and another the work, the idea, some software or a client base. Work cannot be contributed to share capital: article 58 of the Act expressly excludes it. What can be contributed are specific assets or rights, such as a trademark, a program or machinery, and in that case article 73 makes the shareholders jointly and severally liable for the existence of that contribution and for the value attributed to it. Inflating the value of what is contributed to make the percentages fit is expensive later.
If a partner's commitment is to work in the business, the right tool is ancillary obligations (prestaciones accesorias) under article 86: an obligation set out in the articles, separate from the capital contribution, which may be remunerated and whose wilful breach is also a statutory ground for expelling the shareholder.
3. Who manages, and how they sign
The law offers four ways to manage the company: a sole director, several directors acting individually, several directors acting jointly, or a board. It is not a formality:
- With directors acting individually, any one of them can bind the company without the other knowing.
- With two directors acting jointly, nothing is signed without both, which gives mutual control but can paralyse day-to-day business.
- With a sole director, one person runs the company and the rest only oversee it from the general meeting.
And a detail that is always forgotten: under article 217, the office of director is unpaid unless the articles provide otherwise and set out the remuneration system. If a shareholder is going to be paid as a director, the remuneration system must be in the articles from the start; otherwise that pay may be challenged, including for tax purposes.
4. Majorities: what is decided together
The law sets default majorities. Ordinary resolutions pass by a majority of the votes validly cast, provided they represent at least one third of the votes attached to the share capital. Amending the articles or increasing capital requires more than half of the votes attached to the capital. Transactions such as mergers, conversions or the expulsion of a shareholder require two thirds.
The articles can raise those majorities, though not to unanimity. This is how a minority shareholder is given a veto over what really matters to them: borrowing above a certain amount, selling the business or letting an investor in. Whatever is not protected here is left in the hands of whoever holds the majority.
5. How a partner leaves, and how another comes in
By default, article 107 allows shares (participaciones) to be transferred freely between shareholders and to a spouse, ascendants or descendants. Selling to a third party requires the consent of the general meeting, which can only refuse it by presenting another buyer for all the shares. That is usually enough to keep an outsider out, but it does not answer the hard question: what happens when a partner wants to leave, stops working on the project, dies or divorces.
That question has well-known technical answers: pre-emption rights, call options at a price agreed in advance, drag-along and tag-along clauses, or exit rules for whoever stops working in the business. In founder-led companies, the last of these is handled through vesting. All of it can be agreed, but only while everyone still gets along.
6. The shareholders' agreement, and why it is not enough on its own
All of the above can be written in two places: in the articles of association, which are public and bind the company, or in a shareholders' agreement, which is private and more flexible. The decisive nuance is in article 29: private agreements between shareholders cannot be enforced against the company. A clause that appears only in the agreement binds those who signed it, but does not stop the company from registering a resolution to the contrary.
Sensible practice combines both. What is essential and must hold against everyone goes into the articles. What is confidential, financial or not accepted by the Companies Registry goes into the agreement.
What to bring to the first meeting
To have all this settled before signing, the partners only need to arrive with four answers: what each is putting in (money, work or assets), what percentage each will hold, who will manage and whether they will be paid for it, and what should happen if one of them leaves in the first three years. With that, tailored articles and a supporting agreement can be drafted.
If you would like to go through it with us, the initial consultation is thirty minutes, costs 60 euros plus VAT, and ends with a concrete recommendation on how to incorporate.
This article contains general information for informative purposes and does not constitute legal advice or an investment recommendation. The rules cited may have been amended after publication; always check the text in force before taking a decision.