DISCLOSURE OBLIGATIONS BEFORE THE INVESTMENT REGISTRY OF THE SPANISH MINISTRY OF ECONOMY, IN CASE OF FOREIGN INVESTMENT

Investments made in Spain by non-residents, as well as those made abroad by Spanish residents, require several disclosures that should be carried out for the purposes of being registered with the Investment Registry of the Spanish Ministry of Economy, according to Royal Decree 664/1999.

These disclosures do not entail a request for authorization from the abovementioned Ministry, since investment in Spain by foreigners, and vice versa, are in general both free of administrative authorizations. The notifications should only be made for informative and statistic purposes, regardless of whether the administration may request some additional information or carry out several researches in the event that it is suspicious in relation to a certain transaction or if it needs some clarifications concerning any aspects of the same.

The notifications should be made through a simple questionnaire to be submitted before the Investment Registry, generally by the concerned person or, as the case may be, by the Notary Public who attended the transaction.

The fulfillment of the disclosure has been eased by Aforix, a support program created by the Division on International Commerce of Services and Investment for the purposes of providing electronic means to fulfill the questionnaires. 

FOREIGN INSVESTMENT IN SPAIN

In the framework of the abovementioned disclosures, foreign investment is understood as the one made in Spain by:

I.        Individuals not residing in Spain, i.e. both Spanish citizens and foreigners who are domiciled or who have their primary residence abroad.

II.           Legal entities who are domiciled abroad, as well as public bodies of foreign states.

In this case, the transactions which shall be notified are the following:

• Stakes in Spanish companies. This includes the incorporation of Spanish companies by a foreigner as well as any subsequent subscription of shares through a capital increase or a purchase, and the acquisition of any other securities. Consequently, it is necessary to make a new disclosure each time that new shares or securities are acquired by any means, so that the stake held by the foreign shareholder is always duly updated in the registry.

• The incorporation of branches and any increase of its equity.

• The subscription and acquisition of negotiable securities which represent loans issued by Spanish residents.

• Stakes in investment funds registered with the Registry of the Spanish National Stock Market Commission.

• The acquisition of Real Estate located in Spain, when the amount exceeds EUR 3,005,060.52 or when, regardless to the amount, it comes from a tax haven.

• The execution and participation in Joint Purse Agreements, foundations, joint ventures, cooperative companies and communities of property, when the total value corresponding to foreign investors exceeds EUR 3,005,060.52 or when, regardless to the amount, the foreign investment comes from a tax haven.

The notification shall be made up to one month after the transaction takes place. However, when the investment comes from a tax haven, additionally it will be necessary to make a previous disclosure.

Furthermore, please note that it will also be compulsory to submit an annual report concerning the development of the investment in Spanish companies and branches with foreign shareholding. This report shall be submitted within 9 months since the end of the appropriate fiscal year, and as long as there is a foreign investment. The annual report is only compulsory when the companies’ share capital exceeds EUR 3,005,060.52, as long as the stake of non-residents amounts to or exceeds 50%, or in the event that one non-resident shareholder holds a stake which amounts to or exceeds 10% of the share capital.     Foreign branches located in Spain shall also draft the annual report regardless of their equity. Likewise, parent companies should also submit the annual report regardless of their share capital, as long as the foreign investment amounts to or exceeds 50% of its share capital, or if one non-resident shareholder holds a stake amounting to or exceeding 10% of the share capital.

Finally, it will also be necessary to submit a disclosure to the Registry when the foreign disinvestment, either total or partial, takes place.

SPANISH INVESTMENT ABROAD

In the framework of the disclosures to the Investment Registry, Spanish investment is understood as the one made by:

         I. Individuals residing in Spain, i.e. both Spanish citizens and foreigners domiciled or who have their primary residence in Spain.

         II. Legal entities domiciled in Spain.

In this case, transactions which shall be notified to the Investment Registry are very similar to the foreign investments which also entail this obligations, although with slight nuances:

• Stakes in foreign companies. This includes the incorporation of foreign companies by Spanish residents as well as any subsequent subscription of shares through a capital increase or a purchase, and the acquisition of any other securities. Just like in the case of foreign investments, it is necessary to make a new disclosure each time that new shares or securities are acquired.

• The incorporation of branches abroad and any increase of its equity.

• The subscription and acquisition of negotiable securities which represent loans issued by non-residents.

• Stakes in foreign investment funds.

• The acquisition of real estate located abroad, when the amount exceeds EUR 1,502,530.26 or when, regardless to the amount, the investment is addressed to a tax haven.

• The execution and participation in Joint Purse Agreements, foundations, joint ventures, cooperative companies and communities of property, when the total value corresponding to Spanish investment exceeds EUR 1,502,530.26 or when, regardless to the amount, it is addressed to a tax haven.

Just like in the case of foreign investment, the notification shall be made after the transaction, except in the event that the investments is made in tax havens, in which case it will also be necessary to fulfill a prior notice.

Likewise, it will also be compulsory to submit an annual report when the share capital of the foreign company exceeds EUR 1,502,530.26, and the stake of the resident amounts to or exceeds 10% of the share capital. Spanish branches located abroad shall also draft the annual report regardless of their equity, as well as investments made in holding companies located abroad.

Finally, it will also be necessary to submit a disclosure to the Registry when the disinvestment from resident investors, either total or partial, takes place.

Candela Solís Tello

Lawyer

Area of litigation and corporate Law

www.davilayasociados.es