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Limited Liability Company (SL)

Law 2/1995 on “Sociedades de Responsabilidad Limitada” (Limited Liability Companies) simplified the structure of the  limited liability company (S.L.). Today, S.L.s are the most popular type of business entity in Spain both for local businesses and foreign investors. S.L. equity owners are called Members. The use of the terms acciones and accionistas (shares and shareholders) are forbidden on S.L. due to the closely held nature of this entity. 
 
The current law provides Members to establish in the bylaws their own personal structure of governance of their company. We must remember that Spanish corporations (S.A.) are strictly regulated by the law. The following evidences the idea of  S.L.s as is  closely held entities:
 
• Participation units are generally not freely transferable unless acquired by other members, ascendants, descendants or sister companies, In fact, unless otherwise provided in the bylaws, the Law establishes a pre-emptive acquisition right in favour of the other partners or the company itself in the event of transfer of the participation units to persons different than those aforementioned.
 
• Debenture issues cannot be used as a means of raising funds.
 
• The scope for representation of a Member at the General Meeting is limited.
 
• An S.L. cannot have a capital stock of less than €3,006, which must be fully paid up at its organization. Capital Stock must be divided into participation units, but these need not all be the same (and, consequently, they may carry different voting weight).
 
• Non-voting participation units may be created, up to the limit of half the capital of the company.
 
• The genuineness of monetary contributions made at the time of incorporation or in connection with any capital increases must be attested to before a notary public.
 
•  No independent appraiser’s report on non-monetary contributions is required, although the founders and shareholders are jointly and severally liable for the genuineness of the non-monetary contributions made. Similarly, in capital increases the directors of the company are liable for the difference between the value of the nonmonetary contributions stated in their report and the real value of the contributions. 
 

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