It then developed on common law jurisdictions and mainly for the purposes of wealth protection, succession planning and tax mitigation.

During the 20th century, offshore trusts gained popularity due to the additional layer of privacy or protection provided to assets from creditors or former spouses.

Basics of a Trust

• It creates a legal fiction consisting in distinguishing legal ownership from beneficial ownership.
• The trustee participates and manages the assets entrusted to him on behalf of the trust and for the benefit of the beneficiaries.
• Trust's assets are not part of the trustee’s own property.
• Trust's assets may include any type of asset, including cash, securities, real estate, or life insurance policies.
• A trust can be created either for an individual or a company.
• A trust must have beneficiaries who are identifiable individuals, except a charitable trust, which can have a general purpose such us alleviating poverty.

Main aim of a Trust

As above indicated, the main aim of setting up a trust is to protect assets and ensure financial security, it is a useful tool to facilitate planning succession and provide tax efficiency.

The United Kingdom jurisdiction provides a legal framework that allows individuals and companies to set up a wide variety of different trusts, which can be tailored to the settlor’s particular circumstances to maximize the advantages they provide.

At Scornik Gerstein LLP we can assist you to create the trust that best suits your needs.

Written by Laura Gallego Herráez.

How to obtain the license in Spain?

It would be necessary to register with the Bank of Spain as a provider of virtual currency exchange services for fiduciary currency and as a custodian of electronic purses.

How is the license application submitted?

There are three possibilities:

1. Electronic: its use is mandatory for companies and recommended for individuals. The necessary documentation is submitted electronically through the Electronic Registry of the Bank of Spain.
2. By mail: recommended for individuals. The necessary documentation must be addressed to the Bank of Spain.
3. In-person: only for individuals. The necessary documentation can be submitted at the General Registry of the Bank of Spain.

What documentation must go in with the application?

1. AML policy.
2. Risk analysis policy.
3. Application form for providers of currency exchange services.
4. Application form for Custody Change Service Providers.
5. Self-employed certificate (this only applies to individuals).
6. Assessment form suitability for service providers of exchange of virtual currency for fiduciary currency and custody of electronic wallets.
7. Criminal record.
8. Identity documents.

Resolution deadline

Once the application has been submitted, the Bank of Spain has a period of 3 months to resolve from the receipt of said application.

If any deficiency is detected in the application the Bank of Spain will make a further request for correction or for additional necessary documentation or information, which must be provided within the term provided as otherwise the application will be rejected.

Written by Pilar García Fernández.

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Setting Up A Limited Liability Company Electronically With The Minimum Amount Of Capital Of Just 1 Euro

Pursuant to the C&Glaw, a limited liability company can be set up in Spain with a minimum capital amount of just 1 Euro, as opposed to the 3.000 Euros formerly required.

However, for the purpose of safeguarding the interests of creditors, the limited liability company must at least allocate 20% of its profits to its legal reserves until the said reserves, together with the company’s capital, reaches the amount of 3,000 Euros.

Additionally, if the company goes into liquidation, and if its assets are insufficient to meet its obligations, the shareholders shall be jointly and severally liable for the balance between the amount of 3,000 Euros and the company’s capital.

With the aim of simplifying the administrative processes and reducing the cost of setting up a Spanish Limited Liability company, the Create and Grow Law establishes measures to improve the services of the Centre and Business Creation Network (Centro de Información y Red de Creación de Empresas) allowing setting up a limited liability company by submitting the called Single Electronic Document (Documento Único Electrónico).

Some of those measures are, but is not limited to, the following:

1. The founders of a limited liability company will be able to adopt, if they wish to, a standard table of articles of association provided by the online system as in the United Kingdom.
2. The publication of the registration of the limited liability company in the Official Gazette of the Mercantile Registry will be exempt from payment of any fee.
3. The online system will provide a standard model of authorisation which can be used by the limited liability company to authorise to individuals or other companies to act on its behalf.

Combating Late Payment

The Create and Grow Law establishes the creation of the State Private Late Payment Observatory (Observatorio Estatal de la Morosidad Privada) with the aim of monitoring and analyse data on payment deadlines and promoting good payment practices.

Its actions include the publication of an annual list of defaulting companies that do not pay on time a percentage higher than 5% of their invoices or the total amount of unpaid invoices is higher than 600,000 euros.

According to article 4 of the Spanish Law 3/2004 of 29 December regarding payments in commercial transactions, the maximum period within which the debtor must pay any outstanding debt to a creditor is 30 days, unless the two counterparts set up another date of payment, which cannot exceed 60 days.

However, it is not uncommon for those deadlines not to be met and due to that, small and medium-size business can suffer lack of liquidity.

In order to combat late payment, the Create and Grow Law establishes that a company which does not makes a payment within the period mentioned above, will not be entitled to apply to any public subsidies nor be eligible for take part in public contracts.

Mandatory B2B E-invoicing

Pursuant to the Create and Grow Law, electronic invoices must be used in all commercial relations between companies and self-employed people. This measure not only contributes to reinforce the digitalization of the business operations, but also guarantees greater traceability and control of payments for the public administration in order to combat the late payment mentioned above.

Companies and self-employed individuals with an annual turnover over eight million Euros, must use the e-invoicing system within a year after regulatory development is approved, while companies and self-employed individuals with turnover under eight million Euros, must use the e-invoicing system within two years after the Create and Grow Law comes into force.

According to the Create and Grow Law, businesses and self-employed must give free of charge access to their e-invoices, which should be readable, printable and downloadable.

In addition, said access to must be maintained for up to four years since the invoices were produced.

If businesses or self-employed individuals do not comply with the e-invoicing regulation, they could face a fine of up to €10,000.

Written by Laura Gallego Herráez.

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₁ Ley 18/2022, de 28 de septiembre, de creación y crecimiento de empresas.

₂ Chapter V with regards to crowdfunding platforms will come into force from 10 November 2022.

Some of the clauses that we can find in an IPRA are the following:

1. Non-discrimination between the regulatory regime applicable to domestic investments and the rules applying to investments originating from the other signatory State, with the exception of privileges granted as a result of regional economic integration processes.
2. Expropriation without fair compensation is prohibited.
3. Free transfer of profits and capital.
4. Provisions on the settlement of disputes between the investor and the State so that, in case of dispute between both parties, these are resolved through international arbitration. For example, in accordance with:
• Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL);
• Paris International Chamber of Commerce (ICC);
• Washington-based International Centre for Settlement of Investment Disputes (ICSID).

IPRA signed between the United Kingdom and Latin American countries.

The UK has an IPRA with several Latin American countries, and continues to open negotiations to expand the list.

1. COLOMBIA
2. CHILE
3. PARAGUAY
4. MÉXICO

Written by Laura Gallego Herráez.

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International commercial agreements

Ecuador has a wide network of international trade agreements, which contribute to promote the strengthening of the economy, with different countries, such as México, Chile, the European Union and the United Kingdom.

Indeed, the Government of Ecuador has announced its intention to achieve new international commercial agreements in 2022 with the following countries: EU, US, Canada, China and South Korea.

Setting up a company in 20 minutes, a 'boom' for Ecuador

On 28th of February 2020, the new Entrepreneurship and Innovation Law came into force in Ecuador. This law constitutes an important advance for business promotion in Ecuador.

The said law introduced, among other benefits, the inauguration of Simplified Stock Companies (SSC) (Sociedades de Acciones Simplificadas) which reduced the costs and time required to set up a company.

Some of the characteristics of Simplified Stock Companies (Sociedades de Acciones Simplificadas) are the following:

• Unlike other corporate structures regulated in Ecuadorian legislation, the SSC can be constituted with only one shareholder.
• No minimum capital is required.
• The SSC takes just 20 minutes to set up, and two days for completing its legalization before the Superintendence. (Superintendencia).

Written by Laura Gallego Herráez.

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The types of transformations are indicated in its Article 4. Below we address two of the most common transformations.

Transformation of a Public Company into a Limited Company

In order to transform a public company into a limited company, the following requirements are needed:

1. The company’s transformation must be agreed at a General Meeting by its shareholders, with a Reinforced Quorum.

 

2. Unless the transformation agreement is agreed unanimously through a Universal General Meeting, the company must give access to its shareholders at the company’s headquarters, the following information:
• Report produced by the Director(s) explaining the reasons for the proposed transformation indicating the consequences that the transformation may have for shareholders. Moreover, the said report should indicate the potential gender impact that this transformation may have over the governance structure of the company.
• A balance sheet of the company, which has to be closed within six months of the date on which the General Meeting, called for the purposes of transformation, will take place.
• Auditor’s report concerning to the balance sheet which the company being transformed is required to submit for audit.
• A draft of the new Articles of Association of the new company, alongside other agreements between shareholders, which will be registered at the Mercantile Register.

The company’s transformation agreement should be published at the Official Gazette of the Spanish Mercantile Register (BORME per its acronym in Spanish).

Those shareholders who did not vote in favour of the transformation agreement, will have the right to leave the company.

Transformation of a Limited Company into a Public Company

According to Article 199 of the Spanish Company Act the transformation of a limited company into a public company must be carried out through a General Meeting agreed by a Reinforced Majority of votes of it’s shareholders.

As to the rest of the requirements, these are the same as above mentioned in relation to the transformation from a public company to a limited company.

Written by Laura Gallego Herráez.

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In order for the decisions adopted by the General Meeting to be valid, a quorum is required. The composition of the quorum depends upon the matters addressed because some of them are required to be approved by a majority of votes where others would not.

Spanish law defines two types of General Meeting as follows:

1. Ordinary General Meeting (OGM): which should compulsory take place within the first six months of each corporate year to approve the social administration and the accounts of the company for the previous year.
2. Extraordinary General Meeting: is any General Meeting that is not an Ordinary General Meeting.

Director Or Board Of Directors (Órgano De Administración)

The Director/Board of Directors are appointed by a General Meeting and must observe the decisions adopted by the shareholders at the General Meetings.

The Director or the board of Directors manage and represent the company.

The corporate governance of a company, can be performed by another company₂, one or various individuals, and if the later, they can operate and be organized as follows:

1. Solidary administration (Administración solidaria) where any director can operate with full effectiveness and legitimacy, within the limits established by the law and the General Meeting (Junta General), without for the need of the expressed consent of the other directors.
2. Joint management (Administración mancomunada where all directors must expressly give their consent for the decision to be effective.
3. Board of directors (Consejo de administración) where decisions are taken by the majority of the directors.

With regards to a public company (sociedad anónima), can either have two individual directors operating jointly or three or more individual directors forming a Board of Directors automatically.

In relation to a limited liability company (sociedad limitada) it is possible to establish in its company’s articles of association, different types of structures to organize its organization. By holding a general meeting (junta general) they can decide which type of structure they require, without it being necessary to modify its articles of association.

Remuneration System Of The Director Or Board Of Directors (Órgano De Administración)

The directors of the board of directors will not receive any remuneration unless a remuneration system is established in the articles of association of the company. Indeed, the articles of association must establish accurately, the remuneration system assigned to the directors/board of directors.

The terms of the said remuneration system can be, among others, as follows:

1. A fixed salary.
2. Attendance allowance, where the remuneration is based on the number of attendances to committees, meetings etc.
3. Profit sharing where the director/board of directors are remunerated based in the company's profit either by:
1. A fixed percentage of the profit of the company.
2. A variable percentage of the profit made by the company.
4. Linked to the company's shares by:
1. Giving shares to director/board of directors.
2. Giving the director/board of directors the option to buy shares (stock options) in the company.
3. Making remuneration dependent on the share price. Therefore, as the share price increases the Director/Board of Directors will receive a higher salary.

The Duty Of Diligence And Loyalty Of The Director / Board Of Directors

The duty of diligence and loyalty of the director/board of directors of a company, are regulated at Articles 225 to 232 of the Spanish Company Act and, in broad terms, are the following:

1. General duty of care: It refers to the material performance of the director/board of directors which has to be in line with the aim to achieve major benefits for the company, by complying with the Law and the articles of association.
2. Duty of loyalty: The director/board of directors cannot take advantage of their position for his/her own benefit and the only economic compensation that the director/board of Directors will receive for his/her performance of duties is the one established in the company's articles of association.

Written by Laura Gallego Herráez.

If you want to receive our next articles about DOING BUSINESS IN SPAIN, send us an email to: london@scornik.com

₁Article 191 Spanish Companies Act.

₂In this case, the company will appoint a natural person who will act in its behalf in order to perform the duties of Director of the company.

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Accordingly, any British nationals who wish to hold the position of a director or shareholder of a company incorporated in Spain, must have a foreign identification number. This can be applied for at any Spanish Consulate in the United Kingdom or at any police station in Spain personally or through a legal representative appointed via a power of attorney.

Obtaining a Foreign Identification Number for a corporate entity (NIF)

The NIF (Número de Identificación Fiscal), similarly, is a requirement for any foreign company when carrying out any operation subject to tax in Spain. Accordingly, this will be required for an English company to register at the Mercantile Registry.

This NIF will operate as the company’s tax number and must appear on every invoice issued by the company.

When applying, the company can also notify the Spanish Tax Authorities that it is going to commence its commercial activity.

Stamp Duty Tax on corporate operations

The stamp duty tax is levied on onerous transfers of assets, corporate transactions and documented legal acts.

On corporate operations the stamp duty tax is levied, among others, on the following:

1. Incorporation of the company, the increase and decrease of their share capital and its dissolution.
2. The transfer from the United Kingdom to Spain, of the registered office or its headquarters.

Accordingly, as indicated previously, the incorporation of the company is subject to the said tax. However, at the same time, it is exempt, so at that point it will be necessary to submit the stamp duty tax paperwork (modelo 600) without it being necessary to pay any tax.

The said paperwork can be submitted to the Spanish Tax Authorities, by the founder´s company or through a legal representative appointed via the authorization representation system, that the Spanish Tax Authorities provide for filing tax declarations and self-assessments.

Company Name: obtaining negative certification of company name

When applying for the registration of a company it is firstly required to obtain a negative certification for the company’s name certifying that there is no other company registered at the Spanish Mercantile Register with the same name as the one wished to be use for the company applying for registration.

The company name under which the company will be registered does not require being the same name under which the company will be trading (commercial name) which can even adopt more than one. Accordingly, it is advisable for the commercial name to be registered at the patent and trademark office.

Written by Laura Gallego Herráez.

If you want to receive our next articles about DOING BUSINESS IN SPAIN, send us an email to: london@scornik.com

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NON-MONETARY CONTRIBUTIONS IN CORPORATION COMPANY (SOCIEDAD ANÓNIMA)

Spanish law establishes that those shares that are bought through a non-monetary contribution must be evaluated by an independent expert who will be appointed by the mercantile registrar.

The said evaluation should contain the accurate description and valuation of the non-monetary contribution(s) according to objective criteria.

If the expert fails in providing an accurate valuation of the non-monetary contribution(s), he/she will be held responsible by creditors, third parties and the company.

Nevertheless, Article 69 of the Spanish Company Act determines situations in which the non-monetary contributions can take place without an evaluation being needed.

NON-MONETARY CONTRIBUTIONS IN LIMITED LIABILITY COMPANIES.

In limited liability companies, the evaluation of the non-monetary contributions is made by the stakeholders of the company.

In the case of overvaluation of the non-monetary contributions, the stakeholders who made the non-monetary contribution and those who were stakeholders when the capital increase was agreed will be liable to the company and its creditors.

However, those stakeholders who voted against the evaluation of the non-monetary contributions will be exempt of liability.

Written by Laura Gallego Herraez.

If you want to receive our next articles about DOING BUSINESS IN SPAIN, send us an email to: london@scornik.com

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The General Data Protection Regulation 2016/679 (GDPR) regulates the protection of personal data within the EU, sets a mechanism called «adequacy decision», to asses «adequacy» to those countries that, despite not being European members, have in place regulatory standards that, under the Commission's opinion, guarantee adequate protection to data protection and, consequently, allows for the transfer of personal data from the EU to those countries without the need of additional safeguards.

On 28th June 2021, the European Commission adopted an adequacy decision for the UK, allowing the free movement of data for a four-year period from the adoption of the adequacy decision, i.e. until 28th June 2025 and afterwards the EU will start a new process of evaluation of the standards of UK data protection regulation and accordingly, conclude whether or not to renew the «adequacy status» of the UK.

Currently, the UK GDPR regulates data protection in the UK, which content is the same as GDPR, the only difference being the replacement of the referrals that the GDPR makes to EU data protection supervisory bodies with data protection officers in the UK.

Laura Gallego Herráez.

Associate Spanish Lawyer and business developer at Scornik Gerstein LLP.

Email: laura.gallego@scornik.com

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