What liability do we acquire when purchasing a company in Spain?
On many occasions, it is possible to become involved in purchasing a Spanish company which could entail some kind of negative consequences due to the liability these companies may carry.
Therefore, when purchasing a Spanish company, we always recommend consulting with a team of professionals, like us at the law firm Welex, before the sale. We can carry out a previous records research and offer you the best recommendation about what to do.
Nevertheless, in today’s post, we will clarify some concepts that you should consider when purchasing any type of company in Spain.
It is important that it is clear to you that, when buying a company, even though you may decide to change its name or even reorganise the company, doing so does not exempt you from the liability that the acquired company may carry.
Furthermore, it is also beneficial to remember that you must observe the provisions, if any, established in the articles of incorporation of that company. In this case, new shareholders are obliged to fulfil all that has been promised in agreements with the shareholders.
Regarding labour-related issues, it must be highlighted that the new situation does not entail any alteration, and it is not obligatory to communicate this change to the employees, although it is, of course, recommended.
Liability and the purchase of a company in Spain
In the first place, let’s clarify that both the European Court of Justice (TIJUE) and the Constitutional Court (TC) have established that, when a company or company director acquires a firm, the acquiring party must assume the formal acts that the purchased company has entered into in the past. In other words, any kind of debt or other obligations and liabilities must be assumed by the new owner of the company.
However, there are some cases in which the Constitutional Court may clean a firm’s liabilities; for example, in the case of a rupture of the economic and corporate continuity of the acquired company.
In cases where a company or single person acquires a limited company, it is necessary to issue the corresponding single shareholder statement, and, in that case, register said company correctly in the Companies House within no more than six months after the purchase of the company. Should this process not be executed correctly, the purchasing party shall be liable for all debts of the acquired company. If the requirement of registration is fulfilled, then the liability is limited only to the purchase price.