The matter at issue in this overview is with regard to whether a foreign company without a permanent establishment or branch (in Spain) may acquire real estate assets in Spain.

This question has arisen as a consequence of the refusal of the registrar of the Land Registry to register a real estate asset located in Spain as a contribution to the capital of a company from a country of the European Union pursuant to a capital increase operation.

The case at hand involved a Hungarian company which contributed a property located in Spain by means of a capital increase. The company brought into public the deed of the resolutions of the meeting, providing among other documents, certifications of the resolutions, translated into Spanish and having had the signature legalised and the Hague Apostille affixed thereupon, as well as certifications from the Commercial Registry of the Court of Budapest where the registration of the company was recorded, also translated into Spanish and having had the signature legalised and the Hague Apostille affixed thereupon.

The Registrar of the Land Registry of El Escorial refused the registration of the resolution for the capital increase upon the understanding that the Hungarian company had not incorporated a branch in Spain to act as a permanent representative, using articles 295 and thereafter of the Commercial Registry Regulation and article 22.2 of the Commercial Code to back the argument.

The refusal gave rise to an appeal pursued by the affected company and the notary public who intervened in bringing into public the deed of the capital increase, and which had concluded with a resolution from the Directorate General of Legal Security and Public Trust – DGLSPT (Dirección General de Seguridad Jurídica y Fe Pública-DGSJFP) of 22nd March 2023 in which the conflict is resolved in favour of the appellant company, as well as settling the underlying issue.

The DGLSPT starts by recognising a foreign company as having legal capacity in accordance with article 9.11 of the Civil Code . On the other hand, it recalls that article 58 of Law 29/2015 of 30th July  on international legal cooperation in civil matters provides that registry procedure, the legal requirements and the effects of the record entry are subject to Spanish law. Likewise, article 51 of the Mortgage Regulation establishes that if it is a matter of legal entities registering their acts, their type, corporate name, tax identification number, registration at the pertinent registry shall be recorded, as well as its nationality (if it is a foreign entity) and address. In the case of a foreign company, it will also be necessary to mention the Commercial Registry of the country where the company was incorporated or the Registry of the company.

Subsequently, it refers to article 5 of the Commercial Registry Regulation in the sense that the existence and valid incorporation of the registered entrepreneurs as well as the validity of the post and the sufficiency of the powers of those that represent them can be accredited by a certification, either legalised or bearing the Hague Apostille.

Finally, it recalls that EU Directive 2017/1132 of 14th June 2017, establishes in article 14 thereof that electronic copies of the acts and indications relative to capital companies (which must be published) must be put at the disposal of the public, as well as the obligation of the Member States to ensure that such acts and indications are available in the system of interconnection of registries in a formalised format and that they are accessible by electronic means. The modification of company bylaws can be found among the aforementioned acts, as in the case under discussion.

Thus, in light of the foregoing, and articles 155 and 165 of the Notary Regulations, the DGLSPT revoked the decision of the Registrar of the Land Registry concluding that the appearance before the notary public on the part of a foreign company “does not necessarily have to be expressed in the form of a branch or the representative of a permanent establishment in Spain”, without prejudice to this being a formula for doing so. The only requirement from the foreign company and its representative, is evidence of its existence in accordance with the legislation of its nationality, as well as the corresponding tax identification number. And furthermore, the existence of a permanent establishment is not necessary so that the foreign company may appear before a Spanish notary public and bring into public the deed of resolutions which imply, among other things, the direct or indirect acquisition of real estate property, except in exceptional cases expressly provided for in the Law.

 

 

Eduardo Vilá
Vilá Abogados

 

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5th May 2023