A. GOVERNMENTAL AND REGULATORY APPROVALS
1. Are there any governmental or regulatory
approvals, reviews or filings required specifically by foreign buyers
and, if so, please give brief details (such as relevant body/authority
and timing requirements)?
Foreign investment in Spain is unrestricted
except for investments in certain specific sectors, such as air
transportation, radio and gambling where foreign investment is
restricted (the most notable restriction being a 25% limit on foreign
ownership of the share capital of the company concerned). Furthermore,
the manufacture, marketing and distribution of weapons and explosives
for civil use and activities related to national security require prior
governmental authorisation, except in the case of companies engaged in
any activity related to Spanish national defence that are listed. In
such cases investment authorisation is required when foreign ownership
exceeds 5% of the share capital of the company.
2. Are there any industry sector controls on investment?
Yes, there are industry sector controls applicable to foreign and
national investors alike, that are applicable to certain type of
- the acquisition of a stake equal to, or in excess of 10% of
financial entities (including credit entities, insurance companies,
brokers and broker dealers) require approval from the relevant
- no individual or entity is entitled to hold, directly or
indirectly, shares in more than one concessionaire of private
television or representing more than 49% of the company’s share
- any public entities or individuals, or any entities controlled by
public entities or administrations which, directly or indirectly,
acquire a significant shareholding (i.e., 3% of the share capital or
of the voting rights of the target company) in entities carrying out
activities at a national level in the energy markets (e.g.,
electricity generation and the hydrocarbon industry) shall not be
entitled to exercise the voting rights corresponding to their
shareholding, unless specially authorized to do so by a resolution of
the relevant authorities.
3. Are there merger control regulations and, if so, please give
brief details (such as relevant body/authority and timing requirements)?
Takeovers in Spain may be subject to competition legislation at both
a Spanish and European level.
European merger control is discussed in [**] of this Guide. If
European merger control does not apply, Spanish merger control may apply
if the transaction meets any of the two alternative legal thresholds set
out in the Spanish Antitrust Law:
- Market share threshold: The transaction entails the
acquisition of a market share equal to, or higher than 30%. In
relation to this market share threshold, there is a de minimis
rule: the threshold would not be met if the joint market share of the
parties resulting from the transaction is below 50%, and the target’s
aggregate turnover in Spain is below EUR 10 million.
- Turnover threshold: The global turnover in Spain for all
the undertakings concerned in the previous accounting year exceeded
EUR 240 million, provided that at least two of them achieved an
individual turnover in Spain higher than EUR 60 million.
Under this regime, any transaction meeting any of the legal
thresholds must be notified and authorized by the National Competition
Commission (“NCC”) prior to its implementation. The merger
control procedure formally begins by providing notification of the
transaction to the NCC. Before the formal opening of the procedures, the
parties are encouraged to initiate pre-notification discussions of the
draft notification with NCC officials. This stage is not subject to any
legal deadline. The submission of the notification opens the first phase
of the procedure. From this date, the NCC has one month in which to
decide whether the transaction should be cleared or if a more detailed
assessment is required. If the transaction raises competition concerns,
the NCC will open a second phase of the procedure in which to conduct
further assessment. If a transaction proceeds to the second phase the
NCC must reach a final decision within the two months following the
decision to conduct a second phase analysis.
4. Are there any exchange control restrictions?
There are currently no exchange control restrictions in Spain.
B. TYPES OF CORPORATE LEGAL ENTITIES
What are the most common types of corporate legal entities
established under the laws of your jurisdiction?
The most common form of business vehicles used by foreign companies
are limited liability companies (sociedad de responsabilidad limitada
or S.L.) or corporations (sociedad anónima or S.A.).
Corporations are often used for larger investments, when the
possibility of becoming listed on the stock market is anticipated, or to
comply with the investment requirements for certain regulated
C. SOURCES OF LAW AND REGULATION IN RELATION TO LISTED AND PRIVATE
What are the principal sources of law and regulation applicable to
M&A transactions in your jurisdiction? What are the principal issues
dealt with in such laws and regulations in relation to M&A?
Companies Act (Ley de Sociedades de Capital)
The Companies Act applies to all companies domiciled in Spain.
In relation to M&A transactions, the Companies Act is relevant in
connection to a number of issues, including:
- prohibitions against a company giving financial assistance for the
purchase of its own shares (note that this prohibition extends to the
shares of the parent (for corporations) and to the shares of any other
entity of the group (for limited liability companies));
- share capital increase and reduction and other amendments of the
- requirements and restrictions applicable to the payment of
Business Companies Structural Amendments Act (Ley sobre
Modificaciones Estructurales de las Sociedades Mercantiles)
The Business Companies Structural Amendments Act applies to all
mercantile companies domiciled in Spain, whether listed or unlisted.
This Act is relevant to M&A transactions in connection with a number of
- mergers and spin-offs;
- transfer of on going concerns;
- transfer of the corporate domicile to another country; and
- appraisal right (“derecho de separación”) granted to
minority shareholders in certain cases (i.e., the right to sell their
shares to the company at a certain price determined in accordance with
Securities Market Act (Ley del Mercado de Valores)
The Securities Market Act sets out the rules of conduct that apply
generally to participants in the Spanish securities market, regulating
- disclosure obligations in respect of certain transactions
concerning shares of listed companies in excess of certain thresholds
(including acquisitions, transfer of voting rights, and equity swaps);
- market abuse, such as insider dealing; and
- disclosure of shareholders agreements.
It also sets out the regulation principles on takeover bids.
Royal Decree on takeovers (Real Decreto 1066/2007, de 27 de
julio, sobre el régimen de las ofertas públicas de adquisición de
The Royal Decree on takeovers (the “Royal Decree”) contains
more detailed rules developing the principles set out in the Securities
The Securities Market Act and the Royal Decree together prescribe
certain requirements which are applicable when making mandatory offers.
This legislation also contains procedural rules relating to both
voluntary and compulsory tender offers. The rules are intended to
protect minority shareholders, and also to ensure that offers are
conducted fairly and transparently, with the minimum possible disruption
to the securities market.
Spanish takeover regulation will govern all aspects of an offer if
the target has its registered office in Spain and is admitted to trading
on a regulated market in Spain. Specific rules apply to companies which
meet only one of these two requirements.
D. THE CONDUCT OF LISTED COMPANY M&A
1. What are the principal methods of acquisition?
The most common methods of acquiring a listed company are:
- a takeover offer to purchase the shares of the target company; or
- a merger under the Business Companies Structural Amendments Act.
This section focuses on the takeovers regime.
2. Are hostile bids permitted?
3. In what circumstances (if any) is a mandatory bid obligation
The person or entity that (acting individually or with other parties)
obtains control of a listed company has the obligation to make a
takeover bid for all the securities of the target at an “equitable
The relevant control thresholds for purposes of takeover bids are the
- direct or indirect acquisition of a percentage of voting rights in
the listed company equal to, or in excess of 30%; or
- holding any interest carrying less than 30% of voting rights but
appointing, within 24 months following the acquisition, a number of
directors which, together with those already appointed by the bidder,
if any, represents more than one-half of the members of the board of
Control of a listed company may be obtained in any of the following
- by means of the acquisition of shares or other securities that
directly or indirectly carry voting rights in such company;
- through shareholders’ agreements; or
- as a result of indirect or unexpected takeovers.
Concert or concerted action is deemed to exist when two or more
persons cooperate pursuant to an agreement (express, implicit, oral, or
written) in order to obtain control of a listed company.
4. Is there a minimum price at which the offer must be made?
As a general rule, an offeror making a voluntary bid is free to offer
whatever price it wishes.
Mandatory takeovers must be made at an “equitable price”, which may
not be less than the highest price that the offeror or persons acting in
concert with it have paid or agreed to pay for the same securities over
the 12 months prior to the announcement of the bid.In the event that the
offeror did not carry out any acquisitions in the 12 months prior to the
announcement of the takeover bid, the equitable price may not be less
than the price calculated pursuant to the valuation rules set out in the
Royal Decree for de-listing offers. There are cases where the CNMV can
modify the price calculated in accordance with the foregoing.
5. What are the key documents in a takeover bid?
Key documents in a takeover bid include:
- Takeover notice: This is a notice given by the offeror,
which starts the takeover process. It must be sent to the CNMV at the
same time that it is disseminated by any other means and as soon as
the event becomes known or the decision is adopted.
- Request for authorisation of the takeover: This request
must be submitted by the offeror to the CNMV and contain the main
terms of the transaction. It must be accompanied by: (i) documents
evidencing the adoption of the decision to make the takeover bid by
the competent person or body; and (ii) the offer document.
- Offer document: The offer document, which must be
disseminated by the offeror, contains in summary:
- information regarding the offeror and its group; a description
of agreements regarding the bid between the offeror and the
shareholders or directors of the target; information on securities
of the target which are held by the offeror; information regarding
transactions on securities of the target made by the offeror and
persons acting in concert therewith over the 12 months preceding the
announcement of the bid;
- information regarding the securities which are subject to the
bid, the consideration offered, the conditions to which the bid is
subject, and the guarantees for and financing of the bid;
- procedure for acceptance and settlement of the bid;
- information regarding the purpose of the transaction, including
strategic plans; and
- information on authorisations required.
- Target’s board report: This report must contain, among
other matters: (i) the opinion of the members of the board of
directors of the target regarding the bid, and the intention to accept
or reject the bid by those that are direct or indirect holders of the
affected securities; (ii) information on agreements between the target
and the offeror, its management or shareholders, or between any of
these and the members of the board of the target; and (iii) conflicts
of interest affecting board members.
The report must be made public by the target itself, and must also be
submitted to the CNMV and to the representatives of the employees of the
6. Do takeover documents require pre-approval by any regulatory body
prior to publication?
Yes, the offer document and related documentation must be filed with
and be authorised by the CNMV prior to their distribution to the public.
7. How long does a takeover take?
The timetable will depend on a number of factors, including whether
the bid is mandatory or voluntary, whether the consideration is in cash
or whether competing offers are made.
In a voluntary cash takeover bid without considering competing
offers, key dates include:
- D - 1 month: Announcement by the offeror of a firm intention to
make an offer;
- D: Submission of the request for authorisation of the bid;
- D + 20: Authorisation of the bid by the CNMV;
- D + 21: Public dissemination of the bid;
- D + 22: Commencement of the acceptance period;
- D + 32: Publication of the target’s board report;
- D + 36 / 91:
Expiration of the period for acceptance of the bid;
- D + 43 / 98: Disclosure of the result of the bid; and
- D + 46 / 101: Settlement of the bid.
E. PRELIMINARY AGREEMENTS
1. Is it common for the parties on private M&A transactions to enter
into an “agreement” such as a Memorandum of Understanding (MOU), Letter
of Intent (LOI), Termsheet, Framework Agreement or other? If so, to what
extent (if any) do the parties generally endeavour to create legally
Yes, MOU or LOI are common in Spanish transactions.
MOU and LOI are generally deemed and intended to be non-binding
documents. However, it is usual for MOU and LOI to include legally
binding provisions typically dealing with confidentiality, exclusivity
and break-up fees.
2. Does the execution of a non-binding LOI/MOU result in a duty for
the parties to negotiate in good faith and, if so, what does this duty
Yes; negotiating in good faith is a general principle of Spanish law
to which the parties of a LOI/MOU are typically bound.
This duty will be breached by a party that unreasonably refuses to
cooperate with the other to assess the transaction (for example by
unreasonably withholding information) or that refuses to negotiate
unless under conditions that may be deemed abusive or illegal.
3. Are lock-out / exclusivity agreements (meaning agreements by the
seller not to (for example) negotiate or enter into an agreement with
third parties) common on private M&A transactions?
Yes, time limited binding exclusivity agreements are common in
private M&A transactions.
4. In connection with proposed acquisition of listed company, is it
common for the bidder and target to enter into any preliminary agreement
and, if so, what kind of issues are commonly dealt with?
Preliminary agreements between the target company and a potential
bidder are possible and not unusual in the context of friendly
acquisitions. These agreements may cover matters such as exclusivity
undertakings from the target (that is, the agreement not to negotiate
with any other potential offeror, nor to recommend a competing offer to
its shareholders), standstill provisions (a clause preventing the
offeror from acquiring shares of the target without the target’s consent
for a specified period). A confidentiality obligation is a legal
requirement where the target company grants access to information on the
business to a potential offeror. In this situation, Spanish law provides
that the recipient of the information must agree to keep the information
confidential and use the information for the sole purposes of launching
the tender offer. It should be noted that Spanish law requires that the
target company should make the information available to any other
Agreements in preparation for a bid between the controlling
shareholder of the target (and not the target itself) and the potential
offeror are relatively common: irrevocable commitments under which the
latter undertakes to make a takeover bid and the former to participate
with its controlling interest.
5. Are there any regulatory constraints specifically aimed at
payment of break fees (meaning payments from the buyer or seller to the
other (or payments payable by the target company) if the deal does not
proceed) on M&A transactions?
There are no regulatory constraints in relation to the payment of
break-up fees in private company M&A transactions.
With regard to M&A for listed companies, the Royal Decree expressly
allows for the possibility of the target and the first offeror agreeing
on a break-up fee. The Royal Decree, which considers the break-up fee as
a fee payable to the first offeror as compensation for the expenses
incurred in preparing the bid in the event that its bid is not
successful because competing offers having been made, subjects such
agreements to four conditions: (i) that the fee does not exceed 1% of
the total amount of the bid; (ii) that it is approved by the board of
directors of the target; (iii) that a favourable report is obtained from
the financial advisors of the target; and (iv) that it is described in
the offer document.
F. MINORITY SHAREHOLDER RIGHTS
What are the principal rights given by law to a person acquiring a
non-controlling interest in a company?
The Companies Act contains a number of provisions designed to
ensure that the principle of “majority rule” is not abused. For example,
with regard to S.A.s:
- Holders of 5% of the issued shares may request that the management
body: (i) include items on the agenda of the general shareholders’
meeting; or (ii) call the shareholders’ meeting.
- Regardless of whether or not it is included on the agenda of the
relevant meeting, a shareholder may request that the general
shareholders’ meeting decides upon whether a liability claim should be
brought against a company director. Such a resolution is adopted by
Holders of 5% of the issued shares may request that the directors
call a general shareholders’ meeting to decide on whether to bring a
liability claim against a company director. Furthermore, holders of 5%
of the issued shares may jointly bring a liability claim against a
corporate director to protect the corporate interest where: (i) the
directors have not called the general shareholders’ meeting; (ii) the
company has not filed the claim against the director within one month
following the date on which the resolution to file a claim is adopted;
or (iii) the general shareholders’ meeting decides not to file a claim
against the company director.
Where a liability claim is brought by the company against a company
director, the general shareholders’ meeting may at any time decide to
reach a settlement or waive the claim, unless holders of 5% of the
issued shares oppose such a measure.
- Holders of 5% of the issued shares may challenge resolutions by
the management body which are null or voidable.
- Holders of 5% of the issued shares may make a request for an
auditor to be appointed to audit the accounts of the company, when
such measures are not compulsory.
- Those amendments of the by-laws which impose new obligations on
the shareholders require their consent. Further, those amendments of
the by-laws which directly or indirectly affect the rights of certain
classes or series of shares, or of part of the shares, must be passed
not only by the general shareholders’ meeting, but also by the
majority of the shareholders whose share are affected.
- In certain cases (e.g., substitution of the corporate purpose),
shareholders’ who have not voted in favour of the relevant resolution
have an appraisal right.
1. Does a share acquisition trigger any statutory obligations for
From a strictly legal perspective, the acquisition of a Spanish
company’s shares does not trigger any statutory obligations, either for
the buyer or for the seller, and will not affect the employer/employee
relationship. However, in order to encourage a healthy working
environment, it could be advisable for the employer to provide the
employees with information regarding the change of ownership of the
2. What employee issues arise in connection with the transfer of an
undertaking, business or part thereof?
Given that by law the transferee is subrogated to or “takes on” all
the labour rights and obligations of the former employer (transferor)
with respect to the affected employees, no employee issues arise in
connection with the transfer of an undertaking, business or a part
thereof. Hence, the main effect is the maintenance of all rights
acquired by the employees, including pension rights. The mere occurrence
of the transfer does not entitle the transferor or the affected
employees to terminate their employment contracts.
Unless otherwise agreed in the collective bargaining agreement
applicable to the transferred business, undertaking or part of a
business or undertaking at the time of the transfer, such agreement will
continue to be applied until the date of its expiry or until a new
collective bargaining agreement enters into force.
Finally, the transferor and the transferee must provide the
representatives of their employees involved in the transfer with certain
information relating to the transfer (i.e., the expected date, the
grounds for the transfer, and the measures to be adopted). If labour
measures are to be adopted as a consequence of the transfer, a
consultation period with the employee representatives must commence in
relation to the proposed measures and the consequences for the affected
H. TRANSFER OF BUSINESS LEGISLATION
Is there any legislation in your jurisdiction, the effect of which
may result in liability of a purchaser of a business for the debts or
obligations of the seller of the business?
Spain does not have a law specifically dealing with the transfer of
on-going concerns. Whereas with regard to share transfers the purchaser
is not liable for the obligations of the seller that are not
specifically transferred, with regard to transfers of businesses, assets
and liabilities there are specific cases where the purchaser will be
liable for certain pre-transfer obligations of the seller, for instance
in relation to labour, tax and environmental liabilities.
Further, with regard to spin-offs and transfers of on going concerns,
pursuant to the Business Companies Structural Amendments Act a
beneficiary or assignee may be liable in relation to liabilities
transferred in the relevant transaction to other beneficiaries or
I. RECENT M&A ACTIVITY BY CHINESE INVESTORS
Please give examples of recent PRC M&A activity in your
Most Chinese investments in Spain are green field and amount to
relatively small representative offices or permanent establishments.
Examples of Chinese companies currently established in Spain include
COSCO, ZTE, Air China, Haier, Chint Group, ICBC and
Huawei. Large projects have been announced, particularly
involving the automotive sector (the regional Government of Catalunya
signed an agreement with Brillance Auto to establish a potential
manufacturing plant, while the Government of Navarra entered into
another agreement with Foton to manufacture electric buses) but little
has been finalised so far. An area that may have potential (public
procurement) remains out of reach of Chinese companies as a result of
the impending accession by China to the Global Procurement Agreement (a
WTO agreement) -- until then Chinese bidders will need to show that
Spanish companies have free access to Chinese public procurement
(something that may be hard to prove in some sectors).
However, there is an increased Chinese interest in Spanish assets
which is evident in sectors where Spain is a world player or has
particular expertise, such as tourism (for example, in October 2011, HNA
agreed to acquire 20% of the Spanish hotel group NH), telecommunications
(China Unicom and the Telefónica group agreed an exchange of shares that
will increase Telefonica’s stake in China Unicom to 9.7% and China
Unicom’s holding in the Spanish group to 1.37%) and financial services
(BBVA agreed to partner with China Development Bank in various areas of
business outside China, particularly in Latin American countries). Other
sectors also seem promising and are attracting the interest of Chinese
investors, such as renewable energies (one of the top priorities of the
latest China five year plan) and key infrastructure operations that need
to be privatized (airports and water treatment, for example) or disposed
of by big Spanish private operators in order to increase their
liquidity. The acquisition of stakes in interesting industrial
conglomerates that are disposed of by cash-strapped savings banks also
appear to have appealed to Chinese investors.
Chinese investors have also been dealing with Spanish investors
regarding their mature investment portfolio in Latin America. For
example, in May 2010, State Gird acquired seven concessionaries of
electricity transmission lines in Brazil from Spanish owners for USD
1.72 billion and, shortly afterwards, in October 2010, the oil company
Sinopec acquired a 40% stake in its Brazilian subsidiary from Spanish
oil company Repsol. We believe that this trend is set to continue in
financial sector, as well as the energy and public infrastructure
 For purposes of this
timetable, the acceptance periods considered are of 15 and 70 calendar
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