• Owned by a small number of shareholders
• Limited liability for owners
• Private sale of shares
• Minimum capital requirement: EUR 3,000

A Private Limited Company is owned by a relatively small number of shareholders, and the sale of company shares is handled privately. An individual/owner is only responsible for the business's financial liabilities to the extent that they invested in the company. The minimum capital requirement is EUR 3,000.

Offers limited liability protection while maintaining privacy and control over ownership.

• Ownership open to public
• Shares traded publicly
• Limited liability for shareholders
• Minimum capital requirement: EUR 60,000

A public company is a corporation whose ownership is open to the public. Anyone can buy shares in the company's stocks. A limited company is a corporation in which an individual's financial liability for the company is restricted to the capital investment. The minimum capital requirement is EUR 60,000.

Allows for raising capital from the public while providing limited liability to shareholders.

• One owner
• Unincorporated
• Personal income tax on profits
• Unlimited liability

Often referred to as a sole trader, a sole proprietorship is an unincorporated business with just one owner who pays personal income tax on profits earned, hence any debts or losses incurred cannot be shared with other individuals. It is the cheapest and easiest business structure to establish with the individual legally responsible for all aspects of the business.

Simplest and most cost-effective structure, but comes with full personal liability for business debts.

• Central Mercantile Register (Registro Mercantil Central)
• National Securities Market Commission (Comisión Nacional del Mercado de Valores)

Corporate information is available at:

• The Central Mercantile Register* (Registro Mercantil Central) (RMC) – www.rmc.es
• National Securities Market Commission (Comisión Nacional del Mercado de Valores) – www.cnmv.es

*Subscription Required

Use the RMC and CNMV websites as primary sources for official company information in Spain.

• Central Mercantile Register
• National Securities Market Commission
• Private reporting agencies

You can obtain information on the financial state of affairs for companies and industry at the Central Mercantile Register or National Securities Market Commission. There are also numerous private reporting agencies offering credit checks.

Combine official RMC and CNMV data with reports from private agencies for comprehensive financial information.

• Credit reports
• Online services

Normally you find this information in a credit report. Credit reports are offered as a service online.

Utilize online credit report services to check for existing judgments against businesses.

• Copy of the contract(s)
• Copy invoices AND full statement of account
• Original versions of complete contractual documentation
• Notes of conversations and verbal negotiations

In order to apply the legal dunning procedure, you will need the following documents as a minimum:

• Copy of the contract(s)
• Copy invoices AND full statement of account (including the allocation of payments and/or credit notes)

In the case of a regular lawsuit procedure, original versions of the complete contractual documentation should be available, starting with the contract, orders, order confirmations, delivery notes and invoices.

Every stage of the trading relationship between the debtor and the creditor should be provable by documentation.

In case of dispute, all notes of conversations between the creditor and the debtor should be kept and provided to your lawyer(s).

In case of any verbal negotiations, you should notarise the dates and notes of any visits and negotiation reports should be kept, along with the names of the witnesses.

Maintain comprehensive documentation for all business transactions to ensure legal enforceability.

• Seller retains ownership until conditions are met
• Not common practice in Spain
• Contract must be signed by a notary to be binding

Traditionally, retention of title allows the seller to retain ownership over the goods supplied until certain contractually defined conditions are met. However, this is not a common practice in Spain with a contract of this type not being binding between parties.

Unless the contract has been signed by a notary, it is not an executive title, so you must follow the normal legal proceedings.

This means starting a declarative procedure where the judge will have to recognise your right to cover the debt or remove the merchandise. If the merchandise has been seized, it will be necessary to start a special legal proceeding called Tercería de Dominio, in which you will have to prove your right of divesting ownership and possession to a third party.

Consider including retention of title clauses in contracts for additional protection against buyer default or insolvency, but be aware of the legal requirements in Spain.

• Mandatory warning notice
• Specific content requirements

A warning notice to the debtor is mandatory before filing any enforcement claims. The warning notice should include:

• Creditor name and overview of the claim
• The total amount of the claim, including penalties (interest)
• Payment method required
• A warning that the claim will be enforced through the enforcement authority in case the claim is not settled by the required date
• Information on how to dispute the claim

If this measure has been taken and the payment still has not been made after the two-week notice period (according to the law), the creditor may file for enforcement.

Always send a comprehensive warning notice before initiating legal proceedings.

• Statutory default interest applicable
• Collection costs chargeable
• Cultural considerations

If the contracting parties have not agreed this in the contract, then statutory default interest and collection costs are applicable.

The creditor may in addition to the claim demand to recover from the debtor:

• Penalty interest of the claim: 8%
• Debt collection costs are chargeable to debtors, representing your claims for late payment damage based on the Spanish Civil Code and Commercial Code.

From a cultural point of view, Spanish debtors are not used to paying late payment interest at the amicable phase, and the actual amount of the interest payment is considered a matter of negotiation.

From a cultural point of view, Spanish debtors are not used to paying debt collection costs, though often the actual amount of these costs can be considered a matter of negotiation.

Be aware of your rights to claim interest and compensation for late payments, but consider cultural norms in negotiations.

• 5 years for personal actions
• 10 years for contractual obligations
• 6 years for non-contractual obligations

Personal actions as per Article 1964 of the Civil Code have a limitation period of five years. Those pertaining to contractual obligations are ten years and six years for non-contractual obligations.

A limitation period may be halted upon settlement of the debt, acknowledgement of the debt by the debtor, or the pursuit of court action by the creditor.

Act within the limitation periods to preserve your right to legal action.

• Mediation
• Arbitration

Although not obligatory, parties may be encouraged to explore ADR methods of mediation and arbitration. Exploring such methods is found to be cheaper, quicker, and private in comparison to the pursuit of any debt via court despite exclusion of the jurisdiction of the ordinary courts.

In mediation a licenced, neutral third party from the Chambers of Industry and Commerce is required to aid creditors and debtors agree to the settlement of an open unpaid debt based on supporting evidence and documentation. The mediator usually has no decision-making powers and cannot impose a binding conclusion or settlement on the parties.

Consider ADR methods as potentially faster and more cost-effective alternatives to court proceedings.

• 'Monitorio' procedure
• 'Ordinario' or 'Verbal' proceedings
• Enforcement procedure

Unless ordered otherwise, hearing and trials are public. However, access to court files is restricted to the relevant parties.

The procedure, named 'Monitorio' in Spain, is only applicable for monetary debts valued at less than EUR 250,000 and only when the debt falls due and remains unpaid without dispute. The local court is first to assume responsibility and merely encourages the debtor to pay the debt (including interest) based on the creditor's rights and signed contracts.

Should the debtor choose to oppose the court, an ordinary proceeding of 'Ordinario' or 'Verbal' begins subject to the amount. This may happen immediately following the first action of the local court.

Should the debtor fail to pay once more, an enforcement procedure begins.

The lawsuit mentioned above begins immediately after the failure of amicable collection or if the debtor's solvency is brought into question. Both the plaintiff and the defendant submit evidence such as documentation or witnesses to be reviewed during the hearing.

After the verbal hearing, the judge sets a date to publish the final judgment, informing both parties in writing via the responsible court.

Understand the different court procedures available in Spain and their applicability to your case.

• 'Monitorio' proceeding: around 3 months
• 'Ordinario' proceeding: over 12 months

The average duration of a legal process depends on the type of procedure and its stage.

• The 'Monitorio' proceeding takes around three months
• The 'Ordinario' proceeding can take over twelve months

Be prepared for potentially lengthy legal processes, especially for more complex cases.

• Fixed costs (court and solicitor fees)
• Extra costs (witnesses, experts, translations)
• Legal taxes

There are different types of costs to consider:

• Fixed costs like court and solicitor fees which have their official rates. Creditors should consider a fee relative to the proceeding type and residual debt value.
• Extra costs like witnesses and experts' reports, translations and others may also arise.

Legal taxes must be paid at the same time that legal action is explored, without which, the lawsuit will not be accepted by the court. This is subject to the procedure undertaken:

• The 'Monitorio' proceeding – EUR 100
• The 'Ordinary' proceeding – EUR 300
• The cost of enforcement – EUR 200

These taxes are not rechargeable to the debtor and cannot be reimbursed in any case, except if both parties reach an agreement during the legal process whereby 60% of the tax paid will be refunded.

Factor in all potential costs when deciding to pursue legal action, including non-refundable legal taxes.

• Automatic enforcement by issuing court
• 20-day settlement period
• Provisional enforcement possible

A local judgment is automatically enforced by the issuing court. To enforce a judgement, the creditor must issue a claim to the relevant court who will examine the requirements of the judgement. Unfinalised judgments cannot always be enforced, and if revoked the initial enforcing party must indemnify the other party for any damages that such enforcement has caused.

A judgement which was not appealed by the parties within the legal period is definitive and requires the debtor to settle the debt within 20 days of its publication.

Spanish law allows provisional enforcement of the judgment when the defendant presents an admitted appellation. This must be requested by writ to the court which issued the enforceable judgment. The warrant is used to obtain a statutory declaration from the debtor.

Be aware of the automatic enforcement process and the possibility of provisional enforcement in certain cases.

• Exequatur required for non-EU judgments
• EU regulations apply for EU member states

Where a judgment is issued by a court of a non-EU member state, Spanish law provides that the enforcement in Spain of such a judgment is subject to an enforcement order ("exequatur") being made. To enforce a foreign judgment, the Spanish courts apply bilateral agreements signed with non-EU countries, and EU regulations such as:

• Regulation (EC) 805/2004 creating a European Enforcement Order for uncontested claims (European Enforcement Order Regulation).
• Regulation (EC) 1896/2006 creating a European order for payment procedure.
• Regulation (EU) 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast Brussels Regulation).

Understand the different procedures for enforcing EU and non-EU judgments in Spain.

• Execution claim on debtor's assets
• Asset location and auction
• Cost allocation

Should the defendant do not pay within the 20-day period following the publication of the judgment, the executing party can submit an execution claim to the court on the debtor's assets. Similarly, the executing party can ask the court to locate certain assets or indicate the banks, public organisations or companies that could help locate the assets.

Once located, assets will be auctioned, and the due amount used to settle the open balance with any costs billed to the losing party. The cost of this phase will be paid by the condemned party after the assets have been liquidated. Until then, the applicant must bear its costs.

Be prepared for a potentially lengthy and costly enforcement process, especially if asset location is required. The applicant must initially bear the costs of enforcement until assets are liquidated.

• 'Concurso' procedure
• Applies to individuals and legal entities
• Filed with Commercial Court

Insolvency proceedings known as 'concurso', is the only procedure that affects both individuals and legal entities and attempts to establish partial debt settlement to creditors whilst maintaining a future for the debtor.

An insolvency petition must be filed with the Commercial Court (Juzgado de lo Mercantil) of the capital of the province in which the debtor has its centre of main interest (COMI) or registered office.

Public bodies cannot be declared bankrupt. There are also special provisions for insurance companies or banks that become insolvent.

Understand the 'concurso' procedure and its applicability to different types of debtors.

• Voluntary insolvency ('concurso voluntario')
• Compulsory insolvency ('concurso necesario')

If insolvency proceedings are voluntary ('concurso voluntario'), the directors or liquidators must file the insolvency petition upon first realisation that future of the debtor entity does not appear sustainable. This must be actioned within two months of the date on which the debtor is aware of insolvency.

In compulsory insolvency ('concurso necesario'), the insolvency petition can be filed by:

• A creditor - provided the company is deemed to be currently insolvent.
• Debtor(s) liable for the company's debts, provided the company is currently, rather than imminently, insolvent.

Be aware of the different types of insolvency proceedings and who can initiate them.

• Petition with documentary evidence
• Publication in Official State Gazette
• Registration with Registry for Insolvency Proceedings

Such a petition must be written with accompanying documentary evidence and submitted to the insolvency practitioner.

The declaration of insolvency must be published in the Official State Gazette (Boletín Oficial del Estado) and be registered with the Registry for Insolvency Proceedings (Registro de Procedimientos de Insolvencia).

Ensure all necessary documentation is prepared for the insolvency petition and be aware of the public nature of insolvency declarations.