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Categoría: News

  • The time limit for including the worker in the company pension plan is reduced from two years to one month

    Until now, companies had a margin of two years to incorporate new employees into the company’s pension plan. However, from now on this incorporation will have to be practically immediate, within a single month of being hired on the payroll. This is set out in the recent Royal Decree 668/2023, of 18 July, which modifies the Regulation of pension plans and funds, approved by Royal Decree 304/2004, of 20 February, to promote employment pension plans.

    This Royal Decree completes the regulatory development of the Law on Employment Pension Plans and promises to speed up the incorporation of workers into retirement savings vehicles. The measure, which affects large companies and SMEs alike, is designed for both existing occupational pension plans and new publicly promoted pension funds. The latter is the figure through which it is intended to promote pension savings in the company sphere.

    Private pension plans are in short supply in Spain  

    Savings in private pension plans in Spain are very small, especially compared to the volume saved in bank deposits.

    If we look at the data for the end of the first quarter provided by the Association of Collective Investment Institutions and Pension Funds Inverco, we see that the vast majority corresponds to individual plans promoted by financial institutions (82,553 million euros and 7.35 million participants). Far behind are employment plans (35,200 million euros and 1.90 million participants), a type of private pension plan promoted mainly by large companies and the public administration.

    Publicly promoted occupational pension funds

    With the aim of boosting pension savings in companies, also in smaller companies, the publicly promoted occupational pension funds (FPEPP) have been created and will probably be implemented this autumn. These are their main characteristics:

    • Their fees will be lower than those of individual plans, between 0.1% and 0.25% per annum.
    • 500 million in these funds in three years, so they will have a volume that will allow them to access more sophisticated investment assets.
    • Contributions may continue to be made in the case of partial retirement.
    • Savers will be able to benefit from contributions made by companies through commercial programmes or sponsorship campaigns.
    • Existing occupational pension schemes and simplified pension schemes can be subscribed to these new publicly promoted occupational pension funds.
    • They will be managed through a digital platform that will make all the information available to promoters and workers.

    How will its implementation work?

    A few weeks ago, the Ministry of Inclusion, Social Security and Migration proposed awarding the management contract for these new publicly promoted occupational pension funds to five entities: VidaCaixa (CaixaBank), Gestión de Previsión y Pensiones (BBVA), Caser Pensiones, Santander Pensiones and Ibercaja Pensión.

    Each of them will manage three FPEPPs with different risk profiles: one more conservative, one mixed and one riskier. It is these managers who decide which assets to buy for each investment vehicle. In total there will be 15 different options to choose from.

    In short, these publicly promoted occupational pension funds aspire to consolidate themselves as an instrument of complementary social provision, giving a boost to social provision in the company.

  • Donation of shares or inheritance pact: Which is better for a family business?

    The moment of generational handover is one of the most critical for family businesses. To make it a little easier, tax benefits have historically been introduced when a parent donates his or her shares to his or her descendants. In Spain there are two regimes for this: the donation of shares and the succession pact. Let’s look at them in detail and review the new developments that have taken place in this area in recent times.

    Donation of shares in the family business

    Throughout Spain, the donation of shares between different generations of a family business has in theory tax advantages for both the donor and the donee.

    • Reduction in inheritance and gift tax for the donee (usually the child of the company founder). The requirement is that he/she keeps the company in his/her possession for at least ten years. In this case it is the autonomous communities who regulate this benefit.
    • Non-subjection of the capital gain to personal income tax of the donor, which is deferred. The conditions are that he/she is 65 or over or disabled and that he/she retires. In this case, only the State Law is competent to regulate the matter.

    The risk of tax incentives for gifts of shares in family-owned companies

    If the donee complies with the maintenance requirement and then sells his shares, at the time of the transaction he will have to pay the income tax that the donor did not pay at the time. If, on the other hand, the donee fails to comply with the maintenance requirement and, for example, sells the shares before ten years have elapsed, then it is the donor who has to pay the untaxed income tax. This can be a tricky situation, as the donor will then be a retired person who may not be at his best financially.

    To this potential risk must be added the recent Resolution of the Central Economic-Administrative Tribunal of 29 May 2023 (RG 1501/2020), which has ruled that if the company that is donated is the owner of assets that are not used for an economic activity, the deferral in the donor’s personal income tax is only partial.

    In other words, the donor will generate a taxable capital gain, in an amount proportional to the weight that these assets have in the company’s net worth. The remainder is deferred and subject to compliance with the maintenance requirement of the donee.

    As a consequence of all these difficulties, many family businesses choose to plan the transfer on the death of the share owner.

    The advantages of the succession pact

    Certain autonomous communities with their own civil law have an alternative regime to donation: the inheritance pact.

    With the succession agreement, the owner agrees, during his lifetime, to transfer certain assets to his heirs. The key difference compared to a gift is that inheritance agreements are taxed as an inheritance and, therefore, the transferor does not pay income tax. It is not necessary for the parent to be of a certain age or to retire. He can even continue to manage the company. It is also irrelevant if the company has assets that are not used for its activity.

    This is not a tax deferral, but a definitive benefit. However, there is one condition: the heir must not transfer the assets before the expiry of five years or before the death of the previous owner. Otherwise, he is subrogated to their acquisition value and the inheritance agreement results in a mere tax deferral. It is the child, and not the parent, who is liable to pay the personal income tax.

    The major limitation of the succession pact is that it can only be made in Aragon, Catalonia, Navarre, the Basque Country, Galicia and the Balearic Islands. For residents of other territories, two years of residence in one of these communities and a declaration of will are required for this civil law to apply to them.

    At Confianz we can advise you on how to organise the generational handover of your family business in the most advantageous way. Get in touch with us.

  • Forecasts for the M&A market in the second half of 2023

    The year 2023 started with subdued M&A expectations due to rising interest rates and fears about the onset of a possible recession. Nevertheless, the number of transactions in the first six months has surpassed the pre-pandemic levels of 2019. Will the second half of the year see changes?

    M&A market forecasts for the remainder of 2023

    For the second half of the year, the market is showing signs that more interesting and transformative M&A opportunities will emerge. After a difficult start to the year, many things have changed in recent months: inflation and rising interest rates are slowing down, the US has weathered the debt ceiling crisis and artificial intelligence has emerged as the next big technological revolution.

    Executives will continue to use M&A activity as a tool to reposition their businesses, drive growth and generate lasting results. For three reasons:

    • The fall in the value of listed companies will create investment opportunities.
    • Corporate restructuring will continue to pick up, which may lead to mergers and acquisitions of distressed companies. Retail, FMCG, real estate and industrials are the four sectors where most restructuring is expected.
    • More stable interest rates will reduce uncertainty and make it easier to price transactions.

    The rise of the mid-market in the second half of the year

    The M&A market for the remainder of the year will be dominated by mid-size deals, which are more feasible in the current regulatory and financing environment. Executives are favouring mid-size deals because they are less affected by market volatility and face less regulatory scrutiny. They can also be transformational and accelerate growth if they are part of a well-planned strategy.

    The push for artificial intelligence

    By sector, the most active sector in the first half of the year was technology, media and telecommunications, which accounted for 28% of deals. New technologies are key to the transformation of companies; and artificial intelligence will create opportunities in the M&A market for both corporate groups and private equity funds.

    In terms of value, the energy, power and natural resources sector led the ranking from January to June, with 23% of the total. Companies are increasingly looking to reduce their impact on the environment and are committed to zero net emissions strategies. The energy transition is already a reality and is generating enormous changes that open up opportunities for M&A transactions.

    Tips for undertaking an M&A transaction now

    Macroeconomic conditions will lengthen the negotiation periods for transactions and will make it necessary to deepen due diligence processes. The business situations that will emerge in the M&A market will be more complex and challenging for all parties.

    In order to close a transaction and avoid price reductions, sellers must assume that buyers and their financing sources will devote more time and effort to analysing and studying the transaction. However, a common mistake we see quite often is that sellers and their banks set very aggressive sales terms. This can cause the transaction to fail.

    We end with a word of advice: companies with strong balance sheets and liquidity would do well to seize the moment to make acquisitions now that difficult financing is reducing competition. At Confianz we are specialists in M&A transactions and can advise you throughout the process.

  • The new Antiopas law on foreign investment will enter into force on 1 September

    On 1 September, the new Royal Decree 571/2023 of 4 July on foreign investment will come into force. This antiopas regulation fixes some of the temporary measures that were approved during the pandemic to prevent the purchase of national strategic assets by foreign capital.

    The main novelty is that administrative procedures are reduced and streamlined. Thus, the resolution period for authorising or vetoing investments is halved from six to three months. This period also includes consultations with the administration, which will have 30 working days to respond.

    The antiopas shield

    Let’s look back at how we got here. To do so, we must go back to March 2020, when the Executive implemented the so-called «antiopas shield». In this way, article 7 bis of Law 19/2003 established the obligation of prior permission from the government for non-EU investors intending to invest more than 500 million euros or to acquire more than 10% of a strategic company listed on the stock exchange. The reasons given were security, public order and public health. The aim was to prevent foreign capital from taking advantage of the stock market crashes that occurred during the COVID-19 pandemic to take over strategic Spanish companies.

    In November of the same year, this measure was complemented by a transitional provision which established that the government should also authorise foreign direct investment by EU and EFTA companies in listed companies or even in unlisted companies if the investment exceeded 500 million euros. The aim was to prevent investors from circumventing the restrictions by simply setting up companies on EU territory.

    Inflation and rising interest rates have meant that this regulation has been successively extended to the present day.

    What’s new in the Antiopas Law 2023

    Now the Executive has modified and developed the regime for foreign investment in Spain and, in particular, the investment control regime. These are some of the main novelties:

    • The deadline for approving or vetoing investments is reduced from six to three months. This reduces and speeds up administrative procedures, one of the main complaints of companies and investors.
    • It formalises the system of voluntary consultation which had already existed in practice. Through this voluntary procedure, investors can receive a confidential and binding response as to whether or not a given transaction should be subject to authorisation. The authorities will have 30 working days to respond. Otherwise, the interested party may submit an application for authorisation.
    • The possibility of using the simplified procedure of 30 working days for transactions of less than EUR 5 million is eliminated.
    • Internal restructuring within a group of companies and increases in shareholdings by investors already holding at least 10% in the Spanish company are not subject to the control mechanism if such increases are not accompanied by changes in control.
    • In the case of investment through private equity funds, the person obliged to submit to control as the owner of the investment will be the management company, provided that the shareholders or beneficiaries do not legally exercise political rights or have privileged access to the company’s information.
    • All investments of less than €1 million are no longer exempt. The threshold now varies depending on the sector of the company in which the investment is made. The energy sector, electronic communications, mining, strategic raw materials, etc. are particularly regulated.

    Conclusions

    Overall, we believe that this new regulation takes up in writing some interpretative criteria that were already being applied by the authorities and offers greater legal certainty in the market.

  • A new Royal Decree-Law regulates the structural modifications of commercial companies

    The Council of Ministers recently approved a series of measures in Royal Decree-Law 5-2023 of 28 June, including a new regulation on the structural modifications of commercial companies. This regulation transposes the so-called Mobility Directive (Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019), which amends Directive (EU) 2017/1132 as regards cross-border transformations, mergers and divisions. This establishes a legal framework harmonised with the European Union to improve transparency in this type of transaction.

    The new regulation modifies many aspects of the structural modification regime:

    • Repeals Law 3/2009 in its entirety
    • Adapting cross-border structural changes to the Mobility Directive
    • It creates a new regime applicable to both internal and cross-border structural changes.

    Documents required to address any structural modifications

    The aim of this Royal Decree-Law is to regulate both internal and cross-border (intra- and extra-European) structural modifications of commercial companies. These structural modifications cover transformation, merger, spin-off and global transfer of assets and liabilities. Each of these cases has a specific procedure. However, they now also require additional supplementary documentation:

    1. Structural modification project. It must be drawn up, following the instructions in Article 4 of the new regulation, by the director of the company making the structural modification.
    2. Report of the administrative body. This must be drawn up by the administrator(s) and sent to the shareholders and employees. It details the legal and economic aspects of the structural modification and the consequences for the employees, for the future activity of the company and its creditors.
    3. Independent expert’s report. At the request of the directors, an independent expert shall examine the draft structural modification and draw up a report for the shareholders. He shall assess the exchange ratio and the compensation offered. This report shall not be necessary if it is agreed by all the shareholders with voting rights or if it is provided for in the specific rules governing each structural alteration. It shall therefore be optional in the case of internal transformations and internal global transfers of assets and liabilities.

    Protection of shareholders and creditors in structural changes

    The protection of shareholders and creditors is provided for in all structural modification operations:

    • Protection of members. The former right of separation is replaced by a right of disposal. This may be exercised by shareholders who have voted against the project or are holders of shares or holdings without voting rights. It will apply in three cases:
      • Internal transformations.
      • Mergers by absorption of a 90% owned company when the directors’ and experts’ reports on the merger plan are not drawn up.
      • Cross-border transactions where they will be subject to a foreign law. .

    In addition, if the shareholder considers that the cash compensation offered by the company has not been adequately fixed, he has the right to claim compensation within two months.

    • Protection of creditors. The former right of opposition is replaced by the possibility of claiming the modification or extension of the measures with the intervention of the Commercial Registrar and independent expert and, where appropriate, the Commercial Court.

    When it comes into force

    The new rule came into force on 29 July 2023 and applies to projects that the companies involved have not approved prior to this date. The question arises as to whether the rule refers to projects formulated and approved by the boards. We will keep an eye on the application of the rule in the coming weeks.

  • ‘ salaries as an expense

    The National High Court has recently issued a ruling (Ruling 368/2023 of 11 January) that relaxes the conditions for companies to deduct the salary of their directors and administrators as a corporate tax expense.

    The milimetre doctrine

    Until now, the tax authorities often prevented the deduction of such salaries for various reasons, the most frequent being that the exact remuneration was not detailed in the company’s articles of association.

    This was known as the «millimetre doctrine», which strictly required two conditions for companies to be able to deduct the costs of directors’ and managers’ remuneration:

    1. That the bylaws expressly provide for the possibility of these positions being remunerated.
    2. The exact amount of these salaries should be specified in the Articles of Association.

    If these requirements were not met, the Administration understood that the amounts paid were not obligatory and therefore could not be deductible. However, this condition left out many companies. Because directors and board members occupy key positions and their remuneration often varies according to many variables, such as corporate performance.

    It is no longer necessary to include the exact amount of such remuneration in the company’s articles of association

    This is a legal disquisition that has been going on for a long time. In the past, the Supreme Court had already ruled that what is important is to demonstrate the reality of the service rendered, its effective remuneration and its correlation with the business activity. Now the Audiencia Nacional has ratified this position and has also expressly added that it is not necessary to include the exact amounts of the salary in the articles of association in order to consider it as a deductible expense.

    It is sufficient to set a salary ceiling for the salary to be deductible

    In the latter judgment of the Audiencia Nacional, the remunerated nature of the position was indeed stated in the articles of association. However, they did not specify the exact amount of the remuneration. It was limited to establishing that the remuneration of the directors would be determined at the general meeting and that the amount could never exceed 10% of the net profits of each financial year.

    This practice of setting a percentage of profits as a limit is common in many companies. Now the Audiencia Nacional has interpreted the applicable commercial law in a more flexible manner to conclude that the Administration is applying an excessively rigid interpretation and that it is not necessary for the articles of association to specify a specific amount or a specific percentage. It is valid for the articles of association simply to set a maximum limit for the general meeting. Because in the end this greater flexibility benefits the shareholder.

    What are the new conditions for deducting directors’ and administrators’ salaries as a corporate tax expense

    What are the new conditions for deducting directors’ and administrators’ salaries as a corporate tax expense

    Following this latest ruling by the Audiencia Nacional, the conditions for a company to be able to deduct the salary of directors and administrators from its corporate income tax are considerably more flexible. Two minimum requirements are sufficient:

    • That the Board of Directors, which is the highest body of a Society, has not challenged this salary and decided that the member in question cannot receive it.
    • That this salary has been correctly recorded in the accounts and can be supported by documents such as a bank statement.

    In any case, it is advisable to carry out an individual analysis of each specific case in order to be able to assess the tax consequences. Although the courts are becoming increasingly flexible, it will be necessary to keep an eye on the evolution of their criteria.

  • The duty of cooperation and information in insolvency proceedings

    One of the conditions for achieving the forgiveness of debts in an insolvency proceeding is that the debtor complies with his duties of cooperation and information. He must do so with respect to both the insolvency judge and the insolvency administration. What is more, non-compliance will not only prevent the debtor from being exonerated from unsatisfied liabilities, but the insolvency proceedings will also be presumed to be guilty.

    The reform of the Insolvency Act requires an assessment of the good faith of the insolvent party in its cooperation with the supervisory agents of the proceedings. In practice, this translates into the provision of documents that faithfully reflect their economic situation and the reasons for insolvency. Documents such as annual accounts, company minutes…

    Who must comply with the cooperation and reporting requirements

    In the case of a natural person, the duties of collaboration and information are incumbent on the insolvent party itself. In the case of legal persons, they fall on the administrators or liquidators and those who have held these positions within the two years prior to the declaration of insolvency. This two-year margin has been added to prevent the insolvent party from evading the duty to provide information by claiming ignorance of the company’s past.

    Article 135 of the revised text of the Insolvency Act specifies that these persons «have the duty to appear in person before the court and before the insolvency administration whenever they are required to do so and to collaborate and provide any information necessary or convenient for the interests of the insolvency».

    How to obtain debt relief 

    It is essential, even before filing for insolvency proceedings, to carry out a thorough analysis of all available documentation and of the causes that have led the debtor to become insolvent.

    The debtor must provide truthful information from the very moment he applies for the declaration of insolvency proceedings. Even more so if he intends to opt for the exoneration of unsatisfied liabilities. Already in this first phase of the insolvency proceedings, he must provide all the documents that prove and justify his insolvency situation. It is better to err on the side of completeness than to omit information that may initially seem minor. Because later on they may prove to be transcendental in the insolvency proceedings.

    It is the insolvency judge and the insolvency administrator, if appointed, who will assess the debtor’s good faith and ultimately consider whether the debtor deserves to be exonerated. For this reason, the insolvent party must adopt a fully collaborative and transparent attitude. To this end, it will provide the supervisory agents with as much information as possible.

    Consequences of breaching the duties to cooperate and to inform

    In the event that the judge and the insolvency administrator consider that there has been a lack of cooperation and information on the part of the debtor, they will not only prevent the debtor from being exonerated from his debts. In addition, they may also declare the insolvency proceedings guilty. This is an additional impediment. Because the administrator of the company may lose any rights it has in the insolvency proceedings, be ordered to cover the deficit and be ordered to pay damages.

    At this point, it is worth remembering a change that occurred with the implementation of the insolvency reform. The judge now has to classify the insolvency proceedings as fortuitous or culpable in all cases. There is no longer any exception in this sense, which gives more weight to the creditors.

    In order to bring the insolvency proceedings to a successful conclusion and obtain debt exemption, it is essential to have a consultancy firm specialised in insolvency law such as Confianz from the outset.

  • How to calculate remuneration in family businesses

    Remuneration is one of the thorniest issues facing family businesses. Salary issues vary according to the stages the family business goes through during its life cycle, as it faces the different generational successions. This is why it is important to take care of this aspect in order to neutralise a potential source of internal conflict.

    Remuneration in family businesses throughout their life cycle

    First generation: the entrepreneurial stage 

    This first stage in the life of family businesses is perhaps the one that poses the least conflict. Because the company is unquestionably run by the founder. Meanwhile, the next generation is just starting out in the business and usually accepts his decisions on tax savings, family donations, estate planning, retirement plans, etc. without opposition.

    Second generation: payoffs at the sibling stage

    The complication increases as time goes by and the children take on more and more responsibilities within the family business. When it is time for the handover, the parents will have shaped the salary expectations of the second generation leaders as they progress through the business.

    One possible strategy is for each sibling to receive different remuneration according to his or her training, functions and performance. However, such decisions pose risks for family relations. It is no coincidence that it is at this stage that conflicts over salaries often arise. It is advisable to confront them with a frank and open attitude. This is a way to dispel suspicions and to strengthen the commitment of all family members to the company.

    In second-generation family businesses there are usually two possibilities:

    • It is common for a sibling team to work in partnership co-managing the company, with very few inactive family shareholders and virtually no non-family involvement.
    • In other cases, some business families prefer to choose a new leader from among the second generation siblings.

    Long-term planning is important to avoid that the first children to join the family business end up with a very high and steadily increasing salary. This can lead to conflicts with the children who decide to join the company later on.

    Creating a holding company for the family shareholding can be highly advisable at this stage. This will help to achieve the above objectives.

    Third generation: the stage of cousins and family dynasty

    When it is the turn of the third generation, a new era begins for the family business, which increasingly resembles a conventional company. Because not all family shareholders work there. Some stay away from the day-to-day business and only receive dividends. And their point of view must also be taken into account when calculating the remuneration of family members who do receive a salary from the company. There is a risk here that they may perceive that they are overpaid, at the expense of their dividends. However, those who work in the company may feel that their degree of emotional involvement in the entrepreneurial family project is underestimated.

    This is a source of conflict that can end up having disastrous consequences if a rational, open and professional remuneration scheme, similar to that of a non-family business, is not adopted. It is very useful in this respect to take as a reference the average salaries paid in companies of similar size and in the same sector.

    Initially, a family business is usually the brainchild of a single entrepreneur. Over time, however, ownership is likely to be divided among successor-heirs. As the growth of the family dilutes the shareholdings of individual members, it may be necessary to establish additional incentives for managers. It is recommended that these incentives be linked to increased shareholder value.

    The family protocol can set the remuneration policy

    Good planning and management of the remuneration plan depends to a large extent on the health of institutional coexistence in the family business. In this sense, having a family protocol is often useful, among other things, to establish the conditions for family members’ access to management positions and to draw up salary policies and career plans. The drafting of such a protocol usually requires an external source of advice that can gain the trust of active and inactive shareholders alike.

    Having a family holding company at this stage is essential.

    Are you looking for support in planning your remuneration or creating a family protocol? Then let us show you the way to effective and fair management. Let’s talk soon.

  • When to take out manifestation and warranty insurance in an M&A transaction

    It is becoming increasingly common in M&A transactions between Spanish companies to take out a manifest and warranty insurance policy, also known as W&I Insurance in English-speaking countries, where these policies have always been more popular.

    Its advantage is that this type of insurance allows the transfer to the insurance company of the risk derived from the obligation to indemnify the buyer for the possible lack of truthfulness and accuracy of the representations and guarantees given by the seller.

    Let’s look at it in detail.

    How responsibilities in mergers and acquisitions are assigned

    From the date on which the actual transfer takes place, it is most common in an M&A transaction for the buyer to assume all the business risks inherent in the acquired business.

    For his part, the seller is liable if he breaches agreed obligations, such as the non-competition obligation. Also for the lack of truthfulness and accuracy of the representations and guarantees that he has given in favour of the buyer in the contract of sale.

    What is manifestation and warranty insurance

    In contrast to this default allocation of responsibilities that is established by default in any merger or acquisition, manifestation and warranty insurance introduces a solvent third party, the insurance company, which assumes part of the risk.

    The most common type of W&I Insurance policy is one in which the insurer assumes the risk arising from the seller’s obligation to indemnify the buyer for the lack of truthfulness and accuracy of the representations and warranties given by the seller.

    What exactly are these representations and warranties? They are a set of statements concerning certain circumstances relating to the seller himself, the shares/shares being transferred and the business conducted by the company being transferred.

    Transactions in which M&A insurance is frequently used

    The first thing to do is to anticipate the need to take out an insurance policy for demonstrations and guarantees. In this way, we will be able to integrate it as another element within the negotiation. These are three of the cases in which it may be advisable to take out a policy of this nature:

    • On the seller’s side, when the seller is a private equity fund looking for a clean exit and does not want to assume any liability for past contingencies.
    • On the buyer’s side, in competitive processes, where several aspiring buyers submit their purchase proposals to the same seller. The introduction of a manifestation and warranty insurance in the offer can be an important advantage that can tip the balance in favour of one of the potential purchasers.
    • In the formation of joint ventures, this type of insurance allows the new partners to neutralise the emergence of potential conflicts.

    How to take out manifestation insurance and guarantees

    Any insurer will require a thorough understanding of the transaction to be covered. To do this, it is best to first carry out a thorough due diligence on the business being bought and sold. In the absence of this step, the insurance company will require at least an analysis of the areas about which it does not have sufficient knowledge. Otherwise, it will exclude these areas from the policy coverage or may even refuse to underwrite the policy.

    On the other hand, it should be borne in mind that drafting an insurance policy of representations and warranties requires a precise definition of certain concepts. For example: the concept of damage, the quantitative and qualitative thresholds of limitation of liability, the claims procedure, etc. To this end, it is essential to have  legal advice from a legal expert in M&A transactions involving representation and warranty insurance.

  • Next Listing Act: EU to promote company flotations

    In the second half of 2023, Spain will take over the rotating presidency of the EU. And one of the important legislative developments planned for this mandate is the so-called Listing Act, the new European regulation to promote the flotation of companies on the stock exchange. To this end, it is proposed to reduce deadlines, lower fees and simplify procedures.

    Going public will be easier and faster with the Listing Act

    The new Listing Act dossier will promote IPOs with a number of measures:

    • Reduce deadlines for public offerings of shares (IPOs).
    • Simplify the cumbersome exit prospectuses, which would be reduced by half. Although it would still be a 300-page document, it will significantly reduce bureaucracy for companies. This means significant savings on consultants and professional services.

    The new Securities Market Act already simplifies bureaucratic obligations for listed companies 

    The recent stock market law that has just been passed in Congress is also intended to encourage the stock markets with the arrival of new companies. 

    On the one hand, it reduces issuing prospectuses for fixed-income securities such as corporate bonds. On the other hand, it incorporates the figure of SPACs (Special Purpose Acquisition Companies) into Spanish regulations. This is a formula originating in the United States that allows for a fast-track listing. The mechanism consists of listing an empty company on the stock exchange with the aim of merging it with a traditional company, which is automatically integrated into the stock exchange. Some Spanish companies are already taking advantage of this formula. For example, the Catalan company Wallbox is listed in New York thanks to a SPAC.

    The position of the National Securities Market Commission (CNMV)

    The National Securities Market Commission (CNMV) has also been working for some time to facilitate the IPO of Spanish companies. Such as the formula implemented two years ago that exempts listed companies from providing quarterly information.

    The supervisor is strongly committed to reducing bureaucratic burdens. It therefore seeks to limit the amount of information required from listed companies while preserving shareholders’ rights to know the details and performance of their investments.

    The CNMV has also proposed a reduction in the fees it charges companies for going public. The body accumulates a surplus of €12 million that goes to the Treasury and considers that this money would be more useful if it were used to reduce the burden on companies.

    And its chairman Rodrigo Buenaventura has even recently proposed that unlisted companies should also be required to report on aspects such as financial information on sustainability. The aim is to prevent unaccountability from giving them a significant competitive advantage over listed companies.

    The Spanish Securities and Exchange Commission (CNMV) estimates the investment needed to meet the challenge of the energy transition and digitalisation at 300 billion euros. However, banks are only in a position to provide 100 billion. To reach the rest of the financing, the entity points out that one of them must be the stock markets.

    The Debra directive proposal

    Finally, it should be noted that although its horizon is more long term, there is also a proposal for a European directive which aims to bring the tax burden of market transactions in line with that of interest on bank debt. It is known as the Debra directive.