Main changes introduced by the preliminary draft of the law on structural changes of commercial companies

The aim of the Preliminary Draft is to integrate the entire regime of structural changes, internal and cross-border, into a common framework, taking as a starting point the Directive itself, whose solutions for intra-European operations are extended as far as possible to internal operations.

Below are the most relevant changes introduced by the Preliminary Draft with respect to the current Law 3/2009, of 3 April, on structural changes of commercial companies, applicable to all structural changes, both internal and cross-border, with the specialities mentioned in each case.

Scope of application

It expressly includes within the scope of application companies in insolvency proceedings or subject to a restructuring plan or, in the case of micro-enterprises, a continuation plan, excluding only cross-border transformations where the company is in insolvency liquidation.

Structural modification project

The minimum content of the draft is extended to include, inter alia, the following issues:

• The indicative timetable for completion of the transaction.
• The implications of the transaction for creditors and any security provided to them.
• Accreditation of being up to date with tax and Social Security obligations.
• Details of the offer of cash compensation to shareholders who may have the right to dispose of their shares or, as the case may be, quotas.
• For all cross-border structural changes, information on the procedures determining the arrangements for employee participation in the resulting company or companies in accordance with the provisions of Law 31/2006 of 18 October 2006 on employee involvement in European public companies and European cooperative companies shall additionally be mentioned.

Report of the management body

The minimum content of the directors' report is extended and it now consists of two separate sections, one for shareholders and one for employees. Furthermore, the Preliminary Draft establishes in the event that the company does not have a website, the possibility of sending this report to shareholders and employees by e-mail at least one month (or 6 weeks in the case of cross-border structural modifications) before the date of the meeting.

As a novelty, the following issues should be explained in the shareholders' section:

• The cash compensation to shareholders and the method used to determine it.
• The consequences of the transaction for the shareholders.
• The possible gender impact of the transaction on the management bodies, as well as its impact on corporate social responsibility.
• The rights and remedies available to shareholders.

This shareholders' section is not necessary if so approved by all the shareholders with voting rights in the participating company or companies and, in addition, all persons who, where applicable, according to the law or the bylaws, are entitled to vote.

The employees' section shall explain the possible consequences of the structural modification on employment. Where the management body receives any opinion from the employees in respect of this section, the shareholders shall be informed of that opinion, which shall be attached to the report. Such an employees' section shall not be necessary where the company and its subsidiaries, if any, have no employees other than those who are members of the management body.

Independent expert report

The minimum content of the expert report on the project is also extended to include an opinion on the adequacy of the cash compensation offer to shareholders and, optionally, an assessment of the adequacy of the securities offered to creditors.

This independent expert's report shall not be necessary when it has been agreed by all shareholders with voting rights in the participating company or companies and, in addition, by all persons having such rights, without prejudice to its necessity in the case of demergers as regards the valuation of the assets and liabilities contributed to the capital of the beneficiary companies.

Furthermore, it is expressly stated that it will always be optional in cases of internal transformations and internal global transfers of assets and liabilities.

Preparatory publicity of the structural modification resolution

The prior publicity regime currently foreseen for the projects of mergers and demergers is applied to all structural changes and the content of such publicity is extended.

The publication of the structural modification project must be accompanied by the following documents:

• A notice informing shareholders, creditors and employees of the company that they may submit, no later than 5 working days before the date of the general meeting, comments on the project; and
• The independent expert's report, where appropriate, excluding any confidential information it may contain.

Resolution of the general shareholders' meeting on the approval of the structural modification

The general shareholders' meeting is required to "take note" of the directors' reports and, where appropriate, of the opinions submitted by employees in relation to these reports, as well as of the reports of independent experts and, where appropriate, of the comments submitted by shareholders, creditors or employees, which the general shareholders' meeting must take into account when deciding whether or not to approve the project.

Shareholders protection regime

The scope of application of the regime concerning the dissenting shareholders' right of separation (currently provided for internal transformations, intra-European cross-border mergers and the transfer of the registered office abroad, and called right of transfer in the Preliminary Draft) is extended, albeit with important nuances, to all those structural changes as a result of which the shareholders of the participating Spanish companies will be subject to a foreign law.

In particular, this right of transfer may be exercised not only in favour of the company to which the dissenting shareholder belongs but also in favour of the shareholders or third parties proposed by that company.

In addition, the deadline for exercising this right of transfer is reduced from one month to 20 days from the publication of the structural modificaction resolution.

Likewise, in the case of mergers and demergers, the current wording regarding the right to challenge the exchange rate held by dissenting shareholders who do not wish to exercise the right of transfer is improved, so that they may claim supplementary cash compensation before the competent commercial court or the arbitration tribunal provided for in the bylaws within 2 months from the date on which they received or should have received the initial compensation.

Creditor protection regime

The traditional right of objection (or the right to obtain "adequate" security) is restricted to those creditors who have notified the company (no later than 5 working days before the date of the general shareholders' meeting) of their objection to the security offered in the project and have demonstrated (i) that the satisfaction of their credit rights is at risk and (ii) that they have not obtained adequate security from the company.

In addition, the period for creditors' objection (currently set at 1 month from the publication of the resolution on the structural modification) is extended to 3 months from the publication of the structural modification project.

This common creditor protection regime does not apply in the case of internal transformations.

Employees protection regime

Apart from the changes introduced in the regulation of employees' rights to information and consultation through the report of the management body and their right to submit comments on the project in advance of the general shareholders' meeting, the protection of employees' rights of participation or co-management in management or supervisory bodies established in Law 31/2006 of 18 October 2006 on employee involvement in European public companies and cooperatives, currently provided for cross-border mergers, is also extended to the remaining cross-border structural changes.

Changes with regard to cross-border structural changes

In addition to the changes mentioned in the previous sections, the following changes applicable only to cross-border transactions should be noted:

• The deadline for the Commercial Registrar to carry out the legality control of the structural change and to issue the prior certificate is set at 3 months, extendable for a further 3 months if he/she has reasonable suspicions that the transation is being carried out for abusive, fraudulent or criminal purposes.
• Specific provisions are laid down concerning the appeal against the rejection of the prior certificate, its validity and its transfer to the competent authority of the Member State of destination via the system of interconnection of registers.
• When the transformed company, the absorbing company, the demerged company or the transferring company is Spanish, the structural change shall take effect as from its registration in the Commercial Registry corresponding to that company. Otherwise, the provisions of the legislation of the State of that company shall apply.
• A specific regulation is created for extra-European cross-border structural changes, to which the provisions relating to intra-European structural changes will apply with certain exceptions and special rules.