In depth

Title I is divided into two chapters, the first of which contains a set of preliminary provisions relating to the objective and subjective scope of the regulatory text, incorporating limitations and exclusions applicable to the structural modifications regulated therein; the second chapter contains a set of common provisions applicable to all structural modifications, without differentiating between domestic and cross-border operations, in relation to the drafting of the structural modification project, the reports of the management body and independent experts, the preparatory disclosure, the approval of the projected operation, the protection of shareholders and creditors, and the validity of the registered operation.

As indicated in the Explanatory Memorandum of the new RDL, the common provisions of Title I are completed in Title II of the same legal text with a number of specific rules for each of the domestic structural modifications whose regulation is contained in four separate chapters dealing with conversions due to corporate form changes (Chapter I), mergers (Chapter II), spin-offs (Chapter III) and the global disposal of assets and liabilities (Chapter IV).

Title III refers to European cross-border structural modifications, including different sections for conversions (Section 1), mergers (Section 2), divisions (Sections 3 and 4), and global disposal of assets and liabilities (Section 5), whereas Title IV includes the regulation of extra-European crossborder structural modifications.

Therefore, we find a change of structure in the regulatory body of the new RDL compared to the previous Act 3/2009, of 3 April 2009, taking into account the common provisions applicable to all structural modifications and the specific rules for each type of structural modification.

Regarding the domestic structural modifications and, particularly, focusing on domestic mergers and divisions, the main amendments introduced by the RDL are highlighted below:

1. Merger or division project. The minimum content of the project is extended, requiring, among others, the inclusion of the proposed step plan to carry out the operation, the implications of the operation for creditors, and the guarantees, personal or in rem, that are offered to them; the details of the cash compensation offer to the shareholders who have the right to dispose of their shares, participations or, if applicable, quotas; or the proof of being up to date in the fulfillment of the tax and Social Security obligations.
2. Report of the management body. The content of the report of the management body is extended to include two separate sections for the shareholders and for the employees (or separate reports will be prepared), which must be made available to the shareholders and the employees' representatives or, in their absence, to the employees themselves, one month prior to the date of the general meeting that approves the operation. The section addressed to the shareholders shall not be required when all the shareholders have consented thereto. The section addressed to the employees shall not be required when the company and its branches, if any, do not have more employees than those who are part of the administrative or management body or the modification consists of a domestic transformation.

Furthermore, the directors' report on the modification project shall not be necessary when the structural modification resolution is adopted unanimously by all the companies participating in the amendment at a general meeting in which all shareholders are present or represented.

Independent expert report. The content of the independent expert report is extended to include the expert's opinion on the adequacy of the cash compensation offered to the shareholders entitled/who have the right to dispose of their shares or quotas. In addition, if requested by the directors, the report may contain an assessment concerning the adequacy of the guarantees offered to creditors. Regarding leveraged mergers, the obligation previously existing on the independent expert report to determine the existence of financial assistance has been removed.

3. Preparatory disclosure. The content of the preparatory disclosure is extended, the merger or spinoff common project must be disclosed on the company's website or deposited with the Commercial Registry, as already established in the former legal text and, additionally, (i) a notice informing the shareholders, creditors and the employees' representatives or, where there are no such representatives, the employees themselves, that they may submit comments with regard to the project to the company no later than five (5) business days prior to the general meeting; and (ii) the independent expert report, if required, excluding confidential information contained therein, if any. The publication or deposit of the aforementioned documents must be made at least one (1) month prior to the meeting at which the structural modification shall be approved. It shall not be necessary to publish or deposit the aforementioned documents or announce the possibility of formulating comments whenever the operation is unanimously agreed at a meeting in which all shareholders are present or represented.
4. Protection of shareholders. The right of shareholders to dispose of their shares, participations, or quotas in exchange for an adequate cash compensation is included, provided they have voted against the approval of the project, particularly in domestic conversions and in mergers by absorption of a 90% owned company, when the reports of directors and experts on the merger project have not been drafted.

Regarding the above, the new RD establishes that shareholders who consider that the exchange ratio set out in the project is not adequate shall have the right to demand a supplementary cash payment before the Commercial Court or the arbitral tribunal stipulated in the articles of association provided they have not voted in favor of the approval of the merger agreement or do not have voting rights. However, the surviving company may compensate the shareholders by means of its own shares or quotas instead of the cash payment.

5. Protection of creditors. Regarding the protection of creditors, creditors whose claims antedate the disclosure of the project and who do not agree with the guarantees offered or with the lack thereof in the project and have notified the company of their disagreement, have the right to, within a period of one (1) month for domestic operations and three (3) months for cross-border operations: (i) refer to the Commercial Registrar, if an independent expert report has been issued deeming the guarantees offered to be inadequate (in that case the Registrar shall notify the company so that it may extend or offer new guarantees and in the event the creditor is then dissatisfied, he/she may request the Commercial Court for the guarantees to be provided by the company); (ii) refer to the Commercial Court, if an independent expert report has been issued deeming the guarantees offered to be adequate (in that case the Court shall notify the Registrar); and (iii) request the Registrar to appoint an independent expert (if no expert report has been previously issued) to give an opinion on the adequacy of the guarantees.

The exercise of this right by the creditor shall not paralyze the structural modification operation or prevent its registration in the Commercial Registry.

The new RDL introduces the possibility for the management body of the company carrying out or participating in an operation to attach for disclosure, together with the project, a statement accurately reflecting the current financial situation as of a date no earlier than one (1) month prior to the disclosure of such statement. This statement shall state that it is not aware of any reason why the company, after the operation is effective, would not be able to meet its obligations when they fall due. The issuance of such a statement by the management body shall constitute an assumption, in the absence of proof to the contrary, that the guarantees for creditors presented are adequate or necessary.

6. Inclusion of a new type of simplified merger. The new RDL introduces a new type of simplified merger, adding the possibility of applying the simplified regime when the companies are owned by partners having identical shareholdings in all the merging companies.
7. Special reference to the liability in the spin-off. Regarding the protection of creditors in the spinoff, in addition to the rules set forth in the common provisions, it is added that, concerning the debts arising prior to the disclosure of the spin-off plan but not due at that time and which had 4 remained in the liabilities of the company being divided, the beneficiary companies will be jointly and severally liable, together with the latter, up to the limit of the net assets attributed to each of the beneficiary companies and the net assets remaining in the company being divided.

The joint and several liability of the companies participating in the spin-off will expire after five years.

In addition to the amendments mentioned in the previous sections, the following amendments applicable exclusively to cross-border operations are highlighted, although taking into consideration that for a cross-border structural modification same requirements as for a domestic one shall apply and, also, those required in the specific section on cross-border structural modification (both in the general and special provisions). In case of discrepancy or inconsistency, the special provisions for cross-border conversions shall prevail.

As for specific rules for "European cross-border structural modifications," the following aspects shall be highlighted: 

1. It is specified that the preparatory disclosure of the cross-border structural modification agreement shall be made in accordance with the provisions applicable to domestic modifications, although it is indicated that the participant company or companies must in any case (and therefore also in simplified operations) file certain documentation with the Commercial Registry) indicated in Article 89.
2. The employees' representatives or the employees themselves, as the case may be, shall be consulted and informed before the draft or the directors' report is decided in order to provide the employees with a reasoned response prior to the approval by the general meeting.
3. The requirement of the directors' report has been removed in all cases for cross-border mergers, thus applying the same exceptions as for domestic structural modifications.
4. The expert report shall be mandatory in all cases unless agreed by the shareholders of the companies involved.
5. Regarding the protection regime for shareholders of Spanish entities participating in a structural modification which, as consequence of the same, will be subject to a foreign law, it is specified that they will have the right to sell their shares or quotas to the company to which they belong or to the shareholders or third parties proposed by the latter in exchange for an appropriate cash compensation, provided they have voted against the modification. This right has been extended to the case of non-voting shares and quotas as in domestic mergers.
6. The term for the Commercial Registrar to carry out the legality control of the structural modification and to issue a pre-operation certificate is established at three (3) months, which may be extended for another three (3) months in the event of serious doubts indicating that the operation is set up for abusive, fraudulent or criminal purposes. Furthermore, in order to request the certificate, it is 5 required to provide the Commercial Registry with certain information that shall accompany the General Meeting's cross-border merger resolution, which has to be made public.
7. The Commercial Registry may also extend the deadline due to the complexity of the operation and shall notify the company of the reasons before the expiry of the deadlines.
8. Specific provisions are established as to how to dispute the rejection of the pre-operation certificate, as well as regarding its validity and transfer to the competent authority of the destination Member State through the system of interconnection of registers.
9. When the converted company, the acquiring company, a company being divided or the transferring company is Spanish, the structural modification shall be effective as from its registration with the Commercial Register for the jurisdiction where the latter company is located. However, in case of a spin-off, the registration may not take place before the Commercial Registry of the Member State of the recipient company notifies the Commercial Registry for the jurisdiction where the company being divided is located, through the system of interconnection of registries, that the recipient company has already been registered. Otherwise, the provisions of the law of the State of the latter company shall apply.

With respect to extra-European cross-border structural modifications, the provisions related to intra-European structural modifications shall be applicable with certain exceptions and special rules.

Finally, the first transitional provision of the RDL states that the new law shall apply to structural modifications of corporate companies whose projects have not yet been approved by the companies involved prior to the entry into force of the RDL.

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