The joint stock company: minimum capital and characteristics

The growth of the economy contemplates the support of entrepreneurial and professional activities, through the regulation of the different associative forms.

The launching of an enterprise involves the evaluation of which is the best associative model to adopt. For example, between the incorporation of a corporation and a limited liability company, the questions to be asked must consider aspects such as: the activity to be developed, the number of partners and the flexibility in the incorporation process.

In this opportunity, we focus on reviewing: what is the minimum capital for a Corporation, what are its characteristics and how it is constituted.

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What is the capital stock?

The capital stock is that which is constituted from the contributions of the partners that constitute a company, whether it is a corporation, limited liability company, partnership, cooperative, etc. These contributions can be of two types:

• Monetary contributions: money (established in euros), corresponding to an effective patrimonial contribution to the company and not consisting of a contribution of work or services.
• Non-monetary contributions: they can be movable or immovable property, assimilated rights, credit rights, companies or establishments and the valuation in euros attributed to them must be known.

The Capital Companies Law (LSC) establishes the minimum capital with which the different types of companies must be incorporated. For example:

Corporations: definition

Corporations: what are they?

A corporation (S.A.) is a form of association of a mercantile nature, characterized by the fact that its capital, divided into shares, is constituted from

the contributions of all the partners. The latter are not liable with their personal assets for corporate debts, but only up to the maximum amount of the capital they have contributed.

Together with the Limited Liability Company (S.R.L.) (also called Sociedad Limitada), it is one of the so-called capital companies.

Depending on the way the company is financed, it can be of two types:

• Open: it is financed through sources such as the issuance of shares in the stock exchange or the contribution of promoters and trustees.
• Closed: it is financed with the capital constituted by what the partners contribute.

What is the minimum capital of a corporation?

With respect to Corporations, in Article 4 - Minimum capital stock, the LSC states that:

The capital stock of the corporation may not be less than sixty thousand (60,000 euros).

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Characteristics of Corporations

1. General

In general,

• The corporate name for this type of association is free and exclusive, and must necessarily include the words "Sociedad Anónima" or "S.A.".
• Corporations whose principal place of business or operation is in Spanish territory must have their registered office in Spain.
• They are subject to the corporate income tax regime .

2. Incorporation

The process of incorporation and adoption of legal personality contemplates a series of steps to be followed for the incorporation of an S.A.:

1. Negative certification of the name of the company in the Central Mercantile Registry.
2. Application for the provisional tax identification number before the Tax Agency.
3. Signing of the de ed of incorporation of the company before a notary public.
4. Payment of the transfer tax and stamp duty.
5. Registration of the company, which will be published in the Official Gazette of the Provincial Mercantile Registry.
6. Application for the definitive tax identification number.

3. Bodies of a Public Limited Company

Since Corporations turn out to be large companies, there are bodies foreseen for their administration and proper functioning. These bodies are mainly two:

• The General Shareholders' Meeting: This is the main body of the company, of which the shareholders with voting rights are part and through which strategic and decisive decisions are made.
• The Board of Directors: This is the executive body of the company, which is responsible for the management and administration of the company. The Board of Directors:
  • It may be made up of individuals and/or legal entities (a single administrator or several), without the need to be partners, as established in the bylaws.
  • Its responsibilities include, among others, verifying the annual accounts and the management report.

4. Rights and obligations

As rights of this type of associations, the following are listed:

• The participation of the partners in the profits of the company, according to the capital they have contributed.
• The possibility of subscribing new shares on a preferential basis by the partners, in case of issue.
• The attendance and voting rights of the partners at the General Meetings, as defined at the time of incorporation.
• The self-defense of the company and its rights by means of a lawsuit before the public administrations.
• The collection of debts.
• The exercise of ownership and usufruct.

As for the obligations, these include:

• To keep its accounts, according to the applicable regulations, which includes keeping up to date:
  • the inventory book and annual accounts,
  • the minutes book with the resolutions of the General Shareholders' Meeting,
  • the book of registered shares.
• To pay the debts to which it is creditor and to carry out legal acts.
• The partners will have the obligation to disburse the capital that it was established that they would contribute at the time of the incorporation of the company.
• The others contained in the bylaws, referring to:
  • the manner of adopting resolutions,
  • the date of commencement of operations,
  • the closing date of the fiscal year,
  • the transferability of shares, etc.

In summary, the decision to incorporate a corporation responds to the determination of different factors such as:

• The need to have a significant amount of funds, which will be contributed by a significant number of shareholders.
• The type of economic activity to be carried out, according to the provisions of the Law.
• The will to limit its operation in terms of its management, capital management, dissolution, etc.

And you, do you already know if this is the model that suits you best?