Sale of shares in a limited company between shareholders in Spain

Sale of shares in a limited company between shareholders in Spain

The sale of shares in a limited company (SL) between shareholders is common in the life of a company: the departure of a founder, adjustments in the distribution of capital, the entry of a partner who strengthens their position, or reorganizations within the group. Although it seems like a simple operation, the Capital Companies Act (LSC) and, above all, the internal statutes and agreements, impose steps and precautions that must be respected in order for the transfer to be valid and enforceable against the company.

Regulation of the transfer of shares between partners

The starting point is that the shares of a limited liability company (SL) are not freely transferable like the shares of a public limited company (SA). The legal rule is to restrict transferability in order to protect the stability of the group of shareholders. Therefore, before discussing price, it is advisable to review three documents: the articles of association, the shareholders’ agreement (if any), and the Shareholders’ Register.

The articles of association usually contain limits, preemptive rights, and procedures; the agreement may add communication obligations or valuation formulas; and the Register allows you to check who is a shareholder, with what percentage, and whether there are any encumbrances.

Pre-emptive rights and internal agreements

Transfers between shareholders are usually more flexible than transfers to third parties. The LSC allows the articles of association to declare transfers between shareholders, spouses, ascendants, or descendants, or within the same corporate group to be free. If the articles of association are silent on this matter, transfers to third parties require consent of the company (resolution of the board of directors), but between shareholders it is normally sufficient to follow the notification procedure and, if applicable, respect the right of first refusal. In practice, even between shareholders, it is advisable to formally notify the company of the transaction so that the administrative body can update the Register and avoid subsequent conflicts.

Procedure for selling shares in a limited company

The typical procedure begins with an offer or communication from the selling partner to the administrative body indicating their intention to sell, the number of shares, the identity of the buyer, and the price or valuation criteria.

If there is a right of first refusal, the other shareholders (and, subsidiarily, the company) have a period of time to match the conditions. If no one exercises this right, the sale to the designated partner can be completed. If someone does exercise it, the seller is obliged to transfer the shares to the person who takes their place. When there is disagreement about the value, the LSC provides for recourse to an independent expert appointed by the Commercial Registry to set the price, which provides neutrality and closes the discussion.

The price can be set freely, but it is common to rely on simple and verifiable methods: EBITDA multiples, valuation by comparables, adjusted net worth, or hybrid formulas that incorporate objectives (earn-outs).

The important thing is to document the criteria transparently and, if there is a shareholders’ agreement, to respect the methodology agreed therein. In internal transactions, much friction arises from poorly explained valuations; a valuation note attached to the contract avoids misunderstandings.

From a formal point of view, the transfer of shares must be recorded in a public document before a notary. The deed identifies the seller and buyer, the number of shares, the price, and the form of payment, and includes the usual statements: ownership and free transferability, absence of encumbrances, compliance with the articles of association, and, where applicable, waivers of preemptive rights or certification that the period has elapsed without exercise. Once the deed has been signed, the administrator records the change in the Shareholders’ Register and issues, if applicable, the new certificate of ownership.

Warnings regarding the sale of shares in a limited company in Spain

There are three practical warnings that should not be overlooked:

• The first is the matrimonial property regime: if the shares are joint property, the spouse may need to give consent to the transfer to avoid future challenges.
• Second, money laundering prevention: depending on the case and the notary, you will be asked for enhanced identification and a declaration of beneficial ownership; providing this documentation in advance saves delays.
• Third, charges and encumbrances: if there are liens or attachments on the shares, it will be necessary to obtain releases or consents from creditors before closing.

From a tax perspective, for the seller who is a natural person, the sale generally generates a capital gain or loss in personal income tax due to the difference between the transfer price and the adjusted acquisition value (including expenses). In normal share transactions, the transfer is exempt from transfer tax and is not subject to VAT as it is a securities transaction, although there are anti-abuse rules in very specific cases (for example, when the purchase of shares gives control of an entity whose assets are mainly real estate). Therefore, it is prudent to request a specific tax note before signing if the company’s balance sheet is heavily concentrated in real estate.

A purchase agreement usually includes the price and payment schedule, minimum representations and warranties, conditions precedent if any internal authorizations are missing, and, where applicable, non-competition or transition agreements to ensure an orderly handover. If the SL has a shareholders’ agreement, it is crucial to verify whether tag along (right of accompaniment) or drag along (obligation to drag along) applies, even in the case of sales between shareholders; sometimes these mechanisms are triggered by thresholds of percentage transferred.

In summary, selling shares between shareholders is feasible and, with proper documentation, safe and efficient. The key is to follow the statutory procedure, agree on a clear valuation, formalize it in a public document, and immediately register it in the Shareholders’ Register. With these foundations in place, the sale not only transfers the percentage, but also preserves trust between the shareholders and the continuity of the company. If this is accompanied by a brief tax review and a review of the shareholdership agreement, the closing will be smooth and without surprises.