A branch office in Spain is set up through the granting of a notarial deed and its inscription in the Spanish mercantile registry (for example in Madrid). The European Union has enacted legislation with respect to the setting up of a branch in order to make it easier for companies to expand and to have a presence in another member state. Spain has transposed that legislation in the Reglamento del Registro Mercantil in which one can find the Spanish requisites.
Right of Establishment
The setting up of branches is part of the right of establishment which is one of the key freedoms under the Treaty on the Functioning of the European Union: “restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.”
Legislation makes a difference between companies from (European Union) member states and companies that come from third countries that incorporate/ register a branch. The difference is reflected in different requisites for registration.
The requisites for the establishment of a branch can be found in the Eleventh Council Directive 89/666/EEC of 21 December 1989 concerning disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State.
(Dis) Advantages over incorporation
In general the setting up of a branch takes less administrative effort and has no capital requirements compared to the incorporation of a local company. On the other hand a company is not able to isolate the risk that comes with doing business to just the branch. Any consequences will directly hit the company that has established the branch. The incorporation of a local business would offer such protection.
If you have any questions on the establishment of a branch office in Spain, you can contact us or call us directly on 0034 610 739 364.