Internaciontal October 2018
FOREIGN INVESTMENT IN SPAIN
By Edgar Rubio
Spain has always been an attractive country for foreign investments, either due to its good financial health (the fifth economy of the EU) or its privileged location, both from a geographical point of view and its cultural and trading ties. This reality has allowed our country to be historically conceived as a bridge country to other markets, principally: the European, North-African, South American and the Middle East markets. This scenario, together with skilled labour, first-level infrastructures, as well as an entrepreneurship boosting culture (based on Act 14/2013 of 27 September on support to entrepreneurs and their internationalisation) makes Spain a pioneering country not only in attracting foreign investment, but also in promoting it to enhance the economic growth and job creation. It is therefore not surprising that the OCDE index (“FDI Regulatory Restrictiveness Index") places Spain as the ninth country worldwide with one of the most open legal regulations as regards international investment. In this sense, the magazine “Forbes" recently published that 70 of the 100 principal global companies have branches in Spain and Thomson Reuters recently stated that 90 of the 100 main companies of the R&D sector worldwide have a subsidiary in our country.
Taking the Foreign Investment Registry (RIE) data of the Secretary of State for Trade as a reference, foreign investments in Spain exceeded 36,000 million Euros in 2017, which is a record figure, considering that these values were not achieved since 2008, just before the worst global economic crisis never witnessed before since the 1929 crash. These good results are mainly due to the creation of new contributions to companies by foreign capital, by means of new incorporations or capital increases, which have had a direct impact on the productive investment of the country and generally, on employment.
It is worth mentioning that a large portion of the international investments received in Spain during 2017 have come from the European Union; particularly, 70% of the foreign capital investments came from countries members of the Union such as, (the most relevant first), Luxembourg, Germany, United Kingdom and France. These countries are conceived as the best partners of Spain in terms of international investment. On the other hand, and although its weight is still very relevant, the United States has been downgraded from being the first investor in Spain in 2016 to the fourth position in 2017. This is partly explained by the rising European economies and the increasing divestment of the American giant in our country. The divestment from Latin America and Asia has been also significant, although not alarming, which, pursuant to the ICEX data, have fallen by 66.7% and 76.8%, respectively, compared with the previous year. As regards the most attractive activities for foreign investment in our country, we highlight gas, electricity supply, telecommunications, financial services and the real estate activity as the flagship productive investment pursuant to an ICEX study.
By regions, the Communities of Madrid, Catalonia and the Basque Country are conceived as the three Golden Autonomous Communities, since they arise the keenest interest from international investors. Particularly, the Community of Madrid is by far the region in Spain with the greatest volume of foreign investments, situation that some experts justify on the fall of investment in Catalonia as a result of the recent political tensions for the territorial crisis between the Catalan and the State governments. In particular, the weight of Catalonia in respect to the whole State has fallen from 20.1% in 2016 to 13% in 2017 (pursuant to the statistical data of the Spanish Export and Investment Institute).
Furthermore, it is worth mentioning that our country has not only become an attractive destination for foreign multinationals, but it also seeks to promote investment of Spanish companies abroad, which, translated into reality, means more Spanish brands with more weight in the international economy. In fact, pursuant to the Report of Activities 2017 prepared by the Spanish Forum of Renowned Brands and taking the "Atlas of the leading Spanish brands " as a source, there are 849 Spanish brands renowned out of the national territory. In other words, Spain, additionally to attract investment from abroad, strives to expand its business network abroad.
Looking to the future and in terms of foreign investment in our country, the most recent indicators remain favourable to growth. Pursuant to the data of the Foreign Investment Registry (RIE), direct foreign investment in Spain in the first three months of this year 2018 has grown by 22.2% more compared with the same period of the previous year, reaching 8,410 million Euros. In net terms, growth was of 463.3%, leading to 6,565 million Euros, and the principal investors were, as in 2017, mainly European countries; particularly, Germany, Luxembourg and The Netherlands, underlining the surprising emergence of China and Canada. Having said this, we can only be optimistic in view of the positive role developed by our country on internationalisation, which Spain is still developing and which is expected to carry on developing both the foreign investment in Spain and the promotion of the internationalisation of Spanish companies abroad.
COMPANIES IN MEXICO
The Mexican company discipline is not significantly different from the Spanish discipline and is principally regulated by the General Companies Act and, exceptionally, by standards related to companies engaged in activities which, due to their strategical importance, require a special regulation and more direct control from the authorities, such as banks, insurers, pension funds and listed companies.
As in Spain, there are also capital and personal companies offering foreign investors a wide range of legal frameworks in Mexico. From a practical point of view, the most important aspect is possibly that any type of company may be incorporated with practically irrelevant capital. This is also applicable to the Mexican equivalent of the Spanish joint stock companies, i.e., the Sociedad Anónima de Capital Variable, whose flexible structure and equity autonomy has converted this company, together with the Sociedad de Responsabilidad Limitada de Capital Variable, into the most common investment instruments in Mexico.
For this reason, we will particularly focus on these two types of companies in respect to other existing companies or investment methods in Mexico, which are less used.
The Sociedad Anónima de Capital Variable and the Sociedad de Responsabilidad Limitada de Capital Variable are fully equity independent, that is, the shareholders’ equity is totally separated from the company’s equity. The recent legislative reforms, which are in force as of 1 January 2012, do not stipulate a minimum limit for the stock capital, but it is recommended to incorporate companies with certain capital amount to provide for minimum initial solvency. The stock capital is very flexible because, unless the variations refer to the fixed minimum amount of the company capital, all capital increases or reductions on the variable portion may be carried out by means of a shareholders’ meeting which must not be notarised. Another advantage is the possibility to hold ordinary and extraordinary meetings with no need of a formal meeting if 100% of the stock capital is present or represented by means of letters-proxies. The minimum number of shareholders set forth by the General Companies Act is 2 (two).
The material difference between these two types of companies is that Joint Stock Companies issue shares that circulate with endorsement, such as debt securities, while in Limited Liability Companies, members are not represented by shares or debt securities. Limited Liability Companies may refuse to, if members may decide so, appoint an Auditor, which is mandatory for Joint Stock Companies.
The requirements to incorporate a Mexican company are the following: 1) Obtaining of the authorisation to use the Name of the company by the Secretariat of Economy; 2) Appearance of the founding members in the incorporation or granting of powers of attorney to local representatives in Mexico exclusively to this end; 3) Determination of the Directors of the company (at least, two, establishing a Chairman and a Secretary among them) or, if any, the Sole Director and determination of an Auditor, if any; 4) Appointment of attorneys and types of powers of attorney to be granted.
In Mexico there are basically four types of powers of attorney:
- Power for litigation and collection purposes: to represent the company in court and for administrative procedures.
- Power for management purposes: to represent the company in any act within its corporate purpose, which may not imply the disposal of real estate, the granting of loans or the issuance of debt securities.
- Power for ownership purposes: to dispose of the real estate of the company.
- Power for debt securities purposes: to obtain loans and open, close and operate banking accounts.
The company shall be incorporated before a Notary Public and once incorporated, it shall be registered with the Public Registry of Commerce and the National Foreign Investments Registry, if the company has any foreign investor. In order to fulfil the recent legislative provisions on money laundering control and prevention, Mexican Notaries require certain additional documentation from foreign investors. However, such documents are easy to be obtained and will not significantly delay the incorporation process.
Additionally, we must say that the Stock Exchange Act provides for the precept of Sociedad Anónima Promotora de Inversión or SAPI. Such company has become progressively important given the flexibility granted by the legislator to allow the issuance of different series of voting shares, such as the special limit to voting or the distribution of the company profits. With the coming into force of the reforms of the General Companies Act of June 2014, Joint Stock Companies have become practically as flexible as SAPI, so that the opportunity to use one or the other should be analysed on a case-by-case basis.
Finally, in September 2016, the Sociedad por Acciones Simplificada or SAS was introduced in Mexico. It is a simplified regime of company which may be incorporated without a Notary Public, by means of an on-line system of the Secretariat of Economy. However, this new vehicle has, among others, the following restrictions that limit its scope to a great extent: i) all shareholders must be natural persons; 2) shareholders of a SAS may not be simultaneously controlling shareholders in another capital company; iii) the annual income of the SAS may not exceed 5 (five) millions of Pesos. If such limit is exceeded, then the company shall be obliged to be transformed into another type of capital company or otherwise, shareholders shall be jointly and severally liable without limitation to third parties and (iv) shareholders shall have an advanced e-signature and a Mexican tax code, requirements which would difficult an investment in the SAS by shareholders residing abroad.
With the collaboration of the law firm Cannizzo, Ortiz y Asociados, S.C.