The protection of the shareholder in the new Structural Modifications Law.

The new Royal Decree-Law 5/2023 transposes the “Mobility Directive”, completely revoking Law 3/2009, on Structural Modifications, and integrating in its regulatory body both internal and cross-border modifications.

What are the main changes introduced by the Structural Modifications Law?

  • The introduction of a specific legal regime for transformations, creating common rules for all structural modifications and special rules for the different types of internal modifications (both for internal and cross-border modifications). Therefore, it will be necessary to consider the specific case in order to determine which rules will be applied.
  • Establishes spin-offs with the formation of new companies.
  • The possibility of spin-offs in favor of existing companies.
  • The merger regime is modified, regulating for the first time non-European mergers.

How does its transitional regime work?

Well, although the New SML entered into force on July 29, 2023, the provisions of the SML 2009 will apply to those structural modifications whose projects were approved by the general meetings of the companies before the entry into vigor of the new SML

Regarding the different transactions, we will focus on the documentation in the procedure and how it is in cross-border transactions. In addition, this law establishes new developments in the protection of shareholders in both internal and external structural modifications.

What documentation will be required for internal operations?

The project will have practically the same content as in the previous SML. However, it is required:

  • Formulation of the project in case of transformation.
  • Mention of the implications of the transaction for creditors, highlighting the guarantees to be offered to them, if any.
  • It must provide details on the cash compensation intended for the shareholders who have the right to dispose of their shares or participations.
  • Documents demonstrating compliance with fiscal and social obligations such as proof of being up to date in the payment of taxes and social security contributions also need to be included.

What should the report of the management body include?

The report should include separate sections for shareholders and employees, or different reports should be prepared for each group. Thus:

  • The one for shareholders will address the proposed cash compensation for those who decide to dispose of their shares, detailing the method used to determine it and the rights available.
  • The one for employees will explain the labor implications, any significant changes in employment conditions or in the location of the activity centers, and their impact on the affiliates. The directors have to make these documents available at least one month before the meeting that approves the transaction, unless otherwise agreed by all the shareholders.

What if it is mandatory?

When it is mandatory, it should include an opinion on whether the compensation offered to shareholders is adequate and an evaluation, at the request of the management body, on the adequacy of the guarantees offered to creditors.

In addition, the New SML clarifies that the expert’s report should only deal with the adequacy of the capital contributed when the beneficiary company is a corporation and eliminates the obligation for the report to mention the existence of financial assistance in mergers where a company acquired debt to obtain control of another company participating in the merger.

How does Preparatory Publicity work?

Currently, except for structural modifications approved at a universal meeting and by unanimous vote of all shareholders with voting rights, requires publication on the website or filing with the Commercial Registry, at least one month prior to the general meeting, of the draft structural modification.

The shareholders, creditors and employee representatives (or the employees themselves) must be notified of the opportunity to submit comments up to five working days before the general meeting.

And what is new with respect to the procedure for cross-border modifications?

In order to provide legal certainty for cross-border structural modifications, each State must issue a “pre-operation certificate” (in Spain by the Mercantile Registrar) to ensure the legality of the operation.

If during the review process, the Registrar suspects that the transaction seeks abusive, fraudulent or criminal purposes, he may request additional information from the competent authorities, and will make an overall evaluation, even with the help of an independent expert.

If he determines that the operation has abusive or fraudulent purposes, the certificate will be denied and the company will be informed, with the possibility of appeal. Otherwise, the certificate will be issued and the company will be notified.

What are the protection mechanisms for shareholders that the law introduces?

Regarding the protection of shareholders in internal operations, the mechanisms are:

  • The right of separation:
  • Or the right of alienation in certain cases of transformation and merger, for example, in mergers by absorption with a direct participation of 90% or more, but not in its totality.

The New SML allows shareholders to dispose of their shares and receive cash compensation and includes the possibility of exercising the right of disposal by shareholders who vote against the transaction, or who are holders of non-voting shares.

If the shareholders are not satisfied with the cash compensation, they have a period of two months to file a claim before the commercial court or the arbitration tribunal to obtain additional cash compensation.

In the case of mergers and spin-offs, the shareholders can dispute the exchange ratio within two months from the date of publication of the resolution of the general meeting. In case they consider the compensation to be inadequate, they can claim a cash payment.

However, in order to provide greater protection and options to shareholders in a situation of structural modifications, the resulting company can compensate them with its own shares or participations instead of cash.

What about external transactions?

Finally, shareholders of Spanish companies involved in a structural modification under foreign law will have the right to dispose of their shares or participations and receive adequate cash compensation, especially those who vote against the resolutions and the holders of non-voting shares and participations.

In cross-border mergers and spin-offs, the shareholders will be able to dispute the exchange ratio established in the project and claim a cash payment if they have not exercised their right of disposal or consider the exchange ratio to be inadequate.


Susana Domínguez Romero 
Jurist - Legal Advisor

Contact information
 + 34 697 302 341

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