How to modify the corporate purpose of a company to incorporate new activities
Patrick Gordinne Perez2024-11-14T17:25:43+00:00Changing a company’s objects is a necessary process when adapting the company’s activity to new business opportunities. In Spain, the corporate object represents all the activities in which a company is engaged, and must be clearly specified in the company’s articles of association.
What is the corporate purpose and why change it?
The corporate purpose of a company is one of the fundamental mentions in the articles of association, and determines the activities in which the entity may engage.
This element is of great importance, as it conditions aspects such as tax obligations, the activity licence and the company’s legal liability framework.
Changing the corporate purpose is often necessary when a company decides to diversify its activities, enter new sectors or adapt its operations to changes in the market.
For example, a company originally engaged in the sale of products may wish to add related consultancy services, which requires an extension of the corporate purpose.
Legal framework for the modification of the company object in Spain
In Spain, the modification of the corporate purpose is regulated by the Spanish Companies Act (Ley de Sociedades de Capital, LSC). Article 285 of the LSC provides that any change to the articles of association, including the modification of the corporate purpose, must be approved by the General Shareholders’ Meeting.
In order to make this amendment, the company must comply with a number of formal requirements and follow a specific procedure, which is explained below:
Procedure for Modifying the Corporate Purpose
The process of modifying the corporate purpose in Spain includes several fundamental stages:
- Convening of the General Shareholders’ Meeting: The modification of the corporate purpose must be approved by the General Shareholders’ Meeting. A meeting must be convened, respecting the deadlines and procedures set out in the company’s articles of association and in current legislation.
- The notice must include the agenda, clearly specifying the intention to amend the corporate purpose.
- Approval by the General Meeting: During the General Meeting, shareholders must vote on the amendment of the corporate purpose. According to the LSC, for this amendment to be approved, a reinforced majority is required, generally two thirds of the capital present or represented, unless the Articles of Association establish a higher percentage.
- Drafting the New Corporate Purpose Clause: Once the amendment has been approved, the new clause must be drafted to clearly and precisely describe the additional activities to be carried out by the company. It is important that the corporate purpose is specific enough to comply with the legal requirements, but also broad enough to allow for flexibility in operations.
- Public deed: The modification of the company object must be formalised by means of a public deed executed before a notary. This deed must be signed by the administrator or representative of the company.
- Registration in the Commercial Register: The public deed must be registered in the Commercial Register corresponding to the company’s registered office. Registration is essential for the modification to have effect vis-à-vis third parties.
Practical Considerations for the Amendment of the Articles of Association
- Clear and complete wording: It is important that the corporate purpose is drafted in such a way that it includes all the activities that the company intends to carry out. However, it is advisable to avoid an overly restrictive corporate purpose that limits the possibilities for future growth of the company.
- Legal advice: Due to the complexity of the process and the need to comply with legal requirements, it is recommended to have the advice of a lawyer specialised in corporate law to ensure that the modification is carried out correctly.
- Licensing and Permits: Depending on the new activities included in the corporate purpose, it may be necessary to obtain new administrative licences or permits. For example, if an activity subject to specific regulation is added, such as trade in pharmaceuticals, it will be necessary to comply with the relevant requirements.
Publication in the Official Gazette of the Mercantile Register (BORME)
Once the modification has been registered in the Commercial Register, it must be published in the Official Gazette of the Commercial Register (BORME).
The purpose of publication is to publicise the change made, allowing interested third parties to become aware of the company’s new activity.
Modifying the corporate purpose of a company in Spain is a process that requires the active participation of the shareholders and compliance with a series of legal requirements.
The correct modification of the company’s corporate purpose allows the company to adapt to new business opportunities and remain competitive in a changing environment.
It is essential that this process ensures that the new activities are clearly reflected in the Articles of Association, and that all the required formalities are fulfilled, from the convening of the General Meeting to the registration in the Commercial Register.
At Asesoría Orihuela Costa we offer you the advice you need to resolve any type of management related to your business activity.