The Capital Companies Act (Royal Legislative Decree 1/2010 of 2 July) comprehensively regulates this type of contribution, establishing strict formal requirements designed to protect both shareholders and company creditors, and differentiating the applicable regime depending on whether the company is a public limited company or a limited liability company.
Concept and Formal Requirements
Non-monetary contributions are those in which a shareholder transfers assets or rights other than money to the company to form part of the share capital. Article 63 of the Capital Companies Act (LSC) provides that “the deed of incorporation or the deed implementing the share capital increase must describe the non-monetary contributions, including their registration details where applicable, the valuation in euros attributed to them, and the numbering of the shares or holdings allocated”.
This requirement for a detailed description and precise valuation responds to the need for the share capital to accurately reflect the assets contributed, ensuring the protection of creditors and minority shareholders against possible artificial overvaluations.
Types of Non-Monetary Contributions
Movable and Immovable Property
The contribution of movable or immovable property is one of the most common forms of contribution in corporate practice. Article 64 of the LSC provides that “if the contribution consists of movable or immovable property or rights equivalent thereto, the contributor shall be obliged to deliver and clear the title to the asset being contributed in accordance with the terms established by the Civil Code for a contract of sale”.
This reference to the rules governing sales implies that the contributing shareholder is liable for the unencumbered possession of the asset and for any latent defects it may have. Furthermore, the same provision states that “the rules of the Commercial Code regarding the same contract shall apply in matters of the transfer of risks”, which is particularly relevant where the asset perishes or deteriorates between the time of the contribution agreement and its actual delivery.
Credit Claims
Article 65 of the LSC specifically regulates the contribution of credit claims, establishing that “if the contribution consists of a credit claim, the contributor shall be liable for the legitimacy of the claim and the solvency of the debtor”.
This dual liability implies that the contributing partner guarantees both that the claim actually exists and belongs to them (legitimacy), and that the debtor has the financial capacity to satisfy it (solvency). This method is particularly useful in debt-to-equity swap transactions during corporate restructuring processes.
Companies or Commercial Establishments
The contribution of entire companies or commercial establishments is subject to specific provisions set out in Article 66 of the LSC, which states: “If a company or establishment is contributed, the contributor shall be obliged to remedy the defect in its entirety, if the defect or eviction affects all or any of the elements essential to its normal operation”.
Furthermore, paragraph 2 of the same provision stipulates that “individual rectification shall also apply to those elements of the contributed company that are significant in terms of their asset value”, thereby establishing a two-tiered level of protection: comprehensive for the economic entity and specific for assets of material importance.
Securities and Other Assets
The contribution of shares, partnership interests, debentures or other securities is expressly permitted. Where securities listed on regulated markets are contributed, Article 69(a) of the Companies Act establishes an exception to the expert’s report, valuing them “at the weighted average price at which they were traded on one or more regulated markets during the last quarter preceding the date of the actual contribution”.
Valuation Regime in Public Limited Companies
Independent Expert Report
Article 67.1 of the LSC provides that “in the incorporation or capital increases of public limited companies, non-monetary contributions, whatever their nature, must be the subject of a report drawn up by one or more independent experts with professional competence, appointed by the commercial registrar of the registered office”.
The report must contain, in accordance with paragraph 2 of the same article, “a description of the contribution, including its registration details, if any, and the valuation of the contribution, setting out the criteria used and whether it corresponds to the nominal value and, where applicable, to the share premium of the shares issued in return”.
Crucially, paragraph 3 provides that “the value assigned to the contribution in the articles of association may not exceed the valuation carried out by the experts”, thereby establishing an absolute upper limit.
Liability of the Expert
Article 68 of the LSC regulates the liability of the valuation expert, establishing that “he shall be liable to the company, the shareholders and the creditors for any damage caused by the valuation”, being “exonerated if he proves that he has applied the diligence and standards appropriate to the task entrusted to him”. The limitation period for such claims is four years.
Exceptions to the Expert Report
Article 69 of the LSC sets out five circumstances in which an independent expert’s report is not required, notably the contribution of securities listed on regulated markets and the contribution of assets whose fair value has been determined “within the six months prior to the date of the actual contribution, by an independent expert with professional competence not appointed by the parties”.
Liability Regime
In Limited Liability Companies
Article 73.1 of the LSC establishes a strict regime of joint and several liability: “The founders, persons holding the status of partner at the time the capital increase was agreed, and those who acquire any paid-up shareholding through non-monetary contributions, shall be jointly and severally liable to the company and to the company’s creditors for the reality of such contributions and the value attributed to them in the deed”.
This liability, in accordance with Article 75 of the LSC, “shall lapse five years from the date on which the contribution was made”. However, Article 76 of the LSC provides that “partners whose non-monetary contributions are subject to expert valuation in accordance with the provisions applicable to public limited companies are excluded from joint and several liability”.
In Public Limited Companies
Article 77 of the LSC provides that “the founders shall be jointly and severally liable to the company, the shareholders and third parties for the reality of the capital contributions and the valuation of non-monetary contributions”, this liability extending “to the persons on whose behalf they have acted”.
Conclusion
Non-monetary contributions constitute a legal instrument of great practical utility in limited companies, allowing share capital to be structured through the incorporation of various assets. Their correct configuration requires precision in the description of the assets or rights contributed, an appropriate valuation that complies with legal requirements, and compliance with the transfer formalities applicable to each type of asset.
At Belzuz Abogados, S.L.P., with over 65 years’ experience and a presence in Spain and Portugal, our Commercial Law Department specialises in the structuring of corporate transactions, the valuation of non-monetary contributions and comprehensive advice on company law.