The public limited company: minimum formation capital and characteristics

The growth of the economy contemplates the support of entrepreneurial and professional activities, through the regulation of the different forms of associations.

The launching of an enterprise involves the evaluation of which is the best associative model to adopt. For example, between the incorporation of a Public Limited Company and a Private Limited Company, the questions to be asked must consider aspects such as: the activity to be developed, the number of partners and the flexibility in the incorporation process.

In this opportunity, we focus on reviewing: what is the minimum capital for a Limited Company, what are its characteristics and how it is constituted.

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What is share capital?

The share capital is that which is constituted from the contributions of the partners that constitute a company, whether it is a public limited company, limited liability company, partnership, cooperative, etc. These contributions can be of two types:

• Monetary contributions: money (stated in euros), corresponding to an effective contribution of assets to the company and not consisting of work or services.
• Non-monetary contributions: these may be movable or immovable assets, assimilated rights, credit rights, companies or establishments and the valuation in euros attributed to them must be known.

The Capital Companies Act (LSC) establishes the minimum capital with which different types of companies must be incorporated. For example:

Public Limited Company: definition

Public Limited Companies: what are they?

The Public Limited Company (S.A.) is a form of association of a mercantile nature, characterised by the fact that its capital, divided into shares, is constituted from

the contributions of all the partners. The latter are not liable for the company's debts with their personal assets, but only up to the maximum amount of the capital they have contributed.

Together with the Limited Liability Company (S.R.L.) (also called Limited Company), it is one of the so-called capital companies.

Depending on the way the company is financed, it can be of two types:

• Open: it is financed through sources such as the issue of shares on the stock exchange or the contribution of promoters and trustees.
• Closed: it is financed by the capital constituted by what the partners contribute.

What is the minimum capital of a public limited company?

With regard to Public Limited Companies, in Article 4 - Minimum share capital, the LSC states that:

The share capital of a public limited company may not be less than sixty thousand (60 000 euros).

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Characteristics of Public Limited Companies

1. General

In general,

• The company name for this type of association is free and exclusive, and must necessarily include the words "Sociedad Anónima" or "S.A.".
• Public limited companies whose principal place of business or operation is in Spanish territory must have their registered office in Spain.
• They are subject to the corporate income tax regime .

2. Incorporation

The process of incorporation and adoption of legal personality contemplates a series of steps to be followed for the incorporation of an S.A.:

1. Negative certification of the name of the company in the Central Mercantile Register.
2. Application for a provisional tax identification number at the Tax Agency.
3. Signing of the de ed of incorporation of the company before a notary.
4. Payment of the transfer tax and stamp duty.
5. Registration of the company, which will be published in the Official Gazette of the Provincial Commercial Register.
6. Application for the definitive tax identification number.

3. Bodies of a public limited company

As public limited companies are large companies, there are bodies for their administration and proper functioning. There are mainly two such bodies:

• The General Meeting of Shareholders: This is the main body of the company, of which the shareholders with voting rights are members and through which strategic and decisive decisions are taken.
• The Board of Directors: This is the executive body of the company, which is responsible for the management and administration of the company. The Board of Directors:
  • It may be made up of individuals and/or legal entities (a single or several directors), without the need to be shareholders, as established in the company's articles of association.
  • Its responsibilities include verifying the annual accounts and the management report.

4. Rights and obligations

The following are listed as rights of this type of association:

• The participation of the partners in the profits of the company, according to the capital they have contributed.
• The possibility of preferential subscription of new shares by the members, in the event of an issue.
• The attendance and voting rights of the shareholders at general meetings, as defined at the time of incorporation.
• The self-defence of the company and its rights by means of a lawsuit before the public authorities.
• The collection of debts.
• The exercise of ownership and usufruct.

In terms of obligations, these include

• Keeping its accounts, in accordance with the applicable regulations, which includes keeping up to date:
  • the inventory book and annual accounts,
  • the minutes book with the resolutions of the General Meeting of Shareholders,
  • the register of registered shares.
• Paying debts owed to it and performing legal acts.
• The shareholders shall be obliged to pay up the capital that they were required to contribute at the time of incorporation of the company.
• The others contained in the articles of association, relating to:
  • the manner of adopting resolutions
  • the date of commencement of operations,
  • the closing date of the financial year,
  • the transferability of shares, etc.

In summary, the decision to incorporate a public limited company is determined by a number of factors:

• The need to have a significant amount of funds, which will be contributed by a significant number of shareholders.
• The type of economic activity to be carried out, as stipulated by law.
• The will to limit its operation in terms of its management, capital management, dissolution, etc.

And you, do you already know if this is the model that suits you best?