When setting up a business, it is normal that many doubts arise about the procedures to be followed or the regulations to be complied with. One of the first things you will have to do if you wish to set up a trading company is to draw up the articles of association. And for this very reason, in this article we will tell you what they are, what they are for, what they should contain and how they can be amended.
What are the articles of association and what are they for?
Index of contents
The articles of association are a set of rules that establish the structure of the company, the roles and responsibilities of the partners and directors and the guidelines for managing the company.
Their main purpose is to provide a clear frame of reference that facilitates decision-making and avoids conflicts between partners due to management.
They must be included in a public deed and registered in the appropriate Commercial Register.
Essential content of the articles of association under the Companies Act
In order for the articles of association to comply with the law and their purpose, they must contain a number of mandatory mentions detailed in Article 23 of the Capital Companies Act:
- Company name. This is the name that uniquely identifies the company. The company name must be different from that of other companies already registered in the Mercantile Register, so before choosing a name it is important to request a negative name certificate.
- Company activity. This section describes the economic activity that the company will carry out, i.e. what it does. You can opt for a broad corporate purpose or one that contains activities related to the main activity in order to avoid having to amend the articles of association if you want to expand the activity.
- Registered office. This is the address where the company’s head office is located and where its main activities are carried out. The registered office determines the applicable regulations and the Commercial Register in which the company must be registered.
- Share capital. The capital is divided into participations or shares, depending on the type of company (limited liability or public limited company). The articles of association must include the amount, the shares or holdings into which it is divided, their value and the correlative numbering.
- Governing bodies. The articles of association must specify the organisational structure in which there will be a General Meeting and a governing body which may be: a sole administrator, joint or joint administrators or a board of directors. The articles of association must establish the number of directors, their method of election, the term of office and, where appropriate, the system of remuneration.
- Mode of deliberation and adoption of resolutions. This section regulates the requirements for convening and holding meetings of the company’s collegiate bodies, as well as the manner of adopting resolutions.
- Date of commencement of operations. If the articles of association do not regulate this, it is considered to be the date on which the memorandum of association is executed.
Articles of association of a limited liability company (SL): special features
A limited company (SL) or limited liability company is one in which the liability of the partners is limited to the share capital contributed, so that the partners are not liable for the debts with their personal assets.
Some of the most relevant particularities of this type of company are the following:
- The name of the company must be followed by the expression Sociedad de Responsabilidad Limitada (S.R.L.) or Sociedad Limitada (S.L.).
- The minimum share capital is one euro and there is no maximum and contributions can be in cash or in kind.
- The share capital is divided into shares.
- The minimum number of partners is one and there is no maximum.
- The liability of the partners is limited and joint and several.
- The partners can be workers or capitalists.
In Spain, this type of company is the most common, especially in small and medium-sized enterprises (SMEs).
Amendment and registration of articles of association
The articles of association are not unalterable, but can be amended to adapt them to internal or external changes in the commercial company.
Thus, amendments must follow the following procedure laid down by law:
- Drafting of the amendment proposal. The initiative may come from the directors or the shareholders.
- Convening of the General Meeting. The shareholders must be convened to discuss and approve the amendment of the articles of association. The notice must include: the reason for the amendment, the points to be amended and the shareholders’ right to review the text.
- Approval of the amendment. On the date set, the General Meeting meets and votes are taken. Once the amendment has been approved, the minutes of the General Meeting are drawn up.
- Execution of the deed. The minutes, together with the certification, are notarised before a notary.
- Registration in the Mercantile Register. Finally, the deed is registered in the Mercantile Register so that the amendment is effective and enforceable against third parties.
Therefore, as you may have seen, articles of association are very important documents for commercial companies. We must not forget to always count on an expert consultancy capable of drafting and reviewing them before any registration. Leialta is the opportunity you have been looking for, we will take care of all the doubts that may arise.
