How to sell my company in Spain: a step-by-step legal guide

How to sell my company in Spain: a step-by-step legal guide

Selling a company takes six phases: preparation, finding a buyer, letter of intent, due diligence, contract and closing. What is rarely explained is that the deadlines that really set the pace are not the commercial ones but the legal ones. Three of them cannot be shortened, however much of a hurry the parties are in.

If you sell through a company to benefit from the Corporate Income Tax exemption, you need a holding of at least 5% held without interruption during the year before the day of the transfer, and that requirement cannot be completed afterwards. Unless your articles of association say otherwise, the transfer procedure of an SL (Spanish private limited company) may force you to wait three months for the company to stay silent before you can sell to your buyer (Article 107.2 of the Spanish Companies Act, LSC). And if the buyer is from outside the EU (or from the EU but with ultimate beneficial ownership outside it) and your company operates in certain sectors, the prior administrative authorisation takes another three months. The regime is explained in “Buying a company in Spain as a foreigner”.

Anyone who starts thinking about these matters when a buyer is already sitting across the table finds that the most profitable decisions of the whole deal are no longer available.

The process of selling my company

Deciding what you sell and from where

Before taking any step, there are two decisions that shape everything else.

The first is what is being sold: the shares in the company or the business itself. It changes what the buyer inherits, what happens to the workforce and which indirect taxes are paid. As a seller you will almost always prefer to sell shares, because the liabilities, including contingencies you are not even aware of, stay inside the company you transfer. That does not release you from the representations and warranties you give in the contract, nor from the liabilities imposed by law. The full comparison is in “Transfer of a business vs. buying a company”.

Who sells is the second decision: you personally, or a holding company that owns the shares. The tax difference is huge. In large deals, the top marginal rate on the savings base of Personal Income Tax (IRPF) can reach 30% above €300,000, compared with an approximate effective cost of 1.25% in Corporate Income Tax when the 95% exemption in Article 21 of the Corporate Income Tax Act (LIS) applies. The catch is that the money stays in the company, and taking it out is taxed again.

This second decision has an expiry date. If the structure is not set up far enough in advance, it no longer works.

Preparation

This is where most of the price is won or lost, and it is the phase most people skip.

It means reviewing your own company before anyone else does: the chain of title to the shares, the register of shareholders, assets held in the right name, contracts properly documented, accounts free of personal items, employment matters in order. This is vendor due diligence. Whatever you find yourself can be fixed, while whatever a buyer finds usually comes at a cost.

Of that whole list, the item that delays the most sales is the first one. Article 112 LSC provides that transfers of shares that do not comply with the law or the articles of association “shall have no effect whatsoever vis-à-vis the company”. If 10% was sold to a third party in a private document, that sale is valid between them, but it has no effect vis-à-vis the company if the legal or statutory transfer regime was not followed, and the chain of title leading to you is called into question. It is a defect that can leave you without proven standing to sell what you believe is yours, and it cannot be solved at the notary on signing day. Tracing a former shareholder and executing a corrective deed takes weeks or months. Discovering it with the buyer waiting costs you either the deal or part of the price.

At the same time you prepare the documentation for the process, an information memorandum describing the business, and a realistic valuation. Realistic means verifiable, calculated on recurring EBITDA and on adjustments you can justify document by document, not on the best year in the company’s history.

Finding a buyer and keeping it confidential

Before making any move, decide whether the process will be bilateral, with a single candidate, or competitive, with several. Competitive tension pushes the price up, but it multiplies the number of people who will know you are selling.

The real risk in this phase is a leak. If your customers, your employees or your competitors learn that you are selling, the business can suffer before anything has been signed. That is why the first stage works with blind information that does not identify the company, and its identity is only revealed once a confidentiality agreement has been signed.

It also pays to know what kind of buyer you are dealing with, because each one buys different things and negotiates differently.

A trade buyer, from your sector or a neighbouring one, usually pays more because it is buying synergies: your customers, your production capacity, your team. The business is worth more to it integrated than on its own. On the other hand, it is the buyer that can hurt you most if the process falls through, because you will have shown your margins and your customer portfolio to a competitor. With this profile, confidentiality and staged disclosure stop being a formality.

A financial buyer (funds, family offices, investors) cares about returns and a future exit. Its analysis is more numerical and its process more structured, with close attention to recurring profit and debt. It will almost always want you to stay on for a while and to have part of the price depend on results.

There is a third route, the management team or the existing shareholders. They know the company, so the review is shorter and there are fewer surprises, but they usually have less financial capacity, which translates into more deferred price and a greater need for payment guarantees.

The same business can be worth very different amounts depending on who is looking at it. Sounding out more than one profile does not just raise the price. It also tells you what you are really selling.

Letter of intent

Once there is a serious candidate, you sign a letter of intent that sets an indicative price, the structure, the timetable and the rules of the process.

Be careful with the “non-binding” in the heading, because some clauses are binding from day one, starting with exclusivity, confidentiality and the allocation of costs.

On the seller’s side, two things are worth negotiating well. Exclusivity should have a fixed term rather than an open-ended one, and the price should be tied to the assumptions it is based on, so that the buyer cannot cut it for any reason it likes.

Due diligence

The buyer reviews the company: corporate, employment, tax, Social Security, accounting, contracts, assets and IP. You open a data room and answer questions in writing.

Two pieces of advice for the seller. The first is to hand over the information organised and complete from the outset. A chaotic data room does not hide problems, it magnifies them, and it drags the process out just when you most want it to be short. The second is to take care over the disclosure letter, because whatever you disclose there falls outside your warranties, and whatever you leave out remains inside them.

The full scope of this review is covered in due diligence when buying a company, and if you would rather arrive with your homework done, that is the work of compliance and due diligence.

Contract

You negotiate the sale and purchase agreement, and with it what you will actually receive: the price mechanism, the representations and warranties you give, the caps and time limits on your liability, and the payment guarantees the buyer will require.

Start with the price mechanism. With a locked box, the price is fixed on an already audited balance sheet dated before signing. You know exactly how much you will receive and there is no later adjustment, in exchange for being prohibited from taking value out of the company from that date. With closing accounts, the price is recalculated afterwards according to the debt, cash and working capital on the day you hand over the keys. It is more precise, and it is also a second negotiation once all the cards have been played. Which one suits you depends on your accounts and on how long remains until closing.

The other two are the limits on your liability and the part of the price you will not receive on day one. All three are developed in the share purchase agreement, representations and warranties, escrow and price retentions.

Closing

If the company is an SL, the transfer “must be recorded in a public document” (Article 106.1 LSC), which in practice means a deed executed before a notary.

The deed, however, does not close everything. On closing day a full sequence has to be carried out: payment of the price, delivery of the corporate documents, resignation and appointment of directors, change of bank signatories, notice of the transfer to the company (before closing day) and entry in the register of shareholders. Those last two steps determine from when the buyer is in control. The acquirer exercises shareholder rights “from the moment the company becomes aware of the transfer” (Article 106.2 LSC), and the company “shall only regard as a shareholder whoever is entered in that register” (Article 104.2 LSC). And if the buyer acquires the entire share capital, the company becomes a single-member company, which must be declared in a public deed and registered with the Commercial Registry.

Many sellers find out too late that their personal guarantees survive the sale. If you have backed the company’s loan, the equipment lease or the premises lease with your own assets, those guarantees remain in force vis-à-vis the bank or the landlord until they release them. Cancelling them requires negotiating with each creditor, and it should be an express obligation of the buyer in the contract, ideally as a condition of closing.

Some obligations also outlive the sale: non-compete, confidentiality, a commitment to stay on if you agreed to one, and the warranty period during which you remain liable.

The deadlines you cannot shorten

One year of ownership, if you sell through a company: the Article 21 LIS exemption requires a holding of at least 5% and one uninterrupted year of ownership. Article 21.3 allows no loose reading, since that requirement “must be met on the day the transfer takes place”. There is no way to complete it afterwards. If the transfer takes place eleven months and twenty days after the structure was set up, the whole capital gain is taxed. One point on how the period is counted: time during which the holding was owned by other entities in the same group, within the meaning of Article 42 of the Commercial Code, also counts. The details are in the 95% exemption under Article 21 LIS.

• Three months for the tax certificate: if the deal is an asset sale, the buyer will want the certificate under Article 175.2 of the General Tax Act (LGT), which limits its tax liability as successor. The buyer applies for it, but it needs your consent, and the tax authorities have three months to issue it, with an effect worth knowing. If they do not issue it in time, or issue it without mentioning any debts, the buyer is released from that liability. That period becomes part of the closing timetable, and it is in your interest too, because a buyer who feels secure negotiates better.
• Three months, unless the articles of association avoid it: when the sale of shares in an SL to a third party is not exempted from the company’s consent, the procedure in Article 107.2 LSC applies. You notify the directors of your intention and the company may put forward an alternative buyer.

From that point the path splits in two, and the two branches do not add up. If the company remains silent, you may sell to your buyer once three months have passed since your notice, on exactly the terms you notified. If the company does put forward an acquirer, you sell to that acquirer and the public document must be executed within one month of being told who it is. You settle all of this by reading your articles of association, not by improvising.

Six months, if you are over 65: Article 38.3 of the Personal Income Tax Act (LIRPF) allows the gain to be exempt if you use the proceeds to set up an insured life annuity, up to a limit of €240,000 and within six months of the transfer. This period runs after signing, and it is lost through oversight more often than you might think.

More than one year, if you want to report the gain as you receive it: Article 14.2.d) LIRPF lets you opt to be taxed “as the payments become due” only when more than one year passes between delivery and the due date of the last instalment. If your deferred payment falls due at eleven months, you are taxed on everything at once. This should influence how the payment schedule is designed.

Taken together, these deadlines explain why you should start preparing the sale a year and a half in advance, even though the negotiation itself takes much less time.

What decides the final price

The asking price is set by a multiple of profit. The final price is decided by other things.

The quality of the profit matters more than its amount, and the damage is not linear. Because the price is calculated by applying a multiple, every euro of EBITDA you cannot justify as recurring does not take one euro off the price. It takes off that euro multiplied. An undocumented adjustment of €50,000 can wipe several hundred thousand off the final price.

Next comes how much the business depends on you. Ask yourself what would happen to revenue if you did not turn up tomorrow. If the answer is uncomfortable, the buyer will reach the same conclusion and will protect itself with a mandatory stay-on period and part of the price tied to results. Something similar happens with customer concentration, because the more weight a single customer carries, the cheaper your company becomes. What gets valued is what happens on the day that customer leaves.

Then comes due diligence, and the discount there is not limited to the amount of whatever turns up. Unexpected findings trigger a discount for lost trust that is usually larger than the problem itself.

That leaves the part almost nobody compares properly, which is how much you actually end up receiving. The tax structure can make two identical offers leave very different amounts in your pocket, to the point where a somewhat lower offer with better tax treatment is objectively better. And how much you are paid on day one matters more than the headline figure. A high price with half of it as an earn-out over three years, based on metrics the buyer will manage, is an expectation, not a price. Always compare offers by their certain part.

Finally, your alternative to selling. If you are in no hurry and the business is doing well, you negotiate differently. If you need to close before a certain date, the buyer will end up knowing it.

Frequently asked questions

How long does it take to sell a company?

The negotiation depends on size and sector, but the minimum timetable is set by law and can be calculated. Count backwards from the planned closing date, and bear in mind that these periods do not add up. They run in parallel, and two of them are also mutually exclusive. The underlying one is the one-year holding period under Article 21 LIS, which runs from when you set up the structure and must be completed on the day of the transfer. The final-stage periods overlap with it. These are three months of silence from the company if the sale of shares goes through the Article 107.2 LSC procedure, or three months for the Article 175.2 LGT certificate if the deal is an asset sale (never both, because the first belongs to share sales and the second to asset sales), plus up to three months for foreign investment authorisation, which is processed in parallel and is usually set up as a condition precedent to closing. The result is not the sum of all of them but a good year for the tax structure and some three or four months for the closing stage.

Can I sell my company if I have shareholders who object?

You can sell your holding. In an SL, the company can only refuse consent if it notifies you, through a notary, of the identity of whoever will acquire all of your shares (Article 107.2.c LSC). And if three months pass without a reply, you are free to transfer on the terms you notified. Check your articles of association first, as they may set out a different regime.

Do I have to tell my employees?

Article 44 of the Workers’ Statute (ET) imposes information duties towards the employees’ legal representatives (or the employees themselves if there are none) before the transfer. It does not set a number of days but requires “sufficient advance notice”, and if employment measures are planned, a consultation period must also be opened. If you sell shares, that Article 44 duty is not triggered, because the employer remains the same company. This does not rule out the information and consultation rights of the employee representatives when the deal involves significant changes (Article 64.5 ET). The full regime is in “Transfer of a business vs. buying a company: legal differences”.

How much tax will I pay?

As an individual, the gain goes into the savings base of Personal Income Tax, on a scale that in 2026 reaches 30% in the top bracket. Through a company that meets Article 21 LIS, the effective cost is 1.25% in Corporate Income Tax, with the caveat that the money stays in the company.

Can I keep working at the company after selling it?

It is common, and buyers often require it. It is arranged in a separate contract and is usually linked to the variable part of the price.

What if the buyer is foreign?

The timetable and the risks change. Prior administrative authorisations may be needed, and the governing law and jurisdiction have to be decided.

Before you start

1. Decide the tax structure with a year and a half to spare: it is the only decision on this list that expires irreversibly.
2. Carry out your own review before anyone else does: chain of title, register of shareholders, assets, contracts, accounts.
3. Read your articles of association and check which procedure applies to a sale to a third party. Your minimum timetable follows from that.
4. Prepare the documentation as if you were already in due diligence: organised, complete and with every adjustment justified one by one.
5. Set your minimum acceptable price and your alternative before you sit down to negotiate, not during.

At Supra Legit Lawyers we support the whole deal, from the prior tax structure to signing and post-closing. Tell us about your case.

Legislation cited: Spanish Companies Act (Ley de Sociedades de Capital) (Arts. 104, 106 and 107) · Law 27/2014 on Corporate Income Tax (Art. 21) · Law 35/2006 on Personal Income Tax (Arts. 14.2.d, 38.3 and 66). Also cited: Art. 175.2 of the General Tax Act and Art. 44 of the Workers’ Statute.