BRANCH IN SPAIN

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A foreign entrepreneur can operate in Spain through a branch. The opening of a branch requires the execution of a public deed, which must be registered in the Mercantile Register, along with the formalities indicated in the Section 6.1 of Chapter 2. From the point of view of foreign investment law, the branch does not need to be endowed with capital, although certain branches of entities with financial activities, due to their special activity, are required to have allocated capital.

The decision of the DGRN of 24 May 2007 ruled that the creation of a branch in Spain of a foreign company does not require a certificate of denomination from the Central Mercantile Register; in short, a new legal entity is not created and therefore it is not necessary to require what is required for the creation of a company (the certificate from the Central Mercantile Register that the name of the company to be created has not been registered). The branch office must have a legal representative who is authorised by the company to manage the affairs of the branch office. Apart from this requirement, there are no formal administrative or management bodies. Except for the obvious differences, in terms of internal structure and organisation, a branch functions to a large extent in its business relations with third parties like a company.

The choice between incorporating a branch or a legal entity in Spain may be influenced by commercial reasons; for example, a company may be seen as providing a more "stable" presence than a branch. Beware that branches, lacking legal personality, are not eligible for Spanish public subsidies, and a bank will demand guarantees from the parent!

LEGAL FORMALITIES AND COSTS FOR SETTING UP A BRANCH IN SPAIN BY A FOREIGNER

The establishment of a branch office usually takes between 6 and 8 weeks.

One branch is an extension of an existing company, which has a physical presence in a different location from that of the parent company, but which remains an integral part of the parent company. The branch carries out business activities similar to those of the parent company and is under its control and management.

The branches are often used by companies wishing to expand their presence in a specific geographic area without the need to create a new legal entity. The branches can be established both inside and outside the company's home country and can be managed by local staff or by employees of the parent company who move to the branch temporarily.

Some of the advantages of having a branch office are the ability to reach new markets, improve customer service in specific geographic areas and increase brand presence in different locations.

However, there are also some disadvantages. Branches can be more expensive than other types of business expansion due to establishment and operating costs. In addition, branches may be subject to different regulations and legal requirements than the parent company.

What types of branches are there?

There are several types of branches, for example:

1. Sales branch: is responsible for the marketing of products or services in a specific geographic area.
2. Production branch: is engaged in the manufacture or production of goods or services at a location other than the head office.
3. Service branch: offers specialised services in a specific geographic area, such as consultancy services, legal advice or financial services.
4. Research and development branch: is engaged in research and development of products or services at a location other than the head office.

Each type of branch may have its own particular characteristics and needs.

How to set up a branch?

To set up a branch of a company in another country, certain steps must be followed, which vary depending on the legislation and regulations of the country where the branch is to be established.

The general steps that are usually followed in setting up a branch are described below:

1. Market research: Before opening a branch, it is important to study the market and the competition in the country where you want to establish a branch. This will allow you to assess the feasibility of the project and adapt the business model to the particularities of the market.
2. Selection of country and location: Once market research has been carried out, the appropriate country and location for the branch office must be selected.
3. Branch registration: legal and tax procedures must be followed to register the branch in the country where you want to establish it. This includes obtaining a tax identification number and registering the company with the relevant authorities.
4. Incorporation of the branch: In some countries, it is necessary to incorporate a branch as a separate legal entity, while in other countries, the branch may be an extension of the parent company. In either case, the legal procedures for setting up the branch must be followed.
5. Obtaining permits and licences: Depending on the sector of activity and the country where the branch is to be established, additional permits and licences may be required to operate legally.
6. Recruitment of staff: local staff must be hired for the branch office and comply with the country's labour and tax laws.
7. Opening of the branch: Once the above procedures have been completed, the branch can be opened and start operating.

It is important to It should be noted that the procedures for setting up a branch may vary depending on the country where the branch is to be established, and it is advisable to seek legal and tax advice to ensure compliance with all regulations and requirements.

Differences between a representative office, a subsidiary and a branch office

A representative office, a subsidiary and a branch are ways of establishing a presence in another country or territory.

The differences between these three options are presented below:

• Representative office: This option is a way of having a presence in a country or territory, without setting up a legal entity. A representative office is an entity that does not have the capacity to conduct commercial activities, and its purpose is to represent a company in another country. Its activity is therefore limited to the promotion of the parent company's products or services, networking and market research. The representative office cannot conduct direct business operations and is not entitled to sign contracts or conclude business agreements in its own name.
• Subsidiary: A subsidiary is a separate legal entity from the parent company, incorporated in another country or territory. The subsidiary has its own registration, manages its own finances and conducts business in its own name. A subsidiary has autonomy and decision-making capacity, but is subject to the supervision and control of the parent company.
• Branch: A branch is an extension of the parent company in another country or territory, which functions as a legal entity linked to the parent company. The branch may conduct business in its own name, but is subject to the supervision and control of the parent company.

In a nutshell, the main differences between a representative office, a subsidiary and a branch are the ability to conduct business, autonomy and the legal relationship with the parent company.