Do you need to set up a business in Spain and have concerns about sticking to the rules? Spain is an attractive destination for foreign investment for various reasons (geographical location, healthy economy, good climate, etc) and many foreign businesses decide to set up an affiliated branch or subsidiary. This post delves into the importance of issuing a power of attorney to a lawyer or business advisor who can operate in Spain.
What is a power of attorney for setting up a company in Spain?
A power of attorney is a public document authorized by a notary public that allows an individual or a company to act on behalf of another to carry out certain activities, such as those we are discussing in this post – those steps required for creating a company in Spain.
The person or company that grants the power of attorney defines how broad it will be, stating such actions that can be carried out by the authorized signatory. A power of attorney can be revoked by the grantor at whichever moment deemed appropriate by sending a deed of cancellation, a document which is also issued before a notary public.
What requirements must be met by the power of attorney of a foreign company granted in favour of an advisor or lawyer in Spain?
The power of attorney needs to be issued by the managing body of the foreign company and should specify if the signatory binds the foreign company with his or her sole signature or whether further signatures are required to do so.
In some cases the foreign companies that wish to set up businesses in Spain and know that they should grant a power of attorney, confuse shareholders with the managing body of the company, thus issuing a power of attorney in the name of a shareholder or a business partner in an invalid way because partners are not allowed to grant powers of attorney in the name of the company to third parties. Authority to grant a power of attorney is solely with the managing body.
As a consequence of the above, the power of attorney should be issued by the board representing the foreign business:
- The board of directors – rather than the CEO, whose powers of representation may be limited – should provide a signature from the Secretary or Chairperson.
- The sole director
- The joint or several directors.
What issues may arise with regards to the power of attorney?
Therefore, without going into too much detail, certain issues that can arise with regards to a power of attorney include:
- That the power of attorney has not been granted by the board of directors of the foreign company.
- That the special powers are not properly specified, in such a way that they are considered insufficient for the purposes of setting up a business in Spain or to carry out other formalities.
- That a certificate of good standing is not provided, nor other such documentation required to work with banks and the tax office. This certificate proves that the company exists in the country of origin, is authorized to carry out its stated business, that the authorized person signing the power of attorney is a member of the board of directors and that the power of attorney is in date. A sworn translation of the document must be provided with The Hague Convention Apostille.
- The content of the power of attorney is not as per the requirements. In order to be suited to purpose the power of attorney must include:
- The name of the company
- The registered business address
- The identification details of the signatory, the role they hold in the company and the date of appointment.
- The identification details of the authorized signatories (i.e. the names of the lawyers or business advisors who represent the foreign entity via the power of attorney).
- The powers they are granted to exercise in line with the service for which the power of attorney has been requested.
- A power of attorney can be considered invalid if the person named therein is not entitled to represent the foreign company in such matters. There are examples of powers of attorney that have been granted by the majority shareholder rather than by the board of directors of the company.
When is a power of attorney used?
A power of attorney is necessary for several formalities such as:
- In order to appear before a Notary Public and set up a business in Spain by means of a notarized deed of incorporation.
- So as to obtain a personal identification number known as a NIE for the director (this can be requested from the Treasury by filling out the 030 form). A company registration number (CIF) for a non-resident business can be applied for as soon as the director has a NIE.
- To appear before the Tax Authority authorities in order to register the business, pay taxes such as VAT or income tax (IRPF).
- Carry out formalities with Social Security authorities such as registering the business address or adding employees to the Spanish employment tax regime.
- Appoint a tax representative in accordance with article 46 of the General Tax Law and also as stipulated in article 10 of the Law for Non-Resident Taxpayers.
- Hire workers for the company in Spain.
- Sign utilities contracts for the business premises or the office space that the company is going to use.
As mentioned above, a power of attorney is essential for setting up a business in Spain and obtaining support from a lawyer or a business advisor with knowledge of how to carry out these steps can help speed up the process.