THE FINANCIAL SPECIFICATION AND THE EXCHANGE OF SECURITIES.

THE FINANCIAL SPECIFICATION AND THE EXCHANGE OF SECURITIES.

Despite the fact that commercial legislation and tax legislation should go hand in hand, due to a criterion of coherence in the legal system, and use the same words and definitions for the same cases, this is not always the case, and it is common to find some figures , regulated in tax legislation and not in commercial legislation, or with other figures whose tax application requires additional requirements to those regulated in commercial legislation.

For this reason, a correct understanding and proper application of commercial law, especially corporate law, requires knowledge of corporate tax, and in the case of lawyers, especially the rules of the corporate tax law regarding the tax regime. special of mergers, divisions, contributions of assets, exchange of values, since they are the ones that protect, in most cases, the convenience of these operations.

Due to their lack of definition in commercial legislation, I am going to refer to two types of operations provided for in the corporate tax law, such as the financial division and the exchange of securities, and with the attempt to legally delimit their concept I hope I can help, who may have doubts about its application, and who do not have the feeling, which at least has occurred to me, that tax advisors speak in another language.

These operations are intended, fundamentally, to facilitate the reorganization of companies.

THE FINANCIAL SPINDLE

If we follow the definition given by Articles 69 and 70 of the Law on Structural Modifications of Companies of the company spin-off operation, essentially following what the Corporations and Limited Liability Companies Laws already said, it turns out that a spin-off , It can be total or partial.

The full split involves the extinction of a company, with the division of all its assets into two or more parts, each of which is transferred en bloc by universal succession to a newly created company or is absorbed by an already existing company, the partners receiving a number of shares, participations or quotas of the beneficiary companies proportional to their respective participation in the company being divided.

The partial split It is the transfer en bloc by universal succession of one or several parts of the assets of a company, each of which forms an economic unit, to one or several newly created or already existing companies, receiving the partners of the company that is being divided a number of shares, participations or social quotas of the beneficiary companies of the division proportional to their respective participation in the company that is being divided and reducing the share capital by the necessary amount.

The corporate tax law follows the same line, adding in its article 76, the possibility that partners receive  compensation in money that does not exceed 10 percent of the face value or, in the absence of nominal value, of a value equivalent to the nominal value of said values deducted from its accounting, with the clear purpose of not denying the existence of a spin-off, when the proportional attribution of the shares or participations of the new company is not possible. entity or the existing one to the partners of the spun-off company.

The spin-off, by definition, requires the existence of at least two companies, one that is split, that is, from which a part of its patrimony leaves, and a beneficiary company, which receives that part of patrimony, and which will belong to the same partners, in the same proportion as they were in the spun-off company, with the tax exception of receiving the 10% cash adjustment

The financial spin-off is a variety of the partial spin-off regulated in the Corporate Tax Law, but to which the Structural Modifications Law does not make any reference.

The specialty of the financial spin-offconsists of considering an economic unit, a set of shares or participations in the capital of other entities that confer the majority of the social capital in thisace.

In this case, if the spun-off company maintains in its assets, at least, participations of similar characteristics in the capital of another or other entities or a branch of activity, and receives in exchange values representing the social capital of the beneficiary company, which must be attributed to its partners in proportion to their respective shares, and, where appropriate, compensation in money that does not exceed 10%, which we have previously indicated, we are facing the financial split.

THE EXCHANGE OF VALUES.

In order to understand the exchange of values, I believe that we must start from the regime of special non-monetary contributions that regulates the corporation tax law in its article 87.

Pursuant to the same, fulfilling certain requirements, the contributions of assets related to economic activities or branches of activity, made to companies either at the time of their constitution or in a capital increase, are subject to the tax regime of mergers and divisions. .

Parallel to what happens with the division, the corporate tax law considers that there is an economic unit or branch of activity, when a is contributed to a company, under certain conditions, a set of shares or partitions of companies.

In accordance with article 76.5 of the Corporation Tax Law, the operation by which an entity acquires a share in the capital stock of another that allows it to obtain the majority of the rights of ownership will be considered an exchange of securities representing the capital stock. vote in it or, if it already has said majority, acquire a greater participation, by attributing to the partners, in exchange for their values, other representatives of the capital stock of the first entity and, where appropriate, compensation in money that does not exceed 10 percent of the face value or, in the absence of face value, of a value equivalent to the face value of said securities deducted from their accounting.

The precept is not easy to understand, but ultimately a securities exchange is a non-monetary contribution, in which the element contributed is made up of shares or participations in the capital of an entity that confer the majority of voting rights and that can be verified either in a company constitution or in a capital increase, according to the following scheme:

1st Entity 'A' acquires a stake in the capital of Entity 'B'.

2nd This acquisition must allow «A» to obtain the majority of the voting rights, or if it already has said majority, to acquire a greater participation, in «B».

3rd "A" acquires the securities from the partners of "B" and in exchange delivers his own securities.

That is, the partners exchange their shares or shares in "B" for shares or shares in "A", through its contribution to the capital stock of the latter.

In any case, since this is the most common formula for exchanging securities, it can be verified by other means such as the exchange of shares or participations, in the event that the consideration for the contribution was made with a charge to the treasury stock owned by the purchaser..

The circumstance may arise that the same operation can simultaneously meet the tax requirements of the exchange of securities provided for in article 75.6 LIS and those of the special contributions of article 87 LIS. For such cases, the Directorate General of Taxes considers the exchange over the non-monetary contribution to be preferable to the extent that all the requirements are met in both cases.

We have NOT made reference to the consequences that derive from the application of the special tax regime, since it exceeds what is intended with this entry, and in any case they coincide with what we already indicated in the entry on the taxation of mergers.

I would only like to end by pointing out that as a result of the modification of the corporate tax regime carried out by law 27/2014, the special regime will be applied to such operations, unless expressly indicated otherwise, compared to the previous system that required an option for it.

 

 

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