SPAIN Law and Practice Contributed by: Miguel Cases, Toni Barios, Joaquín Fabré and David Navarro, Cases & Lacambra
• Vessels, aircrafts, vehicles and machinery – docu- mented by means of chattel mortgages ( hipotecas mobiliarias ) need to be registered in the relevant Movable Assets Registry. Chattel mortgages attract stamp duty except for mortgages over vessels if those are formalised by means of a private docu- ment. • Business establishment ( establecimiento mercantil ) – the mortgage covers the business premises and associated assets. The mortgagor should either own or lease the premises. The scope of assets in the mortgage varies but can extend to fully paid merchandise and raw materials if expressly agreed upon. This mortgage is not usually used as it attracts stamp duty. Pledges with transfer of possession In order for the pledge with transfer of possession to be perfected, this requires the possession of the pledged asset to be transferred to the creditor or a third party. For non-physically transferable assets, certain actions freely agreed between the parties, like formalising the pledge as a póliza or notifying the underlying debtor, are seen as equivalent to the transfer of possession. This form is generally free from stamp duty. Typical assets subject to a pledge with transfer of possession are the following. • Shares – there are two main types of shares usually pledged which will determine the required formali- ties applicable. Private limited liability companies ( sociedades limitadas ) require annotation in the book of registered shareholders ( libro registro de socios ) and in the ownership titles ( títulos de propiedad ). Public limited companies ( sociedades anónimas ) require annotation in the book of regis- tered shares, ownership titles and in the share cer- tificates ( títulos multiples ) which should addition- ally be delivered to the creditors. In case of listed shares, the required formalities are: annotation in the registry book, notification to the custodian and issuance of the certificate of legitimation. • Bank accounts – common practice is that the account holder is notified through a notarised let- ter. • Credit rights – common practice is to notify the underlying debtor through a notarised letter, although it is also usual to only notify the under-
lying debtor upon the occurrence of an event of default for commercial, strategic, or sensitive purposes. Other forms of in rem security interest • Pledges without transfer of possession – these pledges do not require asset delivery but need reg- istration in the appropriate movable assets registry for perfection. Non-possessory pledges can be documented in a póliza , avoiding stamp duty. • Pledges over trade receivables – these are often sidestepped due to their complexities, recurrent expenses and potential data and confidentiality issues. Yet they are usually required for specific financings like asset base financings or special situations financing. • Promissory mortgages – although they do not create security interest, promissory mortgages are frequently used as a defensive measure over real estate assets without incurring stamp duty costs. To convert them into a real mortgage, stamp duty will have to be paid. 5.2 Floating Charges and/or Similar Security Interests As explained in 5.1 Assets and Forms of Security , there is no equivalent under Spanish law to the univer- sal floating security seen in English law debentures or the all-asset security under New York law in a single document. Instead, every asset or right category must be outlined in distinct pledge or mortgage documents, which need to be notarised by a Spanish notary pub- lic and, in some cases, registered before the relevant Public Registry. In addition, if there are any alterations to the assets or rights, a notarial update may also be required, and sometimes, this update also needs registration. 5.3 Downstream, Upstream and Cross- Stream Guarantees Under the Spanish legal framework, directors have an inherent responsibility to perform their roles with unwavering loyalty and diligence, ensuring alignment with prevailing laws, the company’s by-laws, and its intrinsic interests ( interés social ).
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