Macarena Méndez July 4 2022 Branches do not constitute independent legal entity CMS Albiñana & Suárez de Lezo | Corporate & Commercial - Spain Macarena Méndez Corporate & Commercial In a 14 March 2022 resolution, the General Directorate of Legal Affairs (DGSJFP) confirmed that setting up a branch does not create a separate legal entity.The resolution confirmed a decision made by a commercial registrar, which refused to register the address change of a branch of a German company in Spain, as the branch had decided on this during its general meeting.The commercial registrar denied the address change on the basis that, while branches do have certain autonomy, they are not independent legal entities and there are no shareholders. Therefore, it is not possible to hold a general shareholders' meeting for the branch. The decision falls on the parent company, which must then implement it either through its administrative body or by a shareholders' meeting agreement, if required by the company's bylaws or internal regulations.The appellant responded that in 2020 they had changed the branch's address following the same procedure without any issue or refusal from the commercial registrar to file the deed.The DGSJFP resolution dismissed the appeal filed by the company and confirmed the registrar's decision stating that:the general directorate cannot issue a ruling on the fact that a different document from the one under dispute received a different assessment in a different commercial registry; andthe submitted document was too ambiguous, as it was unclear whether the decision referred to the parent company or the branch.Although the appellant did not make any substantive claims as to which corporate body was competent under German law, the resolution took the opportunity to state which body would be able to make this kind of decision for companies subject to Spanish law (although this is not applicable to the case at hand).The resolution recalled that the creation of a branch entails, for the parent company, an agreement to open a secondary location that will have a permanent representation and certain autonomy in its management. The branch will then oversee all or part of the company's activities, and legal activities are carried out on its behalf. However, the creation of a branch does not give rise to a new legal entity, which is the case, however, when a subsidiary is created.Therefore, unless otherwise provided for in the articles of association, a change in a branch's address would be the responsibility of the parent company's administrative body and not of the general meeting or the branch's permanent representation.For further information on this topic please contact Macarena Méndez at CMS Albiñana & Suarez de Lezo by telephone (+34 91 451 9300) or email ([email protected]). The CMS Albiñana & Suarez de Lezo website can be accessed at www.cms.law.