Review procedurei Definition of foreign investor and investment
Under Spanish law, foreign investors are defined as individuals not resident in Spain, legal entities domiciled abroad and foreign public entities.
With regard to foreign investment, this would include:
- holdings in Spanish companies;
- establishment and increase of capital allocated to branches;
- subscription for and acquisition of marketable debt security issued by residents;
- holdings in foreign investment funds registered with the CNMV;
- acquisition of property sited in Spain and valued at more than €3,005,060.52, or any investment from a tax haven jurisdiction regardless of the value of the property; and
- formation of or participation in joint ventures, foundations, economic interest groupings, cooperatives and co-ownerships if the total value exceeds €3,005,060.52, or any investment from a tax haven jurisdiction regardless of the amount.
The review procedure by the relevant competent authority of an acquisition of an interest in, or an asset of, a Spanish company (or the concession of a licence) in the sectors described in Section II, in which an authorisation is required, differs between sectors and varies depending on the type of investment; in some cases, the nationality of the acquirer (i.e., EU versus non-EU investors) also introduces certain peculiarities. Because of the limited scope of this chapter, only a brief overview of the main features of this procedure is provided.
The authorisation period ranges from 30 days to six months, depending on the affected sector. It is important to highlight that, in general, these authorisation periods may be suspended by the relevant competent body (by means of information requests), and the period can therefore be extended. As a general rule, if a resolution denying the acquisition is not issued after expiry of the specified period, authorisation can be presumed.
In the case of authorisations related to the financial sector, the information that must be provided in the authorisation request is broadly described in the applicable regulations, and generally aims to offer proof of the investor's integrity, experience, solvency and its ability to comply with all the applicable sectoral legislation.
Except in the case commented on in Section II.vi pertaining to the energy sector, authorisations generally operate as a condition precedent, and the transaction cannot be closed until authorisation is obtained.
During the review process, the public bodies are obliged to keep the information confidential. However, the dissemination of information between different departments has an inherent risk of leakage. In the event of a leak, the existence of the transaction could reach the media, but normally information provided to the regulator is not leaked.
With the exception of competition files, in which other players in the sector may express their position regarding the potential acquisition, authorisation processes are handled only with the interested parties (the acquirer or the buyer, or both, as the case may be).
A public resolution denying an authorisation is subject to administrative or judicial challenge, or both.iii Competition
Companies planning to enter the Spanish market should take into consideration the fact that the acquisition of, or merger with, companies active in Spain may be subject to a mandatory merger control review by the competition authorities. This mandatory review regime implies an obligation on the acquiring company or on the merging parties to notify the deal and to suspend its execution until its approval by the authorities.
Transactions that may be subject to merger control review are mergers of two independent companies, acquisitions of sole or joint control over undertakings, and the creation of a joint venture.
A notification and suspension obligation will apply provided that certain thresholds are met. In this regard, it is important to take into account that two sets of rules apply to transactions affecting the Spanish market: EU merger control rules and Spanish legislation. For transactions that do not reach the EU thresholds (typically those of a smaller scale), Spanish merger control legislation may apply. According to this legislation, transactions must be notified to the NCMC if one of the following alternative thresholds is triggered: (1) if the transaction results in the acquisition or increase of a market share of 30 per cent or more in the relevant market in Spain, or (2) if the combined turnover of the relevant undertakings in Spain amounts to €240 million, provided that at least two of the undertakings concerned have a turnover of €60 million in Spain.
However, transactions are exempt from the notification obligation when the turnover or assets in Spain of the acquired company do not exceed €10 million, as long as the parties do not have an individual or joint market share of 50 per cent or more in any of the markets concerned.
Public takeover bids will not be subject to the suspension obligation provided in the Spanish merger control legislation, provided the following conditions are met: (1) the transaction must be notified to the national competition authority within five days of submission of the bid to the CNMV, and (2) the acquirer must not exercise the voting rights attached to the shares acquired, or must do so only to maintain the full value of those investments and on the basis of a derogation granted by the competition authority.