Public deed as collateral. Notary Vía Augusta 4
Introduction:
The sale and purchase of company shares in a Limited Liability Company (S.L.) is much more than a simple economic transaction. It is a legal act of enormous significance that can alter the balance of power between the partners, define the future of the company and, if it is not carried out with the proper guarantees, become a source of countless problems.
Currently, our preventive legal security system offers a solid umbrella of protection through its formalization by means of a public deed before a Notary. However, a recent Preliminary Draft Law Against Fraud proposes replacing this model with a system of constitutive registration in the Commercial Registry, based on private documents with electronic signatures. This change, far from being a modernization, represents a leap into the void that puts the security of our current system at risk.
The public deed is not a formality, but an investment in security.
When the transfer of company shares is formalized in a public deed, the Notary, as an independent public official, carries out a series of controls that are the basis of preventive legal security in our country. These guarantees are not mere formalities, but pillars that protect the partners, the company, and society as a whole:
- Reliable identification and assessment of legal capacity:
The Notary not only identifies the parties, but also assesses their legal capacity for the act, preventing identity fraud and ensuring that the signatories fully understand its scope and consequences.
- Legality control and impartial advice:
The Notary ensures that the transaction complies with the law and the company's bylaws, protecting the rights of all partners (including those who do not take part in the sale). In addition, the Notary provides impartial and free advice, explaining the consequences of the act to all parties.
- Control of means of payment:
The origin and destination of the money are verified, leaving a clear trace of the transaction, a crucial element in the fight against money laundering.
- Traceability and certain date:
The public deed is a document with an unquestionable date and is archived in the notarial records, guaranteeing its preservation and traceability indefinitely, safe from loss, manipulation, or destruction.
The proposed reform: a leap into the void for legal certainty.
The Preliminary Draft proposes that the transfer be valid not because of the agreement formalized before a Notary, but because of its registration in the Commercial Registry, which would be carried out by means of a mere private document with electronic signatures. This proposal, under an appearance of efficiency, hides profound risks:
- 1. The danger of opacity: a blow to the fight against money laundering and the financing of terrorism.
The fight against money laundering and the financing of terrorism is a priority for Spain and the European Union.
Notarial intervention is a fundamental filter in this fight. The Notary has the obligation to identify the beneficial owner and report any suspicious transaction. With a private document, this control disappears. The door is opened for front men and criminal structures to operate with opacity, without leaving a reliable trace. We must not forget the Polish precedent: a similar system caused serious “contamination” of the business fabric by mafias, forcing the country to reverse the reform and return to the security of the public deed.
- 2. Higher costs and less efficiency for citizens and businesses.
The supposed simplification is, in reality, an increase in costs and a brake on the economy:
- False savings: The citizen will lose the impartial and free advice of the Notary, being forced to hire lawyers or external advisors. To that cost, the registry fee must be added. The result is a more expensive process that economically benefits a very limited group.
- Blockage of legal transactions: The notarial system allows extraordinary efficiency. In the same morning, several linked transactions can be signed (a sale of shares, a declaration of sole ownership, and the appointment of a director, for example), with immediate effects. The registry inscription system, by its nature, can delay each step for weeks, paralyzing decision-making and slowing economic activity.
- Loss of freedom: The citizen may freely choose among more than 3,000 Notaries throughout Spain. However, the Registrar operates within a specific district, so the citizen is required to go to the one assigned by territorial jurisdiction, with no possibility of choice.
- 3. A conflict with Data Protection (GDPR)
The reform also suggests the possibility of registering ownership of the shares in the Commercial Registry. This would turn a register of corporate acts into a register of assets, similar to the Property Registry.
The problem is that the Commercial Registry is, by definition, public. Allowing indiscriminate access to information about who owns what percentage of an S.L. could seriously violate the partners’ right to data protection, exposing sensitive financial information.
- 4. A legally questionable and isolated model in Europe.
From a legal point of view, the proposal is an anachronism. Subjecting a fundamental right such as property and its transfer to an “administrative authorization” such as constitutive registration is a totalitarian-style measure, hardly compatible with our Constitution.
Moreover, this model distances us from Europe. In countries around us such as France, Germany or the United Kingdom, commercial registries are largely ownership registers, but they do not hold the power of qualification over private documents that is intended to be implemented.
The paradox of Public Faith
The most paradoxical aspect is that the reform, driven from the registry sphere, would undermine the very credibility of the Commercial Registry. “Registry public faith” is based on the fact that the registrar qualifies documents that already enjoy a presumption of legality and truthfulness: notarial public documents.
If the Registry begins to register private documents whose authenticity, the capacity of the signatories, and legality have not been verified at the outset by a public official, the presumption of accuracy of the Registry vanishes.
Conclusion: modernizing means strengthening, not leaving unprotected.
The digitalization of legal transactions is necessary and welcome, but it cannot be carried out at the expense of security and transparency. The proposal to allow the transfer of company shares through a private document is a clear example of how a misunderstood modernization can dismantle a system that works and that protects entrepreneurs, creditors, the Public Treasury, and society as a whole.
The solution is not to weaken the system, but to strengthen it. Perhaps, as some legal scholars propose, it would be more appropriate to add to Article 106 of the Revised Text of the Capital Companies Act that the transfer must be stated “for its validity” in a public document, thus consolidating the deed as an essential requirement (ad solemnitatem).
Notarial intervention is not a cost, but an investment in certainty, legality, and security for the partners, for the company, and for the economy as a whole.
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The transfer of social participations is a legal operation of great importance within limited liability companies, as it directly affects the internal structure of the company, the distribution of power among partners, and the future of the business. Knowing how the transfer of social participations works allows for the anticipation of conflicts, the protection of rights, and the guarantee that each corporate change is carried out in accordance with current legislation.
In practice, the transfer of social participations can occur through sale and purchase, gift, inheritance, or other legal transactions, but in all cases, it is advisable to analyse the articles of association, pre-emption rights, and legal limitations. A poorly planned transfer of social participations can lead to challenges, disputes between partners, or corporate deadlock that are difficult to resolve later.
Therefore, the transfer of social shares must be formalised with the utmost possible guarantees, ensuring the correct identification of the parties, the validity of the consent, and the economic traceability of the operation. Having professional advice in the transfer of social shares provides security, transparency, and trust for both sellers and buyers.
Furthermore, the transfer of social participations has fiscal, commercial, and asset implications that are worth studying beforehand. Each transfer of social participations can affect the control of the company, the value of the business, and future strategic decisions. Therefore, correctly planning the transfer of social participations is not just a formal matter, but a key decision for business stability.