If your company needs to expand its corporate purpose, you may need to make changes to your bylaws. Below, we explain in which situations this is necessary and what are the implications of this type of change.
Expanding a company’s corporate purpose can open up new business opportunities, but it also requires compliance with a number of formalities and legal considerations. If the change is substantial, dissenting partners have the right to separate from the company. In addition, you will need to review aspects such as the company name, insurance and rental contracts, and formalities with the tax and social security authorities.
Ampliar el objeto social de una empresa puede abrir nuevas oportunidades de negocio, pero también requiere cumplir con una serie de trámites y consideraciones legales. Si el cambio es sustancial, los socios disconformes tienen el derecho a separarse de la empresa. Además, deberá revisar aspectos como la denominación social, los contratos de seguros y de alquiler, y los trámites con Hacienda y la Seguridad Social.
Corporate purpose
The corporate purpose is the activity or activities for which a company was incorporated, as reflected in its articles of incorporation. Some companies formulate it in a broad manner, allowing them to carry out various activities. Most commonly, however, it is focused on a specific sector or type of activity. If you are considering a new line of business that is not included in the original corporate purpose, it will be necessary to amend the bylaws to include it.
Right of separation of the partners
When the corporate purpose is modified, partners who do not vote in favor of such modification, as well as those who have non-voting shares, may choose to separate from the company and collect the value of their shares. However, this is only possible if the change in the corporate purpose is considered substantial. A substantial change is considered when:
- Essential activities of the company are eliminated.
- Activities are added that imply a significant change in the economic destination of the company’s resources.
For example, if a company that was originally engaged in real estate development decides to leave that activity to focus solely on document management, the partners may separate. Similarly, if a company engaged in the production of chocolate begins to market fish products, this change is considered significant.
On the other hand, if the new activity is similar to the one already carried out by the company, as in the case of a company that produces oil and adds a new brand to market third party oils, it would not be considered a substantial change and the right of separation would not apply.
Modification of the company name
If the name of your company is associated with a specific activity, it is important to verify that the new activity is aligned with that name. For example, a company called “Motor Workshops, S.L.” could not start offering financial consulting services without first modifying its business name.
When modifying the corporate purpose, it is also necessary to review contracts with third parties:
- Insurance. You will probably need to adapt your insurance policies, especially liability insurance, to include the new activity or, if necessary, eliminate coverages that are no longer necessary. This is also a good time to renegotiate conditions and obtain better coverage or prices.
- Rental Contract. If your business is conducted in rented premises, review the terms of your lease. Many leases state what activities can be carried out on the premises, and any change in the activity requires the express authorization of the lessor.
Steps to change the corporate purpose
- Bylaws amendment: To add new activities to the corporate purpose, you must amend the company’s bylaws, which requires a supermajority vote at the shareholders’ meeting. In the case of Limited Liability Companies (SL), the favorable vote of more than half of the shares is required, unless the bylaws establish a higher threshold.
- Deed and registration: Once the amendment has been approved, a public deed of amendment of the bylaws must be executed and registered in the Commercial Registry.
- Notification to the Treasury and Social Security: Do not forget to inform the Treasury through form 036, and the Social Security through form TA7, since the new activity could affect tax and contribution obligations.
For more information, please consult with Tax consulting
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