Public limited company

18/01/2023

With a public limited company (sociedad anónima), the main objective is generally to gather money from several investors to undertake large projects that could not be done otherwise. To fulfil this mission, capital is divided into shares which are distributed amongst investing shareholders based on the amount of money contributed by each one of them. Thus, the more shares a shareholder has, the greater their weight in the company.

A sociedad anónima (public limited company) (SA) is a kind of commercial company whose capital is divided into shares, where shareholders are not personally liable for the company’s debts. Some kinds of entities must necessarily take on this corporate form (stock listed companies, banks, insurance companies, stock companies and agencies, venture capital companies, limited liability sport companies, etc.), and other companies decide on this corporate form simply because they are more interested in it than in others.

The main differences between public limited companies and private limited companies are:

  1. The minimum capital in a private limited company is 3,000€, while the minimum capital in a public limited company is 60,000€.
  2. Public limited companies are open (easier for other shareholders to join), while private limited companies are closed (they tend to condition the entry of other shareholders based on the desire of the company’s current shareholders), although this can be regulated in the bylaws differently. 
  3. When distributing earnings, public limited companies must save part of that money inside what is known as the legal reserve fund. This fund shall be 10% of profits earned and must accumulate until it reaches 20% of Corporate Capital.
  4. A more rigid regulation applies to public limited companies to greater protect their creditors, while private limited companies are subject to a more flexible regulation, which replaces these greater guarantees for creditors with a system of greater liability. 

Save these essential differences, in all other aspects, one might say that both kinds of corporate forms overlap, such that:

  • They have their own legal personality, different from the shareholders who hold the company. 
  • The company is liable for its debts and obligations with the company’s equity, not the shareholders’.
  • The company has a corporate headquarters
  • The company is distinguished by its corporate name (official company name).
  • It must be registered with pertinent registers by means of a public deed.
  • The company pays tax through the Corporate Tax
  • Resolutions are reached by majority. These majorities are formed based on the greater or lesser contribution made by each shareholder. 

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