Investing in a company in Spain: key considerations before signing

Key points:

• Prior verification (due diligence): Thoroughly investigate the company to uncover hidden risks (debts, litigation, labour issues).
• Investment agreement: Clearly define your rights, guarantees, and exit conditions in the shareholders' agreement or the share purchase agreement.
• Tax structure: Plan the transaction to optimise the tax burden, both upon entry and for a future divestment.
• Corporate governance: Ensure that the shareholders' agreement gives you control or protection appropriate to your stake.

The importance of prior verification: 'due diligence'

Before signing any binding documents, it is crucial to perform due diligence. This term, which translates as "diligencia debida", is an exhaustive investigation of the different areas of the target company to identify risks and contingencies.

A comprehensive due diligence process analyses legal, tax, labour, financial, and business aspects. The objective is to obtain an accurate picture of the company to confirm that its valuation is correct and that there are no "surprises" that could affect the investment's profitability.

For example, a legal review could uncover significant unprovisioned litigation, an ongoing penalty from the Agencia Tributaria (Spanish Tax Agency), or the absence of key operating licences. These findings allow for renegotiating the price, demanding additional guarantees, or, in the worst-case scenario, abandoning the transaction in time.

The investment agreement: more than just the price

The results of the due diligence directly influence the negotiation of the contracts that formalise the investment. There are primarily two: the share purchase agreement (SPA) and the shareholders' agreement.

The SPA governs the transaction itself: the subject of the purchase, the price, the payment method, and the guarantees. The shareholders' agreement, on the other hand, governs the future relationships between the shareholders, a key aspect for protecting your investment in the long term.

Key clauses in the shareholders' agreement

A well-drafted shareholders' agreement is your main tool for protection. It should, at a minimum, regulate the company's governance (majorities for key decisions, veto rights), dividend policies, and the conditions for transferring shares.

Particularly relevant are the drag-along and tag-along clauses. The former allows a majority shareholder to "drag" minority shareholders into a sale to a third party, while the latter protects the minority shareholder, giving them the right to sell their stake under the same conditions as the majority shareholder.

Representations and Warranties ('Reps & Warranties')

In the share purchase agreement, the seller makes a series of "representations and warranties" about the state of the company. For example, they guarantee that the company is up to date with its tax obligations or that it has no undeclared labour debts.

If, after the purchase, it is proven that one of these statements was false, the buyer can claim compensation. It is a way of covering risks that may not have been detected during the due diligence.

Frequently asked questions about 'due diligence'

1. How long does 'due diligence' take? It depends on the complexity and size of the company. It can range from a few weeks for a well-organised SME to several months for a company with multiple subsidiaries or a regulated business.

2. Is it an expensive process? The cost depends on the scope of the review. However, it should be considered an investment, not an expense. The cost of discovering a serious problem in time is always much lower than that of assuming it after the purchase.

3. What happens if problems are detected? The detection of contingencies opens up several options: you can renegotiate the price downwards, require the seller to assume the cost of the contingency, or request additional guarantees (such as a bank deposit or a guarantee) to cover the risk.

Potential problems	How ARROWS (office@arws.eu) can help
Discovering hidden liabilities: The company has tax or labour debts that were not on the balance sheets, reducing the real value of your investment.	Legal and tax due diligence: We help you conduct an exhaustive audit to identify all contingencies before signing.
Weak or non-existent shareholders' agreement: After investing, you find yourself blocked, with no decision-making power or a clear path to sell your stake in the future.	Drafting and negotiating shareholders' agreements: We design a bespoke agreement that protects your rights as a shareholder and guarantees you a solid position.
Breach of the seller's warranties: After the purchase, a problem emerges that the seller had guaranteed did not exist, causing you financial loss.	Claim for breach of contract: We represent you to demand the compensation agreed in the share purchase agreement.
Inefficient tax structure: The transaction is structured without tax planning, resulting in a higher tax burden than necessary, both when investing and when divesting.	Tax advice: We analyse the transaction to propose the most efficient and secure structure from a tax perspective.

Tax aspects of the investment

Every investment has tax implications that must be planned in advance. The chosen structure (purchase of shares, capital increase, participating loan) will determine the tax treatment of the transaction and future returns.

For example, any dividends you receive will be taxed under your IRPF (Personal Income Tax). A future sale of the shares will generate a capital gain or loss. At the company level, it will remain subject to Impuesto sobre Sociedades (Corporation Tax), for which the general rate is 25%. It is essential to analyse the impact of taxes such as ITP (Transfer Tax), which can be levied on certain share transfers involving a change of control over companies with real estate assets.

Planning the tax structure of an investment is complex. The lawyers at the ARROWS International network in Spain can analyse your case to optimise the transaction. Contact us at office@arws.eu.

Final summary

Investing in a company goes far beyond agreeing on a price. A prior legal and financial review, along with solid contracts, are essential to protect your capital and ensure the expected return. Investing without these precautions is a risk that no business owner, director, or investor should take.

Shareholders' agreements and warranty clauses are not mere formalities but your main defence against future problems. Having expert advice from the outset protects your capital, avoids litigation, and gives you a strong position in negotiations.

If you are considering an investment, the ARROWS International network in Spain can guide you through the entire process. Write to us at office@arws.eu to discuss your project.

Frequently asked questions about investing in a company in Spain

1. What is the difference between buying existing shares and participating in a capital increase? When you buy shares, you pay the money to the selling shareholder. When you participate in a capital increase, the money goes directly into the company to finance its growth. The former is a transfer of ownership; the latter is an injection of funds.

2. If I invest, can I be held liable for the company's previous debts? As a shareholder, your liability is generally limited to the capital you have contributed (according to the Ley de Sociedades de Capital [Spanish Companies Act]). However, if the company has hidden debts, the real value of your investment will be lower. Hence the importance of due diligence to detect them.

3. Is it mandatory to sign a shareholders' agreement? No, it is not legally mandatory. If one does not exist, the relationship between shareholders is governed by the articles of association and the Ley de Sociedades de Capital. However, this general regulation is often insufficient to adequately protect an investor's interests, especially if they are a minority shareholder.

4. What tax rate applies to the sale of my shares in the future? The capital gain obtained by an individual from the sale of shares is taxed in the savings income base of the IRPF, at progressive rates that vary according to the amount of the gain. Proper planning can optimise this taxation.

5. I have found an interesting company, what is the first step? The first step is usually to sign a letter of intent (LOI) and a non-disclosure agreement (NDA). This allows you to access the company's information to begin due diligence without either party being legally obligated to close the deal.

6. How can I protect my investment if I am a minority shareholder? The best protection is a well-negotiated shareholders' agreement. It should include enhanced information rights, veto rights over strategic decisions (such as the sale of major assets or incurring debt), and exit clauses like the tag-along right.

Disclaimer

Official sources reviewed

BOE consolidated legislation cited, the Spanish Tax Agency and, depending on the subject, the College of Registrars and applicable regional and municipal rules. Editorial review completed on 5 October 2026.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide on the subject according to the legal situation as of 2026. Although we take the utmost care to ensure the accuracy of the content, regulations and their interpretation evolve over time. ARROWS advokátní kancelář, the head of the ARROWS International network, is registered with the Czech Bar Association (its supervisory body) and holds professional indemnity insurance with a limit of CZK 400,000,000. To verify the current regulations and their application to your specific situation, please contact the ARROWS International network in Spain directly (office@arws.eu). We assume no liability for damages arising from the use of the information in this article without prior individual legal consultation.