Spain: New information and consultation obligations in corporate transactions

The Spanish Government has approved a new regulation that significantly amends the information and consultation rights of the employees in the context of corporate transactions such as cross-border conversions, mergers and demergers, as regulated by EU Directives 2019/2121 and 2017/1132.

These regulations, are adopted by way of the Royal Decree-Law 5/2023, of 28 June (RD 5/2023), a potpourri of regulations which, among other matters, also include new provisions regarding work-life balance for parents and carers (read more here).

Internal Structural Modifications 

The right to submit comments on the Structural Modification Project is now granted to employees' representatives (or to employees themselves, if there are no employee representatives), in the same way as to creditors and shareholders. The shareholders’ meeting must then take into consideration these comments when approving the Structural Modification Project. However, this means that the employee representatives’ opinion will be noted, but in no case will be binding. For this purpose, a notice must be published informing the employees' representatives that they have this right to provide such comments, and which they may exercise no later than five working days before the date of the shareholders' meeting.

In addition, the directors' report explaining the transaction, which was already required, must now have two sections:

• one addressed to the shareholders; and
• another addressed to the employees.

Alternatively, a report for shareholders and a report for employees may be prepared. The section of the report addressed to employees should explain the consequences of the transaction for labour relations, the substantial changes in employment conditions or in the location of the business and how this will affect the company's subsidiaries. This report must be made available to shareholders and employees' representatives at least one month before the shareholders' meeting that will approve the transaction.

Cross-border Structural Modifications

Further amendments to the current landscape include those that implement the provisions on the protection of employees' rights of involvement or co-determination in the EU Directive 2019/2121.Where until now only the cross-border mergers were regulated, the new legislation covers also conversions and demergers of this nature.

Key Takeaways

The above-mentioned Royal Decree has introduced new rules on information and consultation applicable in the context of structural modifications which, despite not revolutionising the regime applicable until now, do require companies to broaden the scope of dialogue with the workforce within such corporate transactions. These new rules will enter into force on 29 July 2023.

Nothing seems to indicate that the sanctioning regime for breaches of information and consultation provisions will change. Currently, failure to inform the employees' representatives does not condition the effectiveness of the transaction, but it amounts to a serious administrative offence, which carries a sanction ranging from 751 EUR to 7,500 EUR. However, it remains to be seen how courts will interpret the impact of these new measures.