Business Law

Case 1:
Legal Tools
 Spanish Legislation
Legislation: set of laws proposed by a country’s government and then
approved by the parliament.
1. Constitution: common principles.
• Freedom of enterprise: laws and conditions should be the same.
• Market/private property/private autonomy: right to exercise commercial activity
and earn profits.
• Association right: right jo join other people to create a business.
2. Laws: approved by the Spanish Parliament
• Organic law: ideas that will apply to the whole region. Fundamental rights.
• Ordinary laws: different in each community. Less important topics.
3. National regulation: apply to each different institution.
Spanish and Catalonian Legislation
Catalonian legislation
Con 1. Estatut d’Autonomia
stitu
tion (organic law)
2. Catalonian laws
Laws 3. Catalonian regulations

National regulation
 European Union Legislation
1. Primary legislation: European Union Treaties.
• Not voted by citizens and should respect all national constitutions.
• Binding agreement between all EU countries.
2. Secondary legislation
• Directives: helps publish similar laws. Has the power to tell states to
change national laws.
• Regulations: apply the same legislation in all member countries.
• Decisions: apply to particular situations.
Both are laws, there is not European Constitution.
 Divison of Powers
• Legislative power: approves laws. LEGISLATIVE JUDICIAL POWER EXECUTIVE
• Judicial power: interprets and POWER POWER
applies laws.
National EU level National EU level National EU level
• Executive power: makes sure laws level level level
are respected inside the territories of
each country. Spanish European National EU Commission Government EU
Congress of union laws and EU and city Commission
Deputies council and Ordinary Courts of council
Three institutions: and Senate EU Courts of Justice
Parliament Justice
1. Commission: protects the
interests of the European Union
(particular cases.
2. Council: protects the interests of
the states of the European Union.
3. Parliament: protects the interests
of the citizens.
 Divison of Powers:
Judicial Power
National level
• First instance: first one resolving a case. The resolution can be appealed.
• Provincial audience: highest judicial form in the province. Limited to civil and
criminal topics
• Supreme Courts: judicial body of the territory.
All of them have to apply EU legislation

EU level
• European Union Commission: group of experts from different countries that know
the different interests of the European Union citizens. Purpose different legislations for
the Parliament/Council to approve.
• Courts of Justice of the European Union
Case 2A:
Business Persons
 Business Person
Business person
Any physical person can be one. The first thing a business person does is study the
market and discover a need to cover. Invests money to create a legal identity to do a
commercial activity.

Legal business person

Aggregate of two or more persons to carry out a business in common. As a firm is
authorized by law with duties and rights, recognized as a legal authority having
distinct legal personality.
The one who gets to manage the rights and duties.

Legal person: their goal is not to make profits.

 Business Person:
Code of Commerce
According to the Code of commerce, the Business Person is someone
who…
• Has private autonomy: the ability to contract, decide and start or finish
a company.
• Realizes a business activity often.
• Generates profits through the commercial activity.
• Is registered in the Commercial Register.
• Has created a Deed of Incorporation: initial contract that has to be
presented in front of a public notary to start the company.
• Published everything in the Mercantile Register
 Types of Business Persons
• Personalists: the most important element is the person, who
must make decisions, take risks and generate benefits.
Follow the Code of Commerce and the Corporate Enterprises Act

• Capitalists: most of the capital is owned by the capitalist

investors who invest and risk money but do not have the
obligation to make decisions.
Under the Corporate Enterprises Act
 Types of Partnerships:
Personalist Business Persons
General partnership
The partners are personalists and have the right to decide.
• General partner: invests the capital and 100% of its belongs to
them.
• Worker partner: does not invest but gets profits. Invests
apporting skills.
All partners are involved in the business and face unlimited
liabilities.
 Types of Partnerships:
Personalist Business Persons
Limited partnership
The partners are personalists.
• General partner: personalist, owns the majority of the capital.
• Limited partner: capitalist partner, only invests but does not
run the business.
Can also have worker partners.
 Types of Partnerships:
Capitalist Business Persons
Capitalist Companies
• Decisions are made by majority of capital (≠ the one that has the
most capital) = the majority of capital present in the meetings.
• Are under the Corporate Enterprises Act, but the general partners
are under the Code of Commerce.
• There is always a minimum capital to invest required by law. If it is
not reached, the company must change.
• The capital is divided in shares.
• All partners get profits but may have losses.
 Types of Partnerships:
Capitalist Business Persons
Limited Share Partnership
• General partner: personalist, owns the minority of the capital.
Follow the Code of Commerce and must participate in the
decision-making process. Face full liabilities.
• Capitalist partner: (shareholder) owns the majority of the
capital. It is not mandatory for them to make decisions and face
limited liabilities.
Minimum capital needed is 60.000
 Types of Partnerships:
Capitalist Business Persons
Joint Stock Company
Most common type of company.
• There are no general partners.
• Capitalist partner: (shareholder) own all of the capital. (min.
60.000)

The company is managed by a Board of Directors in behalf of the

investors.
 Types of Partnerships:
Capitalist Business Persons
Limited Liability Company
• There are no general partners.
• Capitalist partner: (stakeholder) own all of the capital. (min. 3.000)

The company is managed by a Board of Directors in behalf of the investors.

One investor will be the director of the company.

Each partner is not responsible for another partner’s misconduct.

Restriction of transmission: the permission of all investors is needed in order to

add a new one.
 Capitalist Business Persons
Legislation: Corporate Enterprises Act

Requirements of the Constitution:

• Capital
• Name: social name of the company.
• Nationality: defined by the location of the main office. Tells which law will
apply.
• Deed of Incorporation: initial agreement of the company.
• Bylaws: the company’s internal regulation.
• Commercial register.
 Capitalist Business Persons
Single member company: takes decisions also based on the majority of
capital.

Corporate group: a business person controls the capital of other business

persons that act together even though they are registered separately.

Nullity: if a business person does not follow the law, they fall into nullity. Must
face unlimited liabilities.

Social contributions: amount of capital that one invests in the business

person. Can be cash or non-cash.
 Capitalist Business Persons
Difference between shares and stakes: shares can be
transferred freely while stakes can’t.

Partners and shareholders rights: to vote, participate in

meetings, to get profit…

Transmission of shares/stakes: shares can be sold and bought

in the share market.
 Company vs. Partnership
Partnership Company
• Members are called partners. • Members are called
• Is not a separate legal entity shareholders.
from its partners. • Separate legal entity.
• Partners face unlimited • Shareholders have limited
liabilities. liabilities.
 Situations where the B.P has to be
controlled
Abuse of Juridical Person
• Creating a business that does not cover a need in order to avoid paying more
taxes.
• Trying to get the law applied in different conditions.
Viel Theory: considers a business person an abuse and that it was not created,
because it does not follow the conditions. Declares the company null.

Criminal liabilities
Possibility of condemning the company because of the crimes committed by the
directors.
Directors and legal persons have criminal liabilities.
Case 2B:
Governing Bodies
 Governing Bodies
In capitalist companies, decisions are made by majority of capital.

• Board of Directors: second governing body of the Business

Person. Directors are chose by the General Meeting.
• General Meeting: the majority of capital acts.

Delegation of power: the capital is represented by someone else

who will participate in the voting. Can be someone external from
the company.
 Governing Bodies:
Board of Directors
Director: the one who runs the company in between the general and ordinary meeting.
Is not necessarily the business person. Faces unlimited liabilities.
In capitalist type of companies, it must be stated in the by-laws the number of directors
there are.

Quorum of constitution: number of directors.

Requirements to join the Board of Directors: someone who is in conflict of interest

with the BP can’t join the Board.

Director’s duties: must be diligent and face unlimited liabilities if they act against the
interests of the company.
 Governing Bodies:
General Meeting
First General Meeting Extraordinary General Meeting
• Must be done after the register of the • Must be held under the conditions of the
company. ordinary general meeting.
• The by-laws are not approved yet. • Held in urgent situations when the topic can’t
• Presentation of the first version of the by-laws. wait to be approved in the general meeting.
• Any other meeting that is not stated in article
Ordinary General Meeting 164.
• Rest of meetings.
• General things are decided. In order to hold a meeting, all
investors/shareholders must be informed
• Called by the Board of Directors. trough a notice (art. 172).
• Must be held every financial year.
• The general financial report must be
If the notice is not sent, the decision is not
presented.
valid.
 General Meeting:
Notice
The notice must include:
• Place: will be held in the same city where the main office is
registered. If the address is changed, must go to the Mercantile
Register and change the by-laws.
• Date
• Agenda points: topics that will be discussed.
• Calls:
• First call: 25% of the capital represented in needed.
• Second call: less than the first call.
Case 2C:
Corporations, financial
concepts and other questions
 Financial Statements
The company’s directors shall issue the financial statements, the
management report and the proposed distribution of earnings.

The financial statements must compromise: the balance sheet, income

statement, statement of changes in the net worth during the financial
year, cash flow statement and respective notes.

Must be approved by the Board of Directors and the General Meeting.

• The Board only has the power to purpose, but it must be approved by
the General Meeting.
 Auditors
External person from the company who has to control the
financial situation of the company. Must be appointed by the
Board of Directors and approved by the General Meeting.

Must verify whether the financial statements presented are true

and fair.

Presents a report in the General Meeting. (Auditor’s report)

 Causes for Partners to Exit and Exclusion
• Supersession or amendment of the corporate purpose.
• Extension of company term.
• Company reactivation.
• Creation, amendment or early cancellation of ancillary
commitments.

The by-laws can stablish other causes fro exit.

 Legal Financial Concepts
Appropriation of earnings
Indicates that the Board of Directors purpose to distribute
earnings between investors, the General Meeting must approve
the decision. It can’t be decided only by the Board of Directors.

Equity should not be less than the social capital after the
distribution of earnings.
• Social capital: capital initially invested in the formation of the
company.
 Reserves
Restricted reserves Legal reserves
They are mandatory by law. Particular
The general meeting decides to % of the capital every year that is
invest a % of the earnings for a invested as a warranty to pay creditors.
particular project. It cannot be If there are no legal reserves, the
used for any other purpose. company should be dissolved.

Unrestricted reserves
Distributable reserves
Can be used for different
Amount that the General Meeting an
purposes. Approved by the distribute.
General Meeting.
 Reserves:
Legal Reserves
• Minimum: 10% of the registered social capital.
• Maximum: 20% of the social capital.

Example: if the social capital is 80.000

• Minimum legal reserves = 10% of 80.000 = 8.000
• Maximum legal reserves = 20% of 80.000 = 16.000
It is mandatory to put every year 10% of the profits until the legal
reserves reach 16.000
Once the 20% is reached, it is no longer mandatory to add money to the
legal reserves.
 Capital Reduction
Capital reduction
• No capital reduction can be done if there are reserves.
• No reduction of capital can be made if the legal reserves are greater than the
10% of the social capital.
• If legal reserves are less than 10%, the capital must be reduced.

Example: if the social capital is 80.000 and legal reserves are 6.000
• Minimum legal reserves = 10% of 80.000 = 8.000
The capital should be decreased until the legal reserves are 10% if the new
capital.
Then, the capital should be decreased to 60.000 or less.
 Capital Reduction:
Mandatory Reduction
It is mandatory to reduce the capital when equity is less than 2/3 of the
social capital.
If the capital is reduced the company type has to change.

Example: if the social capital is 80.000 and equity is 50.000

• 2/3 of 80.000 = 53.333,33 > 50.000
Equity ≥ Social capital
The new social capital should be 50.000 or less.
If the company was a Joint Stock company, the type of company must be
changed since the minimum capital (60.000) is not reached.
 Capital Increase
The maximum amount that can be increased in the 10% of the social
capital.
After increasing the capital, the legal reserves should be the 10% of
the new capital.

Example: actual social capital is 80.000 maximum new capital is

160.000
20% of 80.000 = 16.000
Legal reserves – 16.000 (20% of the old social capital becomes the
10% of the new social capital)
 Capital Increase
Example: actual social capital is 100.000
Maximum (old) legal reserves: 20% of 100.000 = 20.000

10% of the new capital = 20.000  “New capital” is 200.000

The maximum amount that can be increased is 200.000

 Dissolution
A company must be dissolved when…
1. Equity is less than ½ of the capital.
2. The non-voting shares are greater than 50% of the capital.

Causes of dissolution
• Interruption of the activity.
• Termination of the mission that constitutes the coroporate purpose.
• The achievement of the corporate purpose is impossible.
• Losses that reduce equity to lower than one half of the share capital.
• Capital reduction to a sum below the legal minimum.
 Dissolution
Liquidation process: once the General Meeting has agreed on
dissolving the company, they have to start the liquidation
process. This process is done by a specific person, the
liquidators, who are appointed in the General Meeting.

Extinction of the business person: the company has to ask the

Mercantile Register to publish that the business person has been
extinct.
 Exercise
Joint Stock company with a capital of 200.000. After one year
the equity is 230.000

• How much should be the legal reserves?

Minimum: 10% of 200.000 = 20.000
Maximum: 20% of 200.000 = 40.000
Between 20.000 and 40.000 €
 Exercise
Joint Stock company with a capital of 200.000. After one year the equity is
230.000

• Two years later they have the legal reserves required by the law, and they have
also some voluntary reserves. They are planning to increase the capital. How
much is the maximum capital they can increase?
20% of 200.000 = 40.000

10% of the new capital = 40.000 -> 10% of X = 40.000, 0,1X = 40.000
”New social capital” (X) = 40.000 / 0,1 = 400.000

The maximum amount that can be increased in 400.000

 Exercise
• Three years later, there has been an strong economical crisis, now the
equity is 130.000€, they need to know if they have to reduce the capital or
dissolve the company. Explain both situations.
If capital is 400.000 after the increase.
Mandatory reduction: when equity is less than 2/3 of the capital.
2/3 of 200.000 = 266.666,66 > 130.000
The capital needs to be decreased.

Dissolution: ½ of the social capital.

½ of 200.000 = 200.000 > 130.000
The company must be dissolved.
 Exercise
• Three years later, there has been an strong economical crisis, now
the equity is 130.000€, they need to know if they have to reduce the
capital or dissolve the company. Explain both situations.
Mandatory reduction: when equity is less than 2/3 of the capital.
2/3 of 200.000 = 133.333,33 > 130.000
The capital must be decreased to 130.000 or less.

Dissolution: ½ of the social capital.

½ of 200.000 = 100.000 < 130.000.
The company does not need to be dissolved.
Case 3:
Intellectual Property I
 Intellectual Property Types
In Spanish Law, intellectual property refers to copyright and
industrial property rights to creations with application in industry.

Social activity: produces reputation in the market that needs to

be protected according to the intellectual property. The business
person must protect the reputation and the product.

• Intellectual: protects ideas or mind creations.

• Industrial: mind creations that apply to the industry.
 Intellectual Property Types
• Intellectual: protects ideas or mind creations.
• Industrial: mind creations that apply to the industry.
• Protects the activity of the company: commercial name.
• Protects the product: invention, trademark, design.

Offices:
o Registro de la Propiedad Intelectual.
o World Intellectual Property Office (WIPO)
 Intellectual Property: Copyrights
Legal term used to describe the rights that creators have over literary works. There
are two types of rights under copyright:
• Moral rights: protects the non-economic interests of the author.
• Economical rights: allows the owner to get a financial reward from the use of his
work by others.

National protection in the Spanish territory according to the Intellectual Property

Law in the Spanish Register of IP. No EU or WIPO protection.

Berne Convention: in most countries, copyright protection is automatically

obtained without the need of registration, but there is still a system to allow the
country to allow the voluntary registration of works.
 Signs used in the Market
• Protection of the activity of the
company: commercial name.
• Protection of the product: invention,
trademark, design.

Commercial Name
Protects the activity and reputation of the
business person in front of the competitors.
Must be registered in the OEPM (Oficina
Española de Patentes y Marcas) and follows the
trademark law.
The social name on the mercantile register
may be different.
 Industrial Property:
Invention
Invention
• Patent: the invention must be new worldwide. It offers longer
and stronger protection (20 years).
Offers national and international protection. Does not keep others
from producing similar products but cannot be exactly the same.

• Minor invention: the invention must be new in the territory and

is less expensive.
Offers national protection with the national patent law.
 Industrial Property:
Invention
Invention
Once the patent utility model is obtained in Spain, the company can
direct to the WIPO-PCT and apply for an international protection of the
Intellectual Property.

WIPO – PCT (Patent Cooperation Treaty):

International Patent System.
Helps assistants seeking for protection and assists patent offices with
patent granting decisions.
Must have EU or national protection beforehand.
 Industrial Property:
Ornamentation
Ornamentation
Protects the external appearance of the product.
• The product must be new worldwide.
• Exclusive right starts with registration.

Protection:
• National protection: Spanish Design Law.
• European Union Protection: EU Regulation of Design.

WIPO – HAGUE: International Design System.

Provides practical business solution for registering in over 64 territories by filing one single
international application.
 Industrial Property:
Trademark
Trademark
Sign on the product. A business person may have different trademarks.

Protection:
• National protection: OEPM
• European Union protection: EUIPO.
On a national level, trademark protection can be obtained through registration.

On an international level there are two options:

1. File a trademark application with the trademark office in each country that the company
is seeking for protection.
2. WIPO’s Madrid system: one stop solution.
 National Protection
On a national level, there are two different registers to protect
intellectual property:
1. Intellectual property register: protects copyrights (IP law)
2. Registration of trademarks: OEPM (Spanish trademark,
patent and design law)
 Eropean Union Protection
• European Union Registration of Trademarks
• Europea Regulation of Design

There is no protection for patents in the European Union.

WIPO – Madrid: one stop solution for registering and managing

marks worldwide.
 International Protection
International IP protection allows to get protection in other countries of the world
thanks to international agreements.

It is required to have EU protection first. Through the WIPO or EUIPO only

national protection is obtained.

Two different international institutions:

1. WIPO: international protection of copyrights, trademarks, patent and design.
2. European Patent Office: international protection of patents.

WIPO – Lisbon: International System of Appellations of Origin.

IP Protection
 IP Protection
Intellectual Copyrights Inventions Design Commerci Trademark
Property al Name

National level Office OEPM OEPM OEPM OPEM OPEM

Law Spanish Spanish IP Spanish Spanish Spanish Spanish

Law Patent Law Desgin Law Trademark Trademark
Law Law
European Union Office EUIPO EUIPO
level
Law WIPO EU Regulation EU Regulation
of Design of Trademarks
International level Office WIPO WIPO - PCT WIPO & EPO

Law WIPO - Lisbon

EPO
 Conflcits
Courts of Justice (national level)
• EU trademarks and designs can be enforceable in any member
states.
• National trademarks and design.

WIPO – Arbitration: another way to solve disputes outside of the

courts, faster and more flexible.
Case 4:
Advertisement
 What is Advertising?
Advertisements are designed to convince people to buy a product
or service. Its goals is to drive customer behaviour in a particular
way regarding to a product or service.

Purpose of advertisement: inform, convince people to buy a

product.

According to Spanish Law: any form of communication done by

a natural or juridical person, public or private, in the exercise of
trade.
 Types of Illegal Advertisement
• Advertisement against • Advertisement against the
constitutional rights or regulation of particular
person dignity. products or services.
• Advertising for minors that • Misleading, unfair or
encourages them to buy a aggressive advertising.
good or service. • Comparative advertisement.
• Subliminal advertisement • Product placement.
 Types of Illegal Advertisement
• Advertisement against constitutional rights or person dignity
Advertisements that violate the dignity of the person or violate the value and rights recognized in
the Constitution.

• Advertising for minors that encourages them to buy a good or service.

Exploit their inexperience or credutility.
The characteristics of the product should not be misled.

• Subliminal advertisement
Through stimilus production techniques can act on the targe public without being conciously
perceived.

All al regulated by the Spanish Advertisement Law

 Types of Illegal Advertisement
• Advertisement against the regulation of particular products or services.
Products such as medicine, alcohol and drugs.

• Misleading, unfair or aggressive advertising.

All these constitute unfair competition.

• Comparative advertisement.
If the advertiser compares objective facts, it is legal since it is informing the customer. But if it
compares subjective ideas it is illegal.

• Product placement.
Form of advertising in which products or services with trademarks are featured in a production
that targets a large audience. It is not legal if it does not inform the customer it is an advertisement
 Regulation
National regulation
Each country has laws that regulate the advertisement in general along
with some specific laws for particular products.
• Spanish regulations:
• Ley 34/1988 de 11 de noviembre, General de Publicidad. (SAL)
• Ley 3/1991 de 10 enero, Competencia Desleal.
• Ley 7/2010 de 31 de marzo, Comunicación Audiovisual
• Ley 29/2009 de 30 diciembre, por la que se modifica el régimen legal
de la competencia desleal y de la publicidad para la mejora de la
protección de los consumidores y usuarios.
 Regulation:
National Regulation
National regulation
• Spanish constitution 1978: advertisements against constitutional rights.
• Spanish Advertisement Law (34/1988, 11 November): advertisement against
constitutional rights, for minors, subliminal advertisement and special products.
• Unfair Competition Law (17/2001, 10 January): misleading advertising, unfair advertising,
aggressive advertising, comparative advertisement.
• Trademark Law (17/2001, 7 December): cannot use someone else’s trademark or
Commercial Name in an advertisement, unless it is compared with objective facts.
• Design Law (20/2003, 7 July): cannot use someone else’s design in an advertisement.
• Product Placement (7/2010, 31 March) General de la Comunicación Audiovisual.
• Special regulation for specific products.
• Intellectual Property Law (Real Decreto Legislativo 1/1996, 12 April): can be applied to
music, pictures…used in the advertisement.
 Regulation:
National Regulation
Spanish Legilsation that can be Applied to a Unfair Competition Law: 17/2001, 10
Case of Advertisement January
Spanish Constitution 1978: advertisement • Misleading advertising.
against constitutional rights. • Unfair advertising.
• Aggressive and comparative advertising.
• Trademark Law: cannot use someone else’s trademark or Commercial
Spanish Advertisement Law: 34/1988, 11 Name in an advertisement, unless it is compared with objective facts.

November • Design Law: 20/2003, 7 July: cannot use someone else’s design in an
advertisement.
• Advertisement against constitutional rights. • Product placement 7/2010, 31 March
• Advertisement for minors. • Special regulation for specific products.

• Subliminal advertisement. • Intellectual Property Law: 1/1996, 12 April

• Can be applied to music, pictures… used in the advertisement.
• Special products.
 Regulation:
European Union Regulation
Directive 1989/552, October 3 Directive 2006/114, December 12
• Regulates audiovisual media services. • Misleading comparative advertising.
• Subliminal advertisement. • Lays dow conditions under which
Directive 2003/33, May 26 comparative advertising is permitted.

• Advertising and sponsorship of tobacco Directive 2005/29, May 11

products. • Unfair commercial practices.
Directive 2010/13 Communication of EU Comission 2010,
• Coordination of laws and regulations November 17
concerning the provision of audivisual • Protects businesses against misleading
media. marketing practices.
 Advertisement Contracts
Under the General Law of Advertisement, contracts can be
created…
• To broadcast the advertisement in the media.
• To create the advertisement and promote the prodcut.
• For a sponosrship contract
• Promotion of non-profit activities-
• Indirect promotion of the product.
Advantages: promotes the reputation of the company and is cheaper
than direct promotion
 Advertisement Contract:
Who participates in Advertising?
• Advertiser: firms or individuals attempting to fund customers
for their products and services.
• Advertising agency: independent service organization that
contracts with advertisers to manage their advertising.
Advertising agency contract: agreement between a supplier of advertising time or
space and an advertise, who specifies in detail the contect, cost and placement of the
advertisement.
• Supplier of advertising time or space: communications media
representative or the communication medium itself.
 Conflicts
National Courts of Justice will resolve Action: what can be asked the
the conflicts. Courts of Justice to do (UCL, art.
Special entities may offer help, but 32)
do not substitute the Courts of • Stop unfair behavior or
Justice. prohibition of its future repetition.
• Action to remove the effects.
Courts of Justice:
• Rectify misleading, incorrect or
1. First instance Commercial Court false information.
of Justice.
• Action for compensation of
2. Provincial Audience.
damages.
3. Supreme Court
Case 5:
Copyright
 What does Copyright Law protect?
Copyright: economic concept used for describing the set of legal rights that are
immediately possessed by someone who creates a new original work.

Rights that are included:

• Right to reproduce.
• Right to develop derivative works.
• Right to distribute copies.
• Right to give public performance and exhibition of the work.

Copyright protects a whole set of projects such as literary works, poems,

computer programs, artistic workds, advertisements, maps…
 Laws in Spain and Internationally
Spain Regulation
Intellectual Property Act
• Art. 14
• Art. 138
• Art. 139, 140, 141
Registry: National Copyright Office.

International Regulation
WIPO does not offer a copyright registration.
 Conflcit
Conflicts will be sorted out by national level, that will apply both
European Union and National regulation/legislation.

If the damage only affects the Spanish territory, it will apply to the
Spanish Court of Justice, and if it affects several EU countries, it will be
sorterd out by the EU Court of Justice.

1. First instance Commercial Court of Justice.

2. Provincial Audience.
3. Supreme Court.
Case 6:
Antitrust
 What is Antitrust?
Antitrust: rules that are desgined to promote fair competition
and better consumer protection.

Legislation that tries to avoid any type of behavior that could

damage the efficient competition of the market.

In the European Union, Antitrsut Law is oriented to big

companies that are capable of creating great damage. For
smaller businesses, the Unfair Competition Law will apply.
 Market Structure
Monopolistic
Perfect Competition Oligopoly Monopoly
Competition
• Many producers • There are many • There are many • There are many
and many producers and consumers but consumers and
consumers. many consumers. only a few only one
• Firms have no • Firms have light producers. producer.
market power. market power. • Firms have some • A sole firm has
• Free market. • Free market. market power. complete market
• There are no • There are no • Closed market. power.
barriers to enter. barriers to enter or • Natural and/or • Closed market.
• Products are exit. legal barriers to • There are natural
homogenous. • Products are enter. and /or legal
differentiated. • Product is barriers to enter.
differentiated. • Unique product.
 Market Structure
• Structural competition: goal is to provide plenty of agents to
the market. Will offer many options to choose from.

• Efficient competition: its goal is to provide the best product to

consumers, not necessarily through many agents.
It is ok to have a few agents if they are the best.
 Goals of Antitrust Law
Competiton: encourages companie to offer consumers goods and services at the
most favourable terms. Encourages efficiency and innovation and reduces prices.

In order for competition to be effective, it requires companies to act independently

of each other, but still subject to the competitive pressure exerted by others.

The European Antitrust policy is developed from the two general rules set out in the
Treaty of the functioning of the European Union:
1. Article 101: prohibits agreement bebetween two or more independent market
agents.
2. Article 102: prohibits firms that hold a dominant position in a market to abuse
that position.
 Authorities of Competition
European Commission National Competition
Is empowered through the TFEU to Authorities
aply the rules and disposes NCAs are empowered to apply
numerous investigating powers.
articles 101 and 102 of the
The Commission may impose fines TFEU to enusre that
on firms that violate the EU antitrust competition is not restriced or
rules.
disorted.
It cooperates with national courts to
ensure that the EU rules on
competition are applied correctly and
equally through all European Union.
 Behaviors in Antitrsuts Legislation:
Agreements between Companies
Agreement between companies can happenbetween two ro more companies
and it can have any type of restraint.

Agreement between companies that restricts competition: prohibited by Article

101.

Regulation:
• EU level: European Commission.
• Spanish level: CNMC (Comisión Nacional de los Mercados y de la Competencia),
National Courts of Justice, Autoritat Catalana de la Competència.
Behaviors in Antitrsuts Legislation: Mergers
Combination of the activities of the different companies that may
allow them to develop new products more efficiently or to reduce
production or distribution costs. Consumers may benefit from
higher quality goods and services.
• Mergers are permitted as long as they do not stop competition.

Regulation:
• EU level: European Commission.
• Spanish level: CNMC or National Government.
 Behaviors in Antitrsuts Legislation:
Abuse of Dominant Position
A firm is in a dominant position when it is not subjective to any competitor’s constraints
from other opeartors in the market.

According to Article 2 of the Spanish Antitrust Law, an abuse consists of…

• Direct or indirect impositon of prices or other unfair trading services or conditions.
• Limitation of production, distribution or development.
• Injustified refusal to satisfy customer’s demands.

Regulation:
• EU level: European Commission.
• Spanish level: CNMC (Comisión Nacional de los Mercados y de la Competencia),
National Courts of Justice, Autoritat Catalana de la Competència.
 Behaviors in Antitrsuts Legislation:
Effects of the Behavior in the Market
Agreement and exemptions Abuse of Dominant Position
• Less competition during the validity of • Threat to the well-functioning of the
the agreement. market.
• Damages consumer’s welfare. • No free market and greater prices.
• Lower offers limits production.
Mergers
• Less product quality.
• Revenue increase and cost decrease.
• Disadvantages competitors.
• Increased market share.
• Employee motivation decrease.
• Less competition.
Case 7:
Insolvency Process
 What is an Insolvency Process?
Moment in which a company is not able to pay their creditors at
the current moment or in the future.
In this case, the company should be dissolved.

Goal of the Insolvency Process: avoid the dissolution.

• Opportunity for the firm to pay their creditors so they can
continue their acticity in the market.
• If it is not possible to pay the creditors, the last option is to
dissolve the company.
 Structure of the Process
From the moment the company knows it can’t pay its creditors, it must…

1. Inform its investors and general meeting.

2. Talk with creditors.

Early proposal of compostion: trying to reach an agreement with creditors before the process is started.

3. Present the petition of the insolvency process to the Courts.

Then, the Courts will appoint and insolvency administrator that will represent the finaicl
interest of the creditors. (art. 27)
 Structure of the Process

Voluntary Insolvency Process Compulsory Insolvency Process

The company itself presents the Creditors ask the Courts of Justice
petition for the insolvency for an insolvency process if the
process. company is not paying them.
• Legitimacy: debtor (art. 3/6/14) • Legitimacy: creditors (art. 47)
 Insolvency Process Effects
Effects on the Debtor (art. 40 – 48)

• Suspension of power: if it was a voluntary process, the directors can continue their
professional activity, but the insolvency administrator will control the financial situation.

• Must provide books and documents to the insolvency administrator.

• Seizure of assets: personal assets are included in the case of a compulsory insolvency
process.

• Partners (social actions): investors may have lost their capital but will be the last ones to
receive their money back. If they were not informed in the general meeting, they can present a
petition.
 Insolvency Process Effects
Effects on Creditors (art. 49 – 54)

• Integration of aggregate liabilities: amount that the company has to pay to its
creditors. All creditors must be informed that the company is in a process of
insolvency so they can ask for the necessary amount back.

• Individual actions: until the insolvency process is finished, any other petition to the
company is stopped.

• Exercise of action, suspension of debtor power: creditors also have the power
to present a compulsory insolvency process.
 Insolvency Process Effects

Effects on Specific Claims and Contracts (art. 61)

Specific claims: claims for not receiving the money.

If a company has a contract with a company that is in an insolvency

process, the company must wait until the process is finished.

That firm must inform the Courts of Justice that it is one of the multiple
creditors the company in the process in uncapable of paying, so it can get
its money back.
 Insolvency Process Effects

Effects on Detrimental Action to the Aggregate Assets (art. 71)

When the money has been taken away from the company that
would have been used to pay its creditors, the insolvency
administrator will present the reintegration actions so the money
is put back to its place (assets), so it can be used to pay
creditors.
 Insolvency Administration Report
Must present a report to the judge exposing the resolution of the company.
(Whether it can continue tha activity or not)

It should include:
• Insolvency claims: petition of a creditor, so it is included in the lost of creditors.
• Types of claims
• Special preference
• General preference
• Subordinated
• List of creditors
• Publicity
 Insolvency Administration Report
Order of groups to be paid:
1. Workers
2. Government
3. Financial market
4. Creditors
5. Partners of the company
 Insolvency Administration Report
Proposed composition: it is inside of the report and consist of
proposal agreements made by the insolvency administration with the
creditors, in which the majority of them accept to receive the money
later.

Early proposal of composition (art. 104, 105): directors try to reach

an agreement with the different creditors, so they accept receiving the
money later than it was previously agreed.
 Insolvency Administration Report
Adhesion by creditors (art. 108): once the company has published
the list of creditors and some of the noticed ones are not included,
they can ask the Courts of Justice to be included.

Judicial approval of composition (art. 109): one the insolvency

administration has all the information, it has to present everything to
the Courts of Justice.
 Insolvency Administration Report:
Judicial Approval of Composition
Once all information has been presented to the Courts, then the general meeting of
creditors is called to see if the agreements are true and if they all agree, the proposals
made are approved.
Composition phase: starts when the creditor meeting is held.

Judicial Approval of the Composition (art. 127)

• If the majority of creditors do not agree, the Courts will decide to dissolve the company.
• If the majority agrees, the Courts approve the composition and they will not be changed
again. (They are published)
Once the Courts have decided, it is mandatory to follow their decision, since it is not an
agreement but a resolution of the Courts of Justice and any change will not be
accepted.
 Insolvency Administration Report:
Judicial Approval of Composition
Fulfilment of the composition: the composition that was inside the
resolution of the Courts is being followed. This means that the
company can pay at the same time and the amount of money that it
was stablished.

Infringement (art. 140): the resolution is not being followed and an

insolvency process will be started again.
 Judicial Approval of Composition:
Infringement
Infringement (art. 140): the resolution is not being followed and an
insolvency process will be started again.

Winding up phase: requested by the debtor, creditor and/or insolvency

administrator. In this phase, the judge decides that the company has to
be dissolved.

It can be reported year later even if the company no longer exists if the
director has later money to pay the creditors that were not paid when the
company was dissolved. The directors will continue to face unlimited
liabilities until everyone is paid.
 Classification of the Insolvency
It is important to classify in order to determine the liabilities of the directors.
• Fortuitous: directors have been dilignet. They did all they could,
presented everything on time, tried to reach agreements… In this case,
directors have less limited liabilities and more time to pay everyone.
• Tortuous: directors did not present the insolvency process on time or
have not followed the law. They will face unlimited liabilities until they have
paid everyone.
Partners and creditors have the legitimacy to ask for the suspension of the
directors. If they present the petition, is it s a voluntary insolvency process
but they will still face unlimtied liabilities.

Voluntary or compulsory Early process of
insolvency process. composition (art. 5 bis)
Effects on debtors or
Appointment of creditors (depending on
insolvency administrator. the type of process) (art.
49 - 54).
Determination of the Proposed composition
aggregate assets. (art. 99)
Opening of the
Constitution of the
composition phase and
creditors meeting (art.
calling the creditors
116)
meeting (art. 111)
Classificiation of the
insolvency
Opening of the winding • Fortuitous
up phase. • Tortuous
Declaration of insolveny Announcement in the
Opening of insolvency Petition to the Courts of
proceedings by the Mercantile Register (BOE
proceedings (art. 5) Justice (within 2 months)
Mercantile judge. art. 24)
Effects on detrimental Insolvency administrator
action to the aggreagate report (art. 107).
Effects on specific claims Effects on contracts (art. assets (art. 71) • Expose the resolution of the
(art. 58). 61) • Reintegration of the assets to company.
pay creditors.
Early proposal of
Adhesion by creditors Judicial approval of End of the common
composition (art. 104,
(art. 108) composition (art. 109) phase.
105)
Judicial approval of the
composition (art. 127)
Minutes of the meeting • Dissolution. (if the majority Fulfilment of the
Infringement (art. 140)
(art. 126) does not agree to the composition.
agreements)
• Approval of the composition.