Forming a joint venture in Spain
There are three different legal forms of implementing a joint venture in Spain:
Temporary Business Association (Unión Temporal de Empresas: UTE)
UTEs are a form of temporary business co-operation set up for a specified or unspecified period of time, for the purpose of carrying out a specific project or service. UTEs allow several companies to operate together in one common project. This form of association is usual in engineering and construction projects. UTEs are not corporations and have no legal entity. They are formed by notarial deed and are registered in the Special Register of UTEs with the Spanish Ministry of Economy. However, UTEs must comply with bookkeeping and accounting requirements similar to those of corporations.
Economic Interest Grouping (Agrupación de Interés Económico: EIG) or a European EIG (EEIG)
EIGs are non-profit legal entities created for the sole purpose of helping their profit-making members achieve their objectives. They may not act on behalf of their members, nor may they substitute for them in their operations. This figure is commonly used to provide centralised services for a group of companies, such as centralised purchasing, sales, data processing or administrative services.
Spanish law lays down certain requirements for EIGs:
Members of an EIG agree on how to contribute to the entity's capital and how to share the expenses. Each and every member is liable for the whole of the entity's debts.
The European EIGs (EEIG) created under EEC Regulation 2137/85 share the main features of the Spanish EIGs.
Partnership agreement known as contrato de cuentas en participación
This is a sort of unincorporated partnership, by which one or more entrepreneurs (non-managing participants) contribute with money or in kind to a project or venture which is managed by another entrepreneur (managing participant). In consideration, the non-managing participants receive the right to an agreed share of the profit resulting from the project. But, should losses arise, the non-managing participants also have the duty to sustain the same share thereof.
The contributions made under this contract do not qualify as capital; the non-managing investors do not become shareholders of the managing company and they are not affected by the results of the managing company on activities other than those contemplated on the contract.
This type of agreement does not require any legal formality, although, in practice, both parties usually reflect it in a public deed, to be used, if necessary, as a proof before third parties.
For tax purposes, income paid to the non-managing investors is a tax-deductible expense for the managing participant and regular taxable income for the recipient.