The single member SL: four duties an ordinary SL does not have

What a single member company actually is

Article 12 of the Spanish Companies Act defines a single member company in two different ways, and the difference between them matters. The first is original single membership: the company is set up from the outset with one sole shareholder, whether an individual or a legal entity, something perfectly legal and common when a foreigner decides to open their own SL without looking for a token second shareholder. The second is single membership arising later: a company set up with two or more shareholders where, at some later point, every share ends up in the hands of a single owner, for instance because one shareholder buys out the other. That same article 12 adds a detail that settles arguments: shares belonging to the single member company itself count as the sole shareholder's property, so holding part of the capital in treasury does not stop the company being single member, nor does it suspend any of the duties that follow.

Both situations trigger exactly the same four duties this guide covers, but the second brings an extra time related twist the first does not: a clock starts running from the moment the concentration happens, and that clock is what drives the six month risk covered in the next section.

It is worth telling a single member company apart from other figures it sometimes gets confused with, such as an autónomo trading under their own name: the SLU remains a legal person distinct from its shareholder, with its own assets, its own accounting and its own liability towards third parties, and that separation is exactly what these four duties exist to protect.

This type of company is especially common among foreigners settling in Spain to run their own business with no local partners, and also among corporate groups setting up Spanish subsidiaries whose sole shareholder is the foreign parent; in both cases, the regime of the four duties applies exactly the same way, with nothing changing because of the sole shareholder's nationality or because it is an individual rather than a company (the only exception the Act makes, in its article 17, is for single-member companies whose capital belongs to the State, a region or a local authority). Like any limited company, an SLU comes into existence once it is registered at the Registro Mercantil, the moment from which it exists as its own legal person.

The U that has to appear on your invoices and your website

Article 13.2 of the Spanish Companies Act is blunt: for as long as the single membership situation lasts, «the company shall expressly state its single member status on all its documentation, correspondence, order notes and invoices, as well as on any announcement it has to publish under a legal or statutory duty». This is not a style suggestion, it is a legal duty with its own wording, and it is why a company such as VG Capital has to be written VG Capital, S.L.U., the U included, and not simply VG Capital, S.L.

This duty is not limited to letterhead or invoices in the strict sense: it covers commercial correspondence, order notes and any announcement the law or the bylaws require to be published, which in practice means also reviewing the corporate website, the footer of electronic invoices, quote templates and even email signatures carrying the full company name.

This requirement is an express legal duty under article 13.2, and failing to meet it is, above all, a visible signal, to anyone reviewing the company's paperwork, that something in its formal management is not being handled with the care the law specifically demands from this particular figure.

Six months: the deadline that removes your limited liability

Here lies the one point in this whole guide where limited liability protection is genuinely lost, so it is worth reading with the law's exact words. Article 14.1 of the Spanish Companies Act states that, once six months have passed since the sole membership arising later was acquired without it having been registered at the Registro Mercantil, «the sole shareholder shall be personally, unlimitedly and jointly liable for the corporate debts incurred during the period of single membership». Note that the liability only reaches the debts of that specific period, not the company's entire life, but within that period the protection disappears completely.

The six month clock starts counting from the moment the company becomes single member, not from when someone realises it is. Buying out the departing shareholder's shares, with no further step, already starts the countdown, even if nobody tells anyone for months; that is precisely the trap, because whoever is buying is usually focused on closing the commercial deal and forgets the registration formality that goes with it.

This deadline applies to single membership arising later, not to the original kind: when the company is set up from the outset with a sole shareholder, that status is already recorded in the founding deed itself and in the initial registration, so there is no clock that starts running afterwards.

The law also says what happens when the registration arrives late, and it is worth knowing before panicking: article 14.2 shuts the tap going forward, because «once the single membership is registered, the sole shareholder shall not be liable for debts incurred thereafter». Registering out of time does not erase the exposure to debts already incurred during the unregistered period, but it stops the exposure that would have kept building month after month. That is why the right reaction to an oversight is never to wait and see: it is to register as soon as possible, even if the deadline has already gone by.

The prudent practice, as soon as the purchase of shares concentrating ownership into a single shareholder is signed, is scheduling the single membership registration as an immediate task within the same closing of the deal, with the same notary handling the sale deed, rather than leaving it for «whenever there is time». The cost of acting early is minimal compared with the risk of that time quietly stretching into months nobody notices.

The sole shareholder decides alone, but minutes it

Article 15 of the law establishes that the sole shareholder exercises the powers of the general meeting, and that their decisions «shall be recorded in minutes, under their own signature or that of their representative, and may be executed and formalised either by the shareholder themselves or by the company's directors». There is no need to call a meeting that, with a single shareholder, would make no sense to hold in the traditional format of notice, quorum and vote, but there is a need to leave a written record of the decision, dated and signed, as if it were the minutes of a general meeting.

This affects decisions that in an SL with several shareholders go through a general meeting: approving the annual accounts, applying the year's result, appointing or removing directors, amending the bylaws, among others. If the sole shareholder is also the director who pays themselves, that pay follows the rules covered in the director pay guide. The fact that there is only one shareholder does not remove the need to formally document these decisions; it simplifies how they are adopted, but it does not remove the written record.

Many sole shareholders, especially when they are also the director of their own company, tend to skip this step precisely because «there is nobody to argue it with»: the decision gets made mentally and executed on the spot. The problem shows up later, when a bank, an auditor or the authorities themselves need proof that a specific decision was formally adopted on a given date, and no document exists to show it.

A simple, disciplined habit avoids the whole problem: keeping a single running file of dated, signed minutes, one for every decision that would go to a general meeting in an ordinary SL, updated the same day the decision is made rather than reconstructed months later from memory when someone finally asks for it.

Contracts with yourself: in writing and in a book

Article 16.1 of the Spanish Companies Act regulates something that only exists because there is a sole shareholder: contracts between that shareholder and their own company, for instance the shareholder renting a premises to the company, or the shareholder lending money to the SL. The law requires those contracts to «be made in writing or in whatever documentary form the law requires depending on their nature», and to be transcribed «into a company register book that must be legalised as set out for minute books», with express, individualised reference to those contracts in the annual accounts' notes, stating their nature and terms.

The reason for this requirement is obvious once you think about it: when the same person signs on both sides of the contract, as shareholder and as the company's representative, the risk of that contract disguising an unjustified advantage for the shareholder at the company's expense is much higher than when independent parties negotiate with each other. The register book and the reference in the notes are the way the law found to give transparency to those transactions towards third parties, especially the company's creditors.

This book is neither optional nor a minor formality, and its deadline has a source of its own. Article 16.1 refers its legalisation to the rules «for company minute books», and those minute books are named expressly by article 18.1 of Law 14/2013: every book entrepreneurs are required to keep, «including the minute books of general meetings and other collegiate bodies, or the registers of members and of registered shares, shall be legalised electronically at the Registro Mercantil after being completed in electronic form and before four months have passed from the closing date of the financial year». It is worth not hanging that deadline on article 27.2 of the Commercial Code: it does set four months for the compulsory books, but in the same sentence it adds that «as regards the minute book, the Commercial Registry Regulation shall apply», so the chain article 16.1 opens leaves it behind and ends in the 2013 Act.

Four months from the close, counted as article 5.1 of the Civil Code requires, from date to date, expiring on the last day of the month when the month of expiry has no equivalent day: a company closing on 31 December has until 30 April, the same calendar the annual accounts guide sets out. With any other closing date the arithmetic is the same and the answer is different. And not keeping this book has a very concrete consequence, explained in the next section.

In practice, this book often stays blank for years in many small SLUs, precisely because the sole shareholder does not perceive their own loans or leases to the company as «contracts» in a formal sense, but simply as money moving between their own pocket and the company's. That informal perception is exactly what this duty is designed to correct.

What happens if the contract is not in the book and insolvency arrives

Article 16.2 sets the consequence for not meeting the previous step, and it is blunt: «in the event of insolvency of the sole shareholder or of the company, contracts referred to in the previous paragraph that have not been transcribed into the register book and are not referenced in the annual accounts' notes, or were referenced in notes not deposited under the law, shall not be enforceable against the insolvency estate». In plain terms: if the shareholder's loan to their company was never recorded in the register book and insolvency proceedings arrive, that loan can be treated as if it did not exist against the other creditors.

This has very practical consequences for a shareholder who lent money to their own company expecting to recover it someday ahead of other debts: without the register book properly kept, that claim risks being unenforceable against the insolvency estate at exactly the moment it is most needed, when the company can no longer pay all its creditors.

Article 16.3 also adds one last nuance: for two years from the contract's execution, the sole shareholder is liable to the company for any advantage they directly or indirectly obtained to its detriment as a result of those contracts. This is a different liability from article 14.1's, and it adds to it if both circumstances occur together.

Ceasing to be single member, or becoming one again

Article 13.1 does not only require registering the incorporation and the single membership arising later: it also requires registering «the loss of that status or the change of sole shareholder as a result of some or all of the shares having been transferred», stating, in every case, the identity of the new sole shareholder where relevant. In other words, the same registration publicity regime applies in all three directions: entering single membership, changing the sole shareholder within it, and leaving it when a second shareholder joins.

Two duties get conflated here very easily, and they are worth pulling apart, because they do not switch off at the same moment. Registering the loss of single member status is not optional: article 13.1 itself requires it, and until that entry is made the Registro Mercantil will keep showing a sole shareholder who no longer exists. What does end the moment the second shareholder joins is the article 13.2 wording, because that article requires it «for as long as the single member situation subsists»: once the situation is over, so is the duty to state it, and the name goes back to being written S.L. Keeping the U on invoices and correspondence after that second shareholder joins is not caution: it states something on a commercial document that is no longer true, that the company has one sole shareholder.

This flow can repeat several times over a company's life, entering and leaving single membership as its shareholding changes, and each change requires its own registration, without a company being able to «stack up» unreported changes and regularise them all at once later without exposing itself to article 14.1's risk for the time it went unregistered.

A common case in family businesses is a child or a spouse joining as a second shareholder years after the original incorporation: at that point the company stops being single member and that loss of status has to be registered, the same way single membership had to be registered when it arose. Forgetting this step leaves the company formally single member in the registry while, in practice, it no longer is, with all the documentary inconsistencies that creates.

What does not change: taxes, accounts and books

With all the attention these four specific duties deserve, it is worth not losing sight of what does not change simply because a company is single member: it still pays Corporate Tax exactly the same way as any other SL, as explained in the SL tax guide, it still has to prepare and file its annual accounts under the same deadlines, and it still keeps the rest of the compulsory books: the Inventories and Annual Accounts book and the Diario that article 25.1 of the Commercial Code imposes on every trader, the minute book or books article 26.1 adds for trading companies, and the register of members specific to a limited company.

Single membership on its own also does not decide the shareholder's Social Security position: what decides it is whether they carry out director and management duties or provide other services to the company for profit, habitually, personally and directly, while holding effective control of it, control that article 305.2.b of the General Social Security Act takes as given in every case where the worker's shares amount to at least half the share capital, which in an SLU with an individual as sole shareholder is always true. Being the sole shareholder does not exempt the company from any of the tax or company law duties that apply to any SL with an active, ongoing business. All it adds are the four specific publicity and documentation duties this guide covers, designed to make up for the absence of other shareholders who, in an ordinary company, would act as a natural, built-in check on the majority shareholder's own decisions.

How kontora handles it

kontora keeps the register of members, the minute book and the sole shareholder's contracts book, and carries those contracts through to the annual accounts' notes, which is where article 16.1 requires the express reference. When you close the year, it prepares the books' legalisation package with its own fingerprint per book; filing it at the Registro Mercantil is done by you, and the final ZIP is generated by Legalia 2, the free application of the Colegio de Registradores, from the books and fingerprints kontora leaves ready for you. The naming with the U appears on your invoices and commercial documents as soon as you write it into your company details.

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