Corporate Governance: Structures That Scale With Your Company

Corporate governance refers to the system of rules, practices, and structures by which a company is directed and controlled, governing the relationships between shareholders, the board of directors, and management. In Spain, the foundational corporate governance framework is established by the Ley de Sociedades de Capital (LSC, Legislative Royal Decree 1/2010), supplemented for listed companies by the CNMV's Good Governance Code for Listed Companies and the requirements of Regulation (EU) 2017/828 (Shareholder Rights II). Key instruments include the articles of association (estatutos sociales), board regulations, shareholders' agreements (pactos parasociales), and internal codes of conduct, all of which must be aligned with mandatory provisions of the LSC.

When informal governance becomes a brake on growth

Spanish companies go through a critical transition at some point between 10 and 50 employees: the moment when informal governance — the founder who decides everything, partners who call each other before making a decision — ceases to be enough. The problem is not just inefficiency. The problem is that without formal governance instruments, every conflict becomes a crisis, every strategic decision depends on the personal persuasive capacity of each partner, and the company cannot present itself to investors, banks, or major clients with the credibility they require.

The most common failure patterns in the informal governance of mid-sized Spanish companies are: partners with equivalent powers but divergent strategic visions with no resolution mechanism; absence of clear rules on the transfer of shareholdings when a partner wants to exit; non-founder executives with informal authority but no formal position in the governance structure; and family businesses where the distinction between ownership and management is not formalised, generating conflicts when the second generation joins the company.

The solution is not to import the governance model of a large listed company. It is to build for the real company — its size, its sector, its ownership structure, its horizon — the minimum instruments necessary for decisions to be taken predictably, conflicts to have a resolution channel, and the company to scale without governance becoming the bottleneck.

Corporate governance in the family business: separating ownership from management

Family businesses represent more than 85% of the Spanish business fabric and face specific governance challenges. The principal one is the confusion between the three overlapping circles found in every family business: the family (with its dynamics, bonds, and conflicts), the ownership (with its return and control expectations), and the management (with its demands for professionalism and results). When these three circles lack governance instruments to regulate them, family conflicts transfer directly into the business with a multiplier effect.

The protocolo de empresa familiar (family business protocol) is the central instrument for this regulation, but it is not sufficient on its own. The protocol must be coordinated with the articles of association (which must reflect the transfer restrictions agreed in the protocol), with the board of directors regulations (which must govern family representation on the governance body and its relationship with independent directors), and with the remuneration policy (which must establish objective criteria for the remuneration of family members working in the company, separate from the dividends they receive as owners).

The second generation is the critical moment. When the first generation runs the company under the founder’s leadership, informal governance works. When the second generation joins — with multiple heirs, diverse interests, and frequently different levels of involvement in the business — without a protocol establishing the rules of the game, the statistical outcome is conflict that paralyses or fragments the company. We advise family businesses at this transition point with a pragmatic approach that combines corporate law with the organisational psychology of family systems.

Governance requirements by company stage: what regulation and markets demand

Corporate governance obligations in Spain are graduated, and failure to comply carries increasing practical consequences depending on company size and type. For unlisted limited liability and joint-stock companies (sociedades limitadas and sociedades anónimas), the minimum obligations include: preparation of annual accounts within three months of the financial year-end, filing of accounts at the Mercantile Registry within seven months, holding the ordinary general meeting in the first six months of the financial year, and compliance with article 363 LSC obligations in cases of grounds for dissolution. Persistent failure to file annual accounts closes the company’s registry file (hoja registral), preventing registration of any subsequent act — including capital increases, articles amendments, or new powers of attorney.

For Public Interest Entities (entidades de interés público, EIP) — companies with more than 500 employees and assets exceeding 20 million euros or turnover exceeding 40 million — regulation requires an audit committee with a majority of non-executive directors, an auditor selection policy, and a non-financial information statement (estado de información no financiera, EINF) covering corporate governance, social policy, and environmental matters.

For companies considering a stock market listing within a three-to-five-year horizon, the early implementation of CNMV Good Governance Code standards — independent directors, audit and remuneration committees, general-meeting-approved remuneration policy, annual corporate governance report — is the most cost-effective investment that can be made before initiating the admission to trading process. Institutional investors participating in an IPO increasingly apply ESG and corporate governance criteria to their investment decisions.

International corporate governance standards: OECD, Cadbury, and their application in Spain

The academic and practical debate on corporate governance across OECD countries converges on a set of principles that have evolved from the Cadbury Report in the United Kingdom (1992) to the G20/OECD Principles of Corporate Governance of 2023. These principles — board independence, transparency, accountability, and shareholder equity — have informed the CNMV Good Governance Code and the practice of institutional investors globally.

For Spanish companies operating in international markets or seeking capital from foreign investors, the gap between the typical governance practice of a mid-sized Spanish company and the standards those investors expect is one of the main factors that complicate capital-entry transactions. An Anglo-Saxon fund or a European institutional investor analysing a Spanish company expects to find: a board with at least one third independent directors, a functional audit committee, a performance-linked remuneration policy, and a documented internal control system. We help Spanish companies close that gap pragmatically and within the timeframe required by the transaction that is driving the change.