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Corporate Finance/M&A

Spain

Overview
Including: Share and Asset Deals; Tax Implications; Transfer of Employees; Injecting Funds in SPVs; Financial Assistance; Consistency with International Practice; Regulatory Filing Obligations; Goodwill.

A number of amendments to the Spanish tender offer regime were recently introduced. The most important change concerns a new obligation to launch a tender offer not only when the offeror intends to acquire interests in a listed company above certain thresholds, but also when a certain level of control over the board of directors is sought.

The government has announced a new regulation on public takeover bids which requires the launch of a bid if an acquisition in a listed company grants the purchaser control, regardless of whether the acquired stake reaches the 25% threshold. Through this amendment the government intends to protect minority shareholders and improve stock market transparency.

New legislation on tender offers is expected to be passed by the end of the year. It aims to protect minority shareholders and make share acquisitions more transparent. Among the changes proposed are the introduction of new obligations for the launch of tender offers, and amendments to the system of competitive offers.

Any individual or corporation that wishes to acquire 25% or more of the share capital in a listed company must do so through a tender offer. However, some recent transactions have avoided triggering this obligation by acquiring holdings of only 24.99%. The government has responded by changing the law.

Including: Tender Offers; Joint Stock Companies; Collective Investment Undertakings; Trends; The Acquisition Process; Asset Agreements; Applicable Tax Regime.

The Spanish Parliament recently passed Law 24/2001 on Tax, Administrative and Social Measures for 2002. The law applies to the fiscal year starting in 2002 and includes important modifications to the Corporate Income Tax Law, which will impact on certain aspects of mergers and acquisitions in Spain, discussed in this update.

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E-commerce

Spain

Overview
Including: Important Issues; Regulating E-commerce; Domain Name Regulation; Electronic Signatures; Personal Data Protection; Information Society Service Providers

The Law on Information Society Services and E-commerce implements EU law. It aims to promote the development of the information society in Spain through the creation of a safe framework for electronic relations. The government hopes this will spark a technological revolution in Spain and place it on an equal footing with its European neighbours.

A proposal for a Digital Signature Law aims to increase consumer confidence in transacting over the Internet. The digital signatures proposed will be facilitated by certification service providers, which will issue electronic certificates certifying the identity of the digital signature. Further, certain validated certificates will have the same effect as written signatures.

A new registration scheme for the '.es' country code top-level domain was recently enacted which aims to open up the existing procedure. The new regime creates a number of third-level domains, introduces a tender process for the allocation of domain names of significant market value and allows individual to register their names in the second-level domain.

A new regulation on domain name registration aims to ensure that the assignment system can adapt to the specific needs of '.es' domain names, so as to facilitate the growth of e-commerce in Spain. It seeks to establish an adequate balance between reliability and flexibility, and to this extent is based on common registration practice.

The European Commission recently rated the Spanish government as one of the most technologically advanced in Europe, although a recent conference has highlighted weaknesses in key areas of its e-government development. Spain was the one of first countries to recognize electronic signatures, and also offers advanced internet tax initiatives.

The courts have always ruled against cybersquatters who register domain names which are similar to trademarks. Recent decisions have now confirmed that the names of famous individuals are also protected against registrants who seek to use them for their own gain. Importantly, the courts referred to the Uniform Domain Name Dispute Resolution Policy in their decisions.

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Energy & Natural Resources

Spain

A new regulation which elaborates on the obligations to maintain minimum security stocks and diversify gas supply imposed by the Hydrocarbons Act has come into effect. The new rule also regulates the legal status and operations of the watchdog entrusted with the inspection and control of gas and oil, minimum security stocks and diversification of supply provisioning.

An act has created a special regime for power generation facilities which use technology that contributes to environmental objectives. The regime, which came into force on March 29 2004, is a feed-in system based on regulated incentives which position environmentally efficient technologies competitively in the free market.

Spain and Portugal have signed an international convention for the creation and development of an Iberian power market, MIBEL. MIBEL will be the second cross-border market to be created in Europe, and will be the largest European spot market in terms of volume. Its establishment may herald the construction of an EU common market in the energy sector.

The National Energy Commission recently voted against approving the hostile takeover bid launched by Gas Natural for the shares of Iberdrola. Its decision was based on the high degree of leverage involved and the fact that revenue generated through the companies’ regulated activities would be used to finance non-regulated activities. As a result, Gas Natural has withdrawn its offer.

Hidrocantábrico has been selected to acquire 62% of the share capital of former state owned company, Naturcorp. The acquisition will significantly alter the structure of the Basque energy market. It remains to be seen whether the Spanish government will allow Hidrocantábrico to exercise its voting rights, given that some of its shareholders are foreign public companies.

Spanish gas company Gas Natural recently surprised the markets by launching a tender offer for Iberdrola, the most profitable power company in Europe in the past two years. However, Iberdrola’s main shareholders have both announced that they disagree with the offer. The offer has also raised competition concerns despite the submission of a detailed divestment plan.

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Franchising

Spain

Overview
Including: The Basic Law; Developing the Law; Franchisor Registry; Contracts; New EC Regulation

A draft green paper by the Commission on Industry, Tourism and Commerce provides that Parliament will review the draft Distribution Agreements Act, which will regulate the relationships between agents involved in the distribution sector. The act will apply to and protect any party involved in the commercial distribution sector and will regulate all types of distribution agreement, including franchising.

The government has recently modified the rules applicable to the Franchisors' Registry. The government aims to promote the registry as a tool to obtain accurate and updated information. It also aims to clarify the definition of 'franchise' and differentiate franchising activities from other commercial activities that are often confused with franchising.

Information Technology

Spain

The Parliament of Catalonia recently passed Law 5/2002, which creates the Data Protection Agency of Catalonia. The legislation affects databases created by the government of Catalonia, entities involved with local administration, universities and public entities connected to the Catalonian government.

The EU Directive on Data Protection has been incorporated in Spain under the Data Protection Law. However, following the allocation of competence in the Spanish Constitution, the autonomous community of Madrid has enacted its own Law on Data Protection.

A new domestic law gives effect to an EC directive. Its aim is to provide security for electronic communications that use electronic signatures.

A new regulation requires public and private bodies to act urgently to implement new security measures to protect personal data.

Product Liability

Spain

Overview
Includes: Legal Framework before the EU Product Liability Directive; Liability for Damages Caused by Defective Products Act; Proof of Defectiveness; Indemnities for Corporal Damages.

The Warranties for Consumer Goods Law increases the legal protection for consumers in regard to the goods they purchase, and regulates both the seller's and the manufacturer's liability. The law also regulates any warranties offered to consumers in addition to the mandatory two-year warranty which begins to run from the time that goods are delivered.

Telecommunications

Spain

The Telecommunications Market Commission is completing its assessment of the 18 electronic communications markets that have been identified by the European Commission. The resolutions imposing specific conditions on operators with significant market power in those markets will be implemented during Spring 2006. So far the Telecommunications Market Commission has published five reports.

In December 2005 the Telecommunications Market Commission submitted to the European Commission its draft report on the market for access and call origination on public mobile telephone networks. The report states that dominant mobile telephone operators must offer third-party access to their networks. This should allow mobile virtual network operators to obtain access under reasonable terms.

On September 29 2005 and October 13 2005, following a market analysis procedure, the Telecommunications Market Commission published reports on access to mobile telephony networks in various markets. The reports aim to ensure compliance with a new EU framework. This update reviews the commission's conclusions with regards to the various markets.

In July 2005 the Telecommunications Market Commission launched a competition analysis procedure in the market for access to mobile telephony networks, as required by the new EU regulatory framework. The commission detected important legal and structural barriers to entry into this market and recommended that the dominant operators offer third-party access to their networks.

The Spanish government recently approved the Electronic Communication Services Regulation, which sets out the conditions applicable to the provision of electronic communication services with regard to universal service and consumer protection. It also modifies certain aspects of the rules on the use of the radio-electric spectrum which were approved in 2000.

On February 25 2005 the government announced a series of telecommunications measures in the context of the Plan to Promote Productivity. Among other things, the measures affect radio-electric spectrum, mobile virtual operators, Voice over Internet Protocol services, Telefónica's price regulation and tax deduction for expenses in research and development activities.

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