[Last updated: 1 January 2025, unless otherwise noted]

2.1 Main legal framework

The main rules and principles of Spanish law relating to public takeover bids can be found in:

• the consolidated text of the Securities Market Act ("SMA"), passed by the Spanish Law 6/2023 of 17 March 2023; and
• the Spanish Royal Decree 1066/2007 of 27 July 2007 on takeover bid procedures ("RD 1066/2007") by virtue of which the Takeover Directive (as defined below) was implemented into Spanish Law.

The above mentioned legislation is applicable to any takeover bid concerning (i) shares of a listed company, i.e. of any company whose shares have been totally or partially admitted to trading on the Spanish equity regulated market (the Spanish stock exchanges) and, since the approval of the SMA in 2023, on Multilateral Trading Facilities (Sistemas Multilaterales de Negociación) such as the BME Growth segment of BME MTF Equity or Portfolio Stock Exchange; or (ii) any other securities that entitle their holders to subscribe for or acquire such shares of a listed company, regardless of whether they are structured as mandatory or voluntary takeover bids. However, the SMA sets forth that the rules and principles relating to takeover bids in Multilateral Trading Facilities shall be developed by way of Royal Decree and it is therefore widely accepted that the rules of takeover bids shall not be applicable to companies trading on Multilateral Trading Facilities until such Royal Decree enters into force. For further information, see 9 below.

There are also specific rules applicable to takeover bids for listed companies that do not have their registered address in Spain and whose shares are not admitted to trading in the Member State where the company has its registered address.

The main body of the Spanish takeover bid legislation is based on Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids ("Takeover Directive"). This directive was aimed at harmonizing the rules on public takeover bids in the different Member States of the European Economic Area (EEA). Be that as it may, the Takeover Directive still allows Member States to take different approaches in connection with some important features of a public takeover bid (such as the percentage of shares that, upon acquisition, triggers a mandatory public takeover bid on the remaining shares of the target company, and the powers of the board of directors). Accordingly, there are still relevant differences in the national rules of the respective Member States of the EEA regarding public takeover bids.

2.2 Other rules and principles

While the aforementioned legislation contains the main legal framework for public takeover bids in Spain, there are a number of additional rules and principles that may need to be taken into account when preparing or conducting a public takeover bid, such as:

1. The rules relating to the disclosure of significant shareholdings in listed companies (the so-called transparency rules) set forth, mainly, in Spanish Royal Decree 1362/2007 of 19 October 2007, on transparency requirements of listed companies ("RD 1362/2007"). These rules are based on Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004, on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC and related EU legislation. For further information, see 3.4 below.
2. The rules relating to insider dealing and market manipulation (the so-called market abuse rules), set forth, chiefly, in Regulation (EU) 596/2014, of the European Parliament and of the Council of 16 April 2014, on market abuse (the "Market Abuse Regulation") which repeals Directives 2003/6/EC of 28 January 2003, Directive 2003/124/EC, Directive 2003/125/EC and Directive 2004/72/EC. For further information, see 3.3 and 3.5 below.
3. The general corporate regulation contained in the Spanish Companies Act (the "SCA"), set forth in the consolidated text approved by Royal Legal Decree 1/2010 of 2 July 2010, which includes a specific section and regulation for listed companies.
4. The rules and regulations regarding merger control. These rules and regulations are not further discussed herein.

2.3 Supervision and enforcement by the CNMV

Public takeover bids are subject to the supervision and control of the CNMV.

The CNMV has a number of legal tools that it can use to supervise and enforce compliance with the public takeover bid rules, including administrative fines.

The CNMV also has the power to grant (in certain cases) exemptions from the rules that would otherwise apply to a public takeover bid.

2.4 Foreign investments

Spanish foreign direct investment measures before the COVID-19 outbreak included a post-investment notification for any foreign investment, and prior authorization for a number of limited investments, such as investments from countries considered tax havens, activities related to national defense and security, and (for non-EU investors only) investments in gambling, airlines and audiovisual media, among other sectors.

In response to COVID-19, and in order to avoid opportunistic investments in critical sectors for national public security and health, the Spanish government enacted a number of amendments to Law 19/2003, which created a new screening mechanism for certain foreign direct investments. This screening mechanism was subsequently supplemented in 2023 by the enactment of Royal Decree 571/2023 of 4 July 2023 to further develop the foreign investment screening mechanism .

Foreign direct investment is defined as an investment as a result of which a non-EU/non-EFTA resident directly or indirectly acquires 10% of the share capital of a Spanish company (listed or unlisted) and/or any other corporate or legal transaction or business action by means of which a foreign investor acquires control of a Spanish company, or over all or part of it – "control" meaning the ability to exercise decisive influence over the relevant company as per EU Merger Regulation criteria.

The closing of any foreign direct investment transaction subject to the screening mechanism requires prior administrative authorization from the Spanish Council of Ministers. If the value of the investment in Spain is below €5 million, the Directorate General on International Trade and Investments will grant the authorization. The statutory term to issue the decision is three months, although such term may be suspended if the authorities issue requests for additional information, and the transaction shall not be completed until receiving a decision from the competent authority.

The screening mechanism is limited to sectors that affect public order, national security and public health, namely the following:

• Critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, sensitive facilities, and land and real estate crucial for using such infrastructure.
• Critical and dual-use technologies, including telecommunications, artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies.
• Key technologies for industrial leadership and training, including advanced materials and nanotechnology, photonics, microelectronics and nanoelectronics, life science technologies, advanced manufacturing systems and transformation, artificial intelligence, digital security and connectivity.
• Technologies developed pursuant to projects or programs of particular interest to Spain, which include those that have received a significant amount or proportion of public financial support from the EU or from Spain.
• Supply of critical inputs, in particular (a) those supplied by companies developing and modifying software used to operate critical infrastructure in the energy, water, telecommunications, financial and insurance, health, transport and food safety sectors, as well as (b) other indispensable and irreplaceable critical inputs to ensure the integrity, safety or continuity of activities that may impact the aforementioned sectors, among others.
• Sectors with access to or control of sensitive information, including personal data, specific data on critical infrastructure, databases related to the supply of essential services or that may not be publicly accessed and those sectors that carry out activities requiring data protection impact assessment.
• Media.

In addition, and only for non-EU/EFTA investors, the investment will be subject to control, even if the target is not active in any of the strategic sectors above, if any of the following conditions is met:

• Investors that a non-EU/EFTA government, directly or indirectly, controls, including state bodies, armed forces or sovereign wealth funds; the ability to exercise decisive influence as a result of an agreement, by owning shares or an interest in another person/entity (directly or indirectly) or by providing significant funding, is deemed to constitute "control" for these purposes.
• Non-EU/EFTA investors that have already made an investment affecting national security, public order or public health in another EU member state.
• A serious risk that the Non-EU/EFTA investors engage in illegal or criminal activities affecting national security, public order or public health in Spain.

2.5 General principles

The following general principles apply to public takeover bids in Spain, based on the Takeover Directive:

1. all holders of the securities of a target company whose circumstances are equal must be afforded equal treatment. Moreover, if a person acquires control of a company, the other holders of securities must be protected;
2. the holders of the securities of a target company must have sufficient time and information to enable them to reach a properly informed decision on the bid. Where it advises the holders of securities, the board of the target company must give its views on the effects of implementation of the bid on employment, conditions of employment and the locations of the company´s places of business;
3. the board of a target company must act in the interests of the company as a whole and must not deny the holders of securities the opportunity to decide on the merits of the bid;
4. false markets must not be created in the securities of the target company, the bidder company or any other company concerned by the bid in such a way that the rise or fall of the prices of the securities becomes artificial and the normal functioning of the markets is distorted;
5. a bidder must only announce a bid after ensuring that it can fulfil any cash consideration in full, if such is offered, and after taking all reasonable measures to secure the implementation of any other type of consideration; and
6. a target company must not be hindered in the conduct of its affairs for longer than is reasonable by a bid for its securities.

2.6 Basic features of a public takeover bid

The following are the main features of the public takeover bid regime governed by RD 1066/2007 which implements and develops the Takeover Directive in Spain:

• Mandatory takeover bids as a consequence of the prior acquisition of a controlling interest in the target company must be launched unconditionally, over all securities and at an equitable price.
• The threshold which determines the mandatory nature of a takeover bid is set at 30% of the voting rights of the target company (thus excluding any treasury or self-owned shares from the calculation). In addition, the obligation to launch a takeover bid would also arise if the bidder acquired less than 30% of the voting rights but appoints a majority of the members of the company's board of directors.
• The establishment of various types of takeover bids, each with different requirements and features, including mandatory takeover bids (which are defined according to how the controlling interest is obtained and can be in the form of ordinary takeover bids, indirect takeover bids or incidental takeover bids), delisting takeover bids, voluntary takeover bids, and takeover bids for the acquisition of treasury stock for redemption.
• The "equitable price" rule is applicable to mandatory takeover bids, based on the highest price paid or agreed upon in the 12 months immediately prior to the announcement of the takeover bid. This is deemed to be the reference period. However, alternative criteria are established in cases where no share purchases or agreements to purchase occurred during the reference period, whereby the price is determined on the basis of objective valuation measures. In addition, the CNMV is entitled to modify the equitable price in certain specific and predefined situations.
• A more flexible procedure is established for voluntary takeover bids, which may be total or partial, are not subject to the equitable price requirement and allow the establishment of conditions precedent.
• The decision or obligation to launch a takeover bid must be announced immediately, provided that the capacity to pay the full amount of the consideration for the takeover bid has been confirmed.
• The takeover bid must always be previously authorized by the CNMV, which must also approve the relevant information memorandum (folleto).
• The target company's board of directors is under a duty to remain passive but is also entitled to take defensive measures, provided such measures are previously authorized at a general shareholders' meeting.
• Companies are entitled, at their option, to establish a breakthrough regime with regard to anti-takeover bid clauses provided for in their by-laws or in shareholders' agreements, without prejudice to the application of certain imperative breakthrough measures in the event that, after a takeover bid, the bidder obtains voting rights of at least 70% of the target company's share capital.
• A detailed regime for competing takeover bids is established, which allows break-up fees to be negotiated by the initial bidder and the target company for an amount up to 1% of the total takeover bid amount, and including the so-called "principle of equal information" with regard to any information that is provided by the target company to the different bidders.
• A procedure for squeeze-outs and sell-outs is also provided for, linked to the simultaneous obtainment of a 90% controlling interest in the target company as a result of a takeover bid and a minimum 90% acceptance level of the takeover bid.