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Beatriz Milla Martí Notary · Es Mercadal, Menorca

Company Law · Menorca

Share capital reduction

Updated 17/07/2025

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A share capital reduction is a procedure by which a company decreases the amount of its registered share capital. The reduction must be formalised by means of a public deed (escritura pública) executed before a notary and then registered at the Companies Registry (Registro Mercantil) in order to take effect vis-à-vis third parties.

This mechanism is important for adjusting the capital to the company's real needs, offsetting losses, returning contributions to shareholders or restructuring the company's assets.

What is it for?

  • To adjust the share capital to the company's real financial position
  • To distribute part of the capital to the shareholders
  • To offset accumulated losses
  • To improve the company's financial and asset structure

What does the notary do?

  1. Reviews the resolution adopted by the General Meeting or competent body
  2. Authorises the public deed setting out the reduction and the reasons for it
  3. Verifies the identity and capacity of the signatories
  4. Ensures that the legal safeguards for creditors and third parties are respected
  5. Facilitates registration of the reduction at the Companies Registry

Common forms of capital reduction

  • Reduction with repayment to shareholderspart of the capital contributed is returned to the shareholders
  • Reduction to offset lossesthe capital is reduced to absorb accumulated losses
  • Nominal reductiona decrease in the nominal value of the shares (acciones or participaciones)
  • Reduction through redemption of treasury sharesthe company redeems and cancels its own shares

Important considerations

  • The reduction must be approved in accordance with the articles of association and the Spanish Companies Act (Ley de Sociedades de Capital)
  • Creditors' rights must be respected, including any periods during which they may object
  • The change must be registered at the Companies Registry and notified to the tax authorities (Hacienda) and other authorities
  • It must be properly reflected in the accounts and official documents

A capital reduction only takes legal effect and can only be relied on against third parties once it has been executed as a public deed before a notary and registered at the Companies Registry. This guarantees legal certainty and protects the rights of shareholders and creditors.

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