Legal Status - APRIL 2026
Disputes: Defence in administrative disciplinary proceedings
DISPUTES
Defence in administrative disciplinary proceedings
ANTONI FAIXÓ
Partner
The sanctioning file is an administrative procedure in which an Administration analyzes whether a legal infringement has been committed by a person or company upon certain facts, and if the infringement exists, what sanction should be imposed.
In this procedure, the affected party must be notified of the start of the proceedings, and the party has the right to submit allegations, to present and request the taking of evidence, and to appeal the sanctioning resolution that may be issued.
Law 39/2015 generally regulates the bases of the sanctioning procedure, which includes possible prior actions, possible provisional measures, the phases of the procedure, the taking of evidence, the expiring date of the procedure or the available resources.
In addition to this general rule, there are various sector-specific laws and regional laws that regulate specific violations and the penalties that may be imposed for committing an infraction.
In general, the most notorious sanctioning proceedings are in the areas of labor law and tax law, because these are matters that affect all companies, whatever their business sector is.
However, there are activities that have their own sanctions and disciplinary proceedings, among which we can highlight:
Consumer protection. Penalties for non-compliance with consumer protection regulations, such as product warranties, installation defects, lack of spare parts, or failure to comply with the terms of the offer
Energy. Failure to comply with billing or consumer information obligations, infringements in self-consumption or renewable energies, installations without authorization or without meeting technical requirements.
Transport. Excessive driving times, overloading of vehicles, technical deficiencies, transport without administrative authorization or with an expired license, or non-compliance with regulations for the transport of dangerous goods.
Hospitality and catering. Non-compliance with hygiene and food safety regulations, lack of licenses or non-compliance with activity conditions, irregularities in terraces (occupation of public road), exceeding capacity or non-compliance with opening hours.
Urban planning. Execution of works without a license or in contravention of the one granted, improper use of land (for example, residential use on unauthorized land), non-compliance with stop-work orders or demolition orders.
Commerce. Misleading or unfair advertising, sales without giving adequate information to the consumer, breaches of promotions of discounts or prices.
Almost all sectors have their own rules regarding sanctioning law, and it is also common that state and regional rules already exists on a particular sector, sometimes with significant differences in obligations, infractions, and sanctions.
Regarding all sanctioning proceedings, it should be noted that the affected party always has the possibility of appealing the sanction in court, so that a judge can review the actions taken by the Administration and decide whether the sanctioning decision was correct or not.
This is important because it is common for the administrative body that processes and resolves a sanctioning file not to act with sufficient legal basis, and therefore the sanctions can be judicially revoked or reduced in their amount, which is beneficial for the affected party since the amount of the sanctions may be high.
When a sanctioning procedure is initiated —or once a resolution has been issued—, it is crucial to adopt a strategic approach from the beginning.
Understanding how the procedure works allows the proper use of available tools (evidence, resources, expiry dates, statute of limitations, or potential procedural defects), while a solid grasp of sector-specific regulations facilitates the development of strong arguments on the merits of the case. All of this can make a significant difference regarding the outcome of the proceedings.
In this context, proactive case management can lead to significant cost savings and, in many cases, prevent the penalty from being imposed. It's not just about reacting to a potential infraction, but about identifying opportunities within the proceedings themselves to effectively and rigorously defend the affected party's interests. Furthermore, it's important to bear in mind that, beyond the financial impact, certain penalties can become public and generate a negative reputational effect.
Furthermore, experience shows that a well-planned approach from the initial stages of the process not only increases the possibility of success but also provides peace of mind and control in a scenario that, by its very nature, tends to generate uncertainty. Anticipating problems, analyzing every detail, and acting judiciously allows the transformation of a potentially detrimental situation into a much more favorable outcome.
April 2026
COMMERCIAL
Approved draft reform of article 104 of the LSC which strengthens the role of the commercial registry
MANUEL ARMADA
Associate
The Government has recently approved the Draft Organic Law on Public Integrity, which, among other measures, provides for the modification of article 104 of the “Ley de Sociedades de Capital (LSC),” meaning the Corporate Enterprises Act, introducing relevant changes in the regime of identification and transfer of social shares in limited liability companies.
The reform aims to strengthen legal certainty, transparency and the digitalization of the corporate system, assigning the Commercial Registry a central role in determining and publicizing the ownership of company shares.
Below, we summarize the main new features of the new regime, which is currently in the public consultation and information phase.
1. Register of Members in electronic format
The draft bill establishes that limited liability companies must keep a Register of Members in electronic format, which must be communicated to the Commercial Registry corresponding to the company's registered office.
The following must be included in said book:
• The original ownership and the successive transfers of shares (voluntary or forced);
• The creation of real rights or encumbrances, including non-possessory pledges;
• The identification of the beneficial owner, in accordance with the regulations on the prevention of money laundering.
Likewise, the administrators must deposit the Register of Members Book annually in the Commercial Registry, within the same period as the deposit of the Annual Accounts.
2. Registration of the transfers
One of the main novelties of the Preliminary Draft is that any transfer or encumbrance of shares must be registered in a special section of the Commercial Registry, attributing to said registration a constitutive character.
This means that:
• The acquirer may not exercise any rights against the company or against third parties until the transfer is registered, and
• The company will only recognize as a partner those who are registered in the Commercial Registry.
This change modifies the current model, in which effectiveness towards society was mainly linked to the Register of Members kept by the company itself.
3. Impact on the exercise of economic and political rights
The draft bill expressly states that the status of partner may only be recognized with respect to those who are registered in the Commercial Registry.
Consequently:
• Political and economic rights may only be exercised by the registered holder;
• The payment of dividends, restitution of contributions or other patrimonial attributions will only have liberatory effects if made in favor of the person who appears as the registered owner.
In practice, this means that anyone who acquires shares and does not register the transfer will not be able to exercise shareholder rights, including economic rights.
4. Documentation of transmissions
The new system provides for different alternative ways of documenting transfers or encumbrances of shares in the Register of Members:
• Standardized electronic private document, approved by the General Directorate of Legal Security and Public Faith, signed by means of a qualified electronic signature by the transferor and the acquirer;
• Judicial or administrative document;
• Registration certificate of the registration or annotation made.
5. Practical implications
• The Commercial Registry will become the point of reference for determining partner status;
• Transfers of shares will necessarily require registration in order to have full effect;
• Companies must adapt their internal procedures for managing the Register of Members;
• In M&A transactions and corporate reorganizations, it will be necessary to integrate the registration process as part of the closing process.
6. Conclusions
The planned reform of Article 104 of the LSC represents a structural change in the system of identifying partners in limited liability companies, by strengthening the publicity of the registry and moving towards a digitized model with greater legal certainty.
However, its effective application will depend on subsequent regulatory development and legislative processing, so it will be necessary to closely monitor the evolution of the text during its parliamentary process.
April 2026
EMPLOYMENT
Corporate liability arising from the underpayment of social security contributions for workers
FRANCISO JAVIER VIDAL
Associate
The recent Supreme Court Ruling No. 273/2026, dated March 12, has once again brought to the forefront of legal discourse an issue that, although not new, does not always receive the attention it deserves in business practice: the liability of companies for incorrectly reporting their employees’ contributions, and how such underreporting affects the employee’s future entitlement to contributory benefits.
The ruling analyzes the case of an individual who had formally provided services as a self-employed worker for years, although the relationship was later judicially declared to be one of employment. Following this declaration, the social security contributions for the non-prescribed period were regularized. However, years later, when the worker applied for their retirement pension, their regulatory base was lower than what they would have received had they correctly contributed to the General Social Security Scheme throughout the entire relationship.
The Supreme Court declares that, when the underpayment of employer contributions affects the amount of the pension, the company is liable for the difference between the benefit recognized by the INSS and that which would have corresponded to the worker had contributions been made correctly, until said pension is extinguished.
This means that business risk is not limited to the payment of back wages, surcharges, or administrative penalties. In certain cases like this, the company may even be forced to assume, at a later date, the proportional share of the employee's contributory pension based on the loss incurred.
Underpayment as an injury to the contribution career
Contribution bases determine, to a greater or lesser extent, the amount of benefits such as retirement, permanent disability, temporary disability, unemployment or certain benefits linked to occupational contingencies.
And there are many possible causes that can lead to incorrect underpricing, including:
• use an incorrect contractual modality;
• declare a workday shorter than the one actually performed;
• produce late registrations or improper discharges;
• to classify the worker under a Social Security scheme that does not correspond to them;
• applying an incorrect collective agreement;
• assign a lower professional group;
• not updating salary tables;
• not recognizing due salary supplements that affect social security contributions.
Bad faith in business is not mandatory
One of the most relevant aspects confirmed by the Supreme Court is that responsibility does not depend exclusively on bad faith or a deliberate intention to breach the agreement.
There may be cases in which the company has acted in accordance with a certain legal interpretation, in which there is controversy about the nature of the relationship, or in which the contributions corresponding to the non-prescribed period have even been paid once the situation has been regularized.
However, case law analyzes the two circumstances that may occur to determine whether the company is responsible: that the non-compliance has affected the minimum qualifying period necessary to access the benefit, or that it has caused a reduction in its amount by decreasing the regulatory base.
If the underpayment of social security contributions has no real impact on either the establishment of the right to benefits or the amount of the benefit, it should not generate liability for benefits. However, if such an impact exists on either of these two elements, the company may be obligated to pay in proportion to the damage caused.
Statute of limitations for contributions and liability for benefits
Generally speaking, claims for Social Security contributions are subject to a four-year statute of limitations. Therefore, many companies may consider that, after this period, the risk associated with incorrect contributions has expired.
Nothing could be further from the truth. The Supreme Court distinguishes between the statute of limitations for claiming back payments and the moment when potential employer liability arises, which occurs when the worker accesses the benefit and disputes the applied contribution base.
From the notification of that resolution, the worker may file the corresponding prior claim against the managing entity and, if appropriate, direct the action against the company if he maintains that the lower benefit is caused by a breach by the company.
Therefore, a poorly made business decision regarding remuneration many years ago can have future consequences when the worker reaches retirement age or accesses another contributory benefit.
In summary, underpayment of social security contributions is a real problem that can arise not only immediately with the corresponding claim from the worker or the intervention of the Labor Inspectorate, but also over time if it prevents the worker from accessing a contributory pension to which he would have been entitled or reduces its amount.
Therefore, a proper preventive review of salaries, agreements, contracts and contribution bases should be considered a priority in any labor compliance strategy by companies.
April 2026
*These articles do not constitute legal advice.