Sabadell and CaixaBank move their head offices

On 5 October 2017 Banco Sabadell moved its registered office to Alicante and the next day CaixaBank moved its own to Valencia. On 6 October the government approved a decree that made it easier to change the registered office without going through the shareholders’ meeting. Within weeks, thousands of companies moved their registered offices out of Catalonia. It was a highly visible move, led by two of the country’s largest financial institutions and followed very closely by the rest of the business community.

It is worth being precise from the start about what is being discussed. Moving a registered office is not relocating activity: it is a legal decision that changes a company’s official address and, with it, some aspects of its relationship with the registry, the authorities and the courts. Understanding the difference is essential to assess its real consequences, which are less spectacular than the headlines but not irrelevant for that.

What a registered office is

The registered office is a company’s legal address, which determines its commercial registry and the rules that apply. Changing it does not mean moving the business, the employees or the offices: it is a formal change, although with legal consequences. A company can have its registered office in one city and carry out its main activity in another, provided it complies with the rules on where the registered office must be located.

The registered office determines, for example, in which registry the company’s acts are entered and which courts are competent in certain disputes. It can also affect certain formal obligations and relations with the authorities. So even if the change is not noticeable day to day, the choice of registered office is one of the strategic decisions a board or management must weigh carefully.

Why the exodus happened

Companies, and banks in particular, sought to protect their legal certainty and that of their customers at a moment of great uncertainty. The government decree, by removing the requirement to approve the change at a shareholders’ meeting, speeded up the moves and allowed them to be decided immediately. Normally, a change of registered office requires a decision by the shareholders; with the new rule, the administrative body could take it directly.

That speed was decisive, because many companies wanted to clear up as soon as possible any doubt about the legal and financial framework in which they operated, in particular their relationship with the European banking system. For institutions that depend on the trust of depositors and supervisors, certainty about the applicable legal system is a first-order matter. Other companies followed the same logic of caution, though with motivations and circumstances of their own.

Before moving the head office

Before changing the registered office, it is wise to analyse the tax, corporate and reputational effects with an adviser. The move is formal but leaves a mark on relationships with customers, employees and authorities, and is not always easy to reverse. Contracts and licences need to be reviewed, checking whether any depends on the registered office, and the costs of the operation calculated.

It is also important to consider how the decision is communicated to employees, customers and suppliers, and what signal it sends. A decision adopted in haste can be read in different ways and create unnecessary doubts. If the move is presented as a precaution and is reversible, it helps to say so clearly. And above all, a quick decision in times of tension should not be taken without having assessed its medium-term consequences.

A quick decision in times of tension deserves calm reflection on its consequences.

This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.