Paula Monfort, Gabriel Salarich
BANK DIVISION
The prohibition on financial assistance is one of those legal institutions where the legislation says relatively little, while the courts have provided most of the substantive guidance. The Spanish Companies Act (Ley de Sociedades de Capital) establishes the prohibition but does not exhaustively regulate the consequences of its infringement. It has therefore fallen to the courts to define its scope. In this regard, the recent Supreme Court Judgment (STS) No. 673/2026, of 5 May, revisits an issue of considerable practical importance: the breach of the prohibition on financial assistance does not necessarily render the transaction null and void. This is not the first time the Supreme Court has reached this conclusion, having already done so in STS No. 190/2025, of 6 February. The significance of this doctrine lies in the fact that it recognises a degree of judicial discretion and requires financial assistance arrangements to be assessed on the basis of more than the mere wording of the statute.
As a starting point—and although it is not the purpose of this note to examine the concept in detail, given the extensive academic commentary already devoted to the subject—it is worth recalling what the law provides. Financial assistance essentially occurs where a company finances or otherwise assists a third party in acquiring its own shares or equity interests. To define the concept, reference may usefully be made to STS No. 582/2023, of 20 April, which identifies its three essential elements: (i) an act of financing or assistance provided by the company in favour of a third party; (ii) the acquisition by that third party of shares or equity interests in the assisting company itself; and (iii) a causal link between those two elements, such that the financing is intended to facilitate or promote the acquisition.
Having established the above, the issue of real interest is a different one. Even where a breach of the prohibition is established, the courts retain a degree of discretion as to whether the transaction should be declared null and void, and may decline to do so where there are substantive reasons justifying such an outcome. STS No. 673/2026 is particularly illustrative because the existence of financial assistance was beyond dispute: the company offered all its shareholders the opportunity to acquire treasury shares, allowing half of the purchase price to be deferred for one year without interest or security. Despite finding that prohibited financial assistance had occurred, the Supreme Court refused to declare the transaction void in light of the specific circumstances of the case. The arrangement pursued a legitimate objective—preserving the existing shareholder structure and preventing a direct competitor from acquiring control of the company; the financing terms were not unduly burdensome for the company; the transaction enabled the company to dispose of its treasury shares; and it did so on fair terms by ensuring equal treatment of all shareholders. Having regard to the rationale underlying the prohibition, the Court concluded that the transaction had only a minimal impact on the interests protected by the statutory provision and that, accordingly, nullity was not justified.
This is not an isolated decision. In STS No. 190/2025, the Supreme Court had already refused to declare void a mortgage granted in connection with a transaction that constituted prohibited financial assistance. The Court reasoned that declaring the security void would not protect the parties whom the statutory prohibition seeks to safeguard; instead, it would benefit those who had participated in the prohibited arrangement while prejudicing the financial institution, which had played no part in the unlawful purpose.
In both cases, although the courts found that the prohibition had been infringed, they declined to impose the sanction of nullity on substantive grounds. Both judgments also emphasise the technical legal basis supporting this approach. Nullity is not an automatic consequence expressly provided for by company law but is instead inferred from Article 6.3 of the Spanish Civil Code as the general sanction for acts carried out in breach of a mandatory or prohibitive legal rule. It is precisely because this sanction is implied rather than expressly prescribed that the courts retain the ability to assess whether declaring the transaction void is appropriate in the particular circumstances of the case.
These judgments have important practical implications for the advice typically sought in relation to financial assistance. It is no longer sufficient simply to determine whether the three traditional elements of prohibited financial assistance are present. The analysis must also address a second and equally important question: namely, whether, notwithstanding the existence of prohibited financial assistance, there are sufficiently compelling reasons to conclude that nullity should not follow. This is an area in which judicial discretion assumes increasing importance, and where legal advice cannot be confined to the literal wording of the legislation but must also anticipate how a court is likely to assess the commercial purpose of the transaction, its financial impact on the company, and its effect on the interests that the statutory prohibition is designed to protect.
