The “Cuentas en Participación” Agreement: Key Features, Legal Framework and Effects
What is the “cuentas en participación” agreement?
In Spain, the cuentas en participación agreement—regulated under Articles 239 to 243 of the Spanish Commercial Code—is a business collaboration arrangement whereby a participant (also referred to as an investor) makes a capital contribution to a manager’s business. The manager conducts a specific business activity in which the participant has an interest, and the participant participates in the economic results without taking part in equity nor management and without the creation of a separate legal entity.
Nature and operation of the agreement
A distinctive feature of the cuentas en participación agreement is that the participant’s (investor’s) contributions become integrated into the manager’s assets. However, those contributions must be allocated exclusively to the project designated by the investor. In turn, the participant retains the right to share in the project’s results, without intervening in the management of the business.
The cuentas en participación agreement is regulated under Articles 239 to 243 of the Spanish Commercial Code and is a typical contract under Spanish commercial law. The basic statutory definition is found in Article 239, which provides:
“Merchants may take an interest in each other’s transactions, contributing to them with the portion of capital they may agree upon, and sharing in their favourable or adverse results in the proportion they determine.”
Assets and absence of legal personality
One essential characteristic of this agreement is that it does not create a separate pool of assets or a common fund different from the parties’ individual estates. The participant has no rights or obligations other than those deriving from the performance of the investment in the manager’s business (whether positive or negative).
A key element of this contract is that the contributions made by the participant become part of the manager’s assets, and the manager acquires title to them. This approach has been broadly supported both in legal scholarship and in the case law of the Spanish Supreme Court.
Exclusive management by the manager
Another essential feature of the cuentas en participación agreement is that the participant does not intervene in the management of the business. Management powers remain exclusively on the formal manager, and the participant or investor has no authority to intervene, supervise, direct, or audit the management of the business.
This lack of management involvement is consistent with the agreement’s nature as an investment or financing instrument: the participant provides capital but does not take part in business decision-making.
Sharing in results: profit and risk
The participant’s entitlement to share in the results—both favourable and adverse—of the manager’s business is another defining element of this agreement. Under Article 239 of the Spanish Commercial Code, merchants may share in “favourable or adverse results in the proportion they determine”.
This means that the participant assumes both the risk of loss and the possibility of profit in the agreed proportion, with liability not exceeding the amount contributed.
The object of a cuentas en participación agreement may cover a single specific transaction or the manager’s entire business. This flexibility follows from Article 239 itself, which refers to taking an interest in “the transactions of others”.
The Commercial Code does not establish specific formal requirements for the validity of the cuentas en participación agreement, and therefore freedom of form applies. Nevertheless, for evidentiary purposes, it is advisable to set the agreement out in writing and to clearly define the terms of participation.
Obligations of the manager
The manager is obliged to:
- Apply the contribution received to the agreed business or transaction.
- Manage such business with due diligence.
- Render accounts to the participant.
- Pay the participant the share of results to which they are entitled.
Obligations of the participant
The participant must:
- Make the agreed capital contribution.
- Bear losses in the agreed proportion (limited to the capital contributed).
- Refrain from intervening in the management of the business.
No effects vis-à-vis third parties
A core characteristic of the cuentas en participación agreement is its internal nature and the absence of direct effects vis-à-vis third parties. This follows from Article 241 of the Spanish Commercial Code, which provides that third parties only have a claim against the manager and have no right of action against the participant.
This reinforces the idea that no new legal entity is created and that dealings with third parties take place exclusively through the manager. The cuentas en participación agreement remains an internal arrangement between the parties, with no external publicity or direct third-party relevance.
