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(^3) Article 1. Bear in mind Act 20/2007, dated 11th (^) July, on the Freelance Workers’ Statute (Official State Gazette number 166 dated 12th (^) July).

(^4) Article 2. Organic Act 8/2003, dated 9th (^) July, on Bankruptcy Reform, that amends Organic Act 6/1985, dated 1st (^) July, on the Judiciary (Official State Gazette number 164, dated 10thJuly) has created the Mercantile Courts of Law. See, in that regard, its Article 2, that amends diverse principles of the Organic Act on the Judiciary; especially, new Article 86 ter. thereof that establishes the matters that may be heard by the Mercantile Courts of Law.

(^5) Article 4. Drafted pursuant to Act 14/1975, dated 2nd (^) May (Official State Gazette number 107 dated 5 th (^) May), on reform of certain Articles of the Spanish Civil Code and Code of Commerce, on the legal status of the married woman and the rights and duties of the spouses. See Article 315 of the Spanish Civil Code, drafted by Royal Decree Law 33/1978, dated 16th^ November (Official State Gazette number 275, dated 17 th^ November), that establishes that the age of legal majority is eighteen years. See Article 12 of the Constitution. On the capacity of aliens, see Article 15 of the Code of Commerce. Also consider Organic Act 4/2000 dated 11th^ January, on rights and liberties of aliens in Spain and their social integration (Official State Gazette number 10, dated 12 th^ January, correction of errors in Official State Gazette number 20, dated 24 th^ January).

(^6) Article 5. See Article 269 of the Spanish Civil Code and note on preceding Article. On registration of minors or the incapacitated at the Business Registry, see Articles 87.4 and 5, 88.2 and 91 of the new Business Registry Regulations dated 19th^ July 1996 (Official State Gazette number 184 dated 31 st^ July).

(^7) Article 6. Drafted pursuant to Act 14/1975, dated 2nd (^) May (Official State Gazette number 107, dated 5 th (^) May). On general capacity of married women, see Articles 59, 61 to 65 and 316, 1,365 and 1,375 and following of the Spanish Civil Code, drafted pursuant to Act 11/1981, dated 3rd^ May (Official State Gazette number 119, dated 19 th^ May). See Article 32 of the Constitution on legal equality of the spouses in marriage; 87,6, 88,3 and 92 of the Business Registry Regulations.

CODE OF COMMERCE

BOOK I

On businesspersons and commerce in general

TITLE ONE

On businesspersons and acts of commerce

Article 1. Those who are considered businesspersons for the purposes of this Code include:

1.º Those who, having the legal capacity to engage in business, do so habitually; 2.º Business or industrial companies incorporated pursuant to this Code; 3

Article 2. Acts of commerce, whether performed by businesspersons or not, and whether or not they are specified in this Code, shall be governed by the provisions thereof; failing that by the business practice generally observed in each city and, if not covered by either of the rules, by those of ordinary Civil Law. The acts included in this Code and any others of a similar nature shall be considered acts of commerce. 4

Article 3. There shall be the legal presumption of habitual exercise of commerce from when the person intending to engage in business announces this by means of circulars, in the newspapers, on posters, signs displayed to the public, or by any other means, for an establishment that has any business transaction as the object thereof.

Article 4. Those who are of legal age and have free disposal of their assets shall have the legal capacity for habitual practice of commerce.^5

Article 5. Minors under the age of eighteen years and the incapacitated may continue the commerce previously conducted by their parents or predecessors by means of their guardians. Should the guardians lack legal capacity to engage in business, or be subject to any incompatibility, they shall be obliged to appoint one or more agents who fulfil the legal requisites, to stand in for them in the practice of business. 6

Article 6. In the case of engagement in business by a married person, the assets pertaining only to the spouse engaging in business shall be held subject to liability, and those acquired with the proceeds, being entitled to disposing of and of encumbering with a mortgage both. For the other common assets to be subject to liability, the consent of both spouses shall be required.^7

(^8) Article 7. See the note to Article 4.

(^9) Article 8. See note on Article 4.

(^10) Article 9. See note on Article 4.

(^11) Article 10. See note on Article 4.

(^12) Article 11. See note on Article 4.

(^13) Article 12. See note on Article 4.

(^14) Article 13. N.1. Section 1 is left without content as the penalty of civil interdiction has been suppressed by Article 2 of Act 6/1984, dated 31 st^ March (Official State Gazette number 80 dated 3 rd^ April). N2. Amended by Act 22/2003, dated 9th^ July. On bankruptcy. See Articles 878 and 922 of the Code of Commerce. N3. See Articles 136 to 138, 288; 613 and 615 of this Code: Articles 98.3 and 159.4 of the Constitution. See, on incompatibilities of personnel in the service of the Public Administrations, Act 53/1984, dated 26 th^ December (Official State Gazette dated 24th^ January 1985) and Act 1/1995, dated 18 th^ January (Official State Gazette on 24 January). Also see Act 12/1995, dated 11 th^ May, on incompatibilities of the members of the Government of the Nation and High Offices of the General State Administration (Official State Gazette number 113, dated 12th^ May), just as amended by Act 14/2000, dated 29th^ December (Official State Gazette number 313, dated 30th^ December) on Tax, Administrative and Social Order Measures, that updates the list of formal obligations related to the documentation that must be produced by those affected by the Act, without detracting from the necessary control.

Article 7. The consent referred to in the preceding Article shall be assumed to be granted when business is carried out with knowledge and without the specific opposition of the spouse who should provide it.^8

Article 8. The consent referred to in Article 6 shall also be assumed to have been provided when, on contracting marriage, one of the spouses is conducting commerce and continues to do so without objection by the other.^9

Article 9. Consent for the businessperson to bind the personal property of the spouse must be specifically provided in each case.^10

Article 10. The spouse of the businessperson may freely revoke the specific or assumed consent to which the preceding Articles refers.^11

Article 11. The acts of consent, opposition and revocation to which Articles 7, 9 and 10 refer must be recorded, for third party purposes, in a public deed registered at the Business Registry. Those of revocation may not, under any circumstance, detract from rights previously acquired.^12

Article 12. What is set forth in the preceding Articles is understood to be notwithstanding the terms to the contrary contained in the pre-nuptial agreements duly registered at the Business Registry.^13

Article 13. The following persons may engage in business or hold any office or have any direct administrative or financial intervention in business or industrial companies: 1.º (…) 2.º Persons who have been barred pursuant to the Bankruptcy Act, while the period of barring set in the ruling classifying the bankruptcy has not elapsed; 3.º Those who, by law or special provisions, may not engage in business. 14

Article 14. Persons performing the offices hereinafter stated may not be engage in business acting in their own name or through another, nor may they hold offices or have direct administrative or financial intervention in business or industrial companies and within the limits of the districts, provinces or towns, to wit: 1.º Magistrates, judges and officers of the State Prosecution Service in active service; This provision shall not be applicable to municipal mayors, judges and public prosecutors, nor to those who accidentally perform judicial or fiscal duties.

(^17) Article 16. Act 2/2007, dated 15th (^) March, on professional companies (Official State Gazette number 65 dated 16th (^) March), has amended numbers 7 and 8 of section 1. See Articles 2, 81, 228 and following of the Business Registry Regulations dated 19 th^ July 1996 (Official State Gazette number 184 dated 31 st^ July). Number 6 of paragraph 1 of this Article 16 has been introduced by the 4th^ Additional Provision of Act 12/1991, on Economic Interest Groupings. Consider Act 28/1998, dated 13th^ July, on Instalment Sales of Moveable Assets, that repealed Act 50/1965, dated 17th^ July, that was the basis of the Order dated 15th^ November 1982, that regulated the Register of Instalment Sales of Moveable Assets. Also see section 1 of the Sole Additional Provision of Royal Decree 1,828/1999 dated 3rd^ December , that approves the Regulations on Registration of General Contracting Conditions (Official State Gazette number 306 dated 23rd^ December), by virtue of which: “The Register of Moveable Assets is created, formed by the following sections: 1. Ships and Aircraft Section. 2. Car and other Motor Vehicles Section. 3. Industrial Machinery, business establishments and equipment goods Section. 4. Other Collateral Guarantees Section. 5. Other Moveable Assets Section that may be registered. 6. Section of the Register of General Contracting Conditions.” Pursuant to Final Provision 2 of that Royal Decree, “The operation of the Register of Moveable Assets and, within it, the Register of General Conditions, shall commence on this Royal Decree coming into force.” See Order dated 19th^ July 1999, that approves the new Order for Registration of Instalment Sales of Moveable Assets (Official State Gazette number 172, dated 20th^ July). Finally, in the Instruction dated 26th^ April 2001 (Official State Gazette, number 113, dated 11 th^ May), on data to be sent by the Ships Registers to the Central Register of Moveable Assets, the Directorate General of Registries and Notarial Offices (D.G.R.N.) recognizes that, although the Regulations have not yet been approved, it is not less true that the Registry of Moveable Assets has already begun to operate by virtue of the Sole Additional Provision of Royal Decree 1,828/1999, that it has declared applicable under supplementary terms to the Order dated 19 th^ July 1999.

(^18) Article 17. See 1, 3 and 13, 14, 16 and 379 and following of the Business Registry Regulations.

2. It shall also be the remit of the Business Registry to legalise corporate books, the deposit and publicity of accounting documents and any other functions they are attributed by the Laws. 17

Article 17.

1. The Business Registry shall be run under the auspices of the Ministry of Justice by a personal sheet system.
2. The Business Registry shall have its seat in the capitals of provinces and in the towns where, due to needs of the service, it is established according to the legal provisions in force.
3. A Central Business Registry shall also be established in Madrid, merely for informative purposes, the structure and operation of which shall be determined by the regulations.
4. The office of Business Registrar shall be covered pursuant to the terms of Business Registry Regulations. 18

Article 18.

1. Inscription at the Business Registry shall be performed by virtue of a public deed. It may only be performed by virtue of a private document in the cases specifically foreseen in the Laws and the Business Registry Regulations.
2. Registrars shall classify the legality of the extrinsic forms of documents of all kinds under their responsibility, by virtue of which registration is applied for, as well as the capacity and interest of the grantors or signatories thereof and the validity of their content, by what arises from them and of the entries of the Registry.
3. Once the entries at the Business Registry are performed, their essential data shall be notified to the Central Registry, in the Journal of which they shall be published. That publication shall be recorded at the relevant Registry.
4. The maximum term to classify and register shall be fifteen days from the date of the presentation entry. However, if the title has been withdrawn before the registration, has corrigible defects, or if there is a title previously presented, the fifteen-day term shall be calculated from the date of return of the title, correction or dispatch of the prior title, respectively. In these cases, the term of the presentation entry shall be understood to be extended until conclusion of the classification and dispatch term. For extraordinary reasons, the Directorate General of Registries and Notarial Offices may, at the request of the competent registrar, formulated within the first two days of the term for dispatch, extend that term until a maximum of fifteen days more.
5. If the classification of the titles referred to in the preceding section is not performed within the term stated, the party concerned may demand that the Registrar before whom the title was presented to perform this within the term of three days which may not be extended, or instigate that classification be carried out by the Registrar included in the substitution table approved by the Directorate General of Registries and Notarial Offices.
6. The classification performed out of term by the incumbent Registrar shall give rise to a tariff reduction of 30 per cent, notwithstanding application of the relevant penalisation regime.
7. If the Registrar, in fulfilment of his obligations and within the term established, were to issue a total or partial negative classification, the party concerned may appeal to the Directorate General of Registries and Notarial Offices, or instigate application of the substitution table approved by the Directorate General of Registries and Notarial Offices, who shall undertake that classification under his responsibility.

(^19) Article 18. Article 104 of Act 24/2001 on Tax, Administrative and Social Order Measures (Official State Gazette number 313, dated 31st December), has introduced sections 4 to 8. Section 4 has been amended by Act 62/2003, dated 30th^ December, on Tax, Administrative and Social Order Measures (Official State Gazette number 313, dated 31st^ December). See Articles 5, 6, 93 and 95 of the Business Registry Regulations.

(^20) Article 19. See Article 26.3 of this Code and 4, 81 and 83 of the Business Registry Regulations.

(^21) Article 20. See Articles 7 and 8 of the Business Registry Regulations.

(^22) Article 21. See Article 9 of the Business Registry Regulations.

(^23) Article 22. See Articles 87, 89, 90, 94 and 60 of the Business Registry Regulations. Article 22.1 and 2. Consolidated under Act 2/1995 , on Private Limited Companies (Official State Gazette number 71, dated 24th^ March).

8. The terms set forth in the Mortgage Act with regard to application of the substitutions table and classification by the Registrar included in it shall apply.^19

Article 19.

1. Registration at the Business Registry shall be discretional for sole traders, with the exception of ship owners. Sole traders who are not registered may not apply for inscription of any document at the Business Registry or take advantage of its legal effects
2. In the other cases considered under section one of Article 16, registration shall be mandatory. Except for provision to the contrary contained in Laws or enacting regulations, registration must be applied for within the month following granting the necessary documents to perform the entries.
3. Unregistered ship owners shall be held liable with all their assets for the obligations contracted.^20

Article 20.

1. The content of the Registry is assumed to be exact and valid. The entries of the Registry are under the safekeeping of the Courts and shall take their effects while no registration of judicial declaration of their inexactness or nullity is registered.
2. Registration does not endorse acts or contracts that are null pursuant to the Laws. The statement of inexactness or nullity shall not affect the rights of third parties in good faith, legally acquired. 21

Article 21.

1. Acts subject to registration may only be opposed with regard to third parties in good faith from their publication in the Official Journal of the Business Registry. This shall be notwithstanding the actual effects of the registration.
2. In the case of operations performed within the 15 days following publication, acts registered and published may not be opposed with regard to third parties who prove they were not able to know of them.
3. In the event of the content of the publication and the content of the registration not matching, third parties in good faith may invoke the publication if it is favourable to them. Those who have caused the discrepancy shall be obliged to compensate the party damaged.
4. Good faith by the third party is assumed while his knowledge of the act subject to registration and not published or the discrepancy between the publication and registration is not proven.^22

Article 22.

1. The sheet open for each sole trader shall be used to record the data identifying him, as well as his business name and, when appropriate, the sign of his establishment, its seat and that of its branches, if any, the corporate object, date of commencement of the operations, the general powers granted, the consent, opposition and revocation referred to in Articles 6 to 10; pre-nuptial agreements, as well as final decrees in matters of nullity, separation and divorce; and the other particulars established by the Laws or the Regulations.
2. The sheet open for business companies and other firms to which Article 16 refers shall registered the deed of incorporation and amendments, termination, dissolution, reactivation, transformation, merger or split of the entity, creation of branches, appointment and severance of directors, liquidators and auditors, the general powers of attorney, issue of debentures or other negotiable stock grouped in issues, when the firm registered may issue them pursuant to the law, and any other circumstances determined by the Laws or the Regulations.
3. Branches shall also have their own sheet opened at the Registry in the province where they are established, in the manner and with the content and to the ends determined in the regulations. 23

(^26) Drafted according to Article 2 of Act 19/1989 dated 25th^ July , on partial reform and adaptation of the business legislation to the European Economy Community (EEC) Directives on Company matters (Official State Gazette number 178, dated 27 th^ July). Consider Royal Decree 1,514/2007 dated 27 th^ November , that approves the General Accounting Plan (Official State Gazette number 278, dated 20th^ November) and Royal Decree 1,515/2007 dated 16th^ November , that approves the General Accounting Plan for Small and Medium Sized Companies and the specific accounting criteria for micro-companies (Official State Gazette number 279, dated 21 st November; corrections of errors in Official State Gazette dated 29th^ November, 29th^ and 31st^ December).

(^27) Article 26. See, on minutes of Meeting and notarial certificate, Articles 113 and 114 of the Public Limited Companies Act. On content of minutes, see Article 97 of the Business Registry Regulations. With regard to the term to request registration, see Article 83 of the Business Registry Regulations.

(^28) Article 27. On legalisation of traders’ books, see Articles 329 to 337 of the Business Registry Regulations.

TITLE III

On the accounts of businesses*^26

SECTION ONE.

On business books

Article 25.

1. All businesses must keep orderly accounts, in keeping with the activity of their business activities that allows chronological monitoring of all their operations, as well as periodic preparation of balance sheets and inventories. Notwithstanding the terms set forth in the laws or special provisions, an inventories and annual accounts book and another daybook must necessarily be kept.
2. The accounting shall be kept directly by the businesspersons or other persons duly authorised, notwithstanding thee former’s liability. Authorisation shall be assumed to have been granted, except evidence to the contrary.

Article 26.

1. Business companies shall also keep a book of minutes, in which they shall record at least all the resolutions passed by the General Meetings and special meetings and those of the other collegiate bodies of the company, stating the date on the calling and constitution of the body, a summary of the matters debated, the interventions for which a record is requested, the resolutions passed and the results of the votes.
2. Any partner and the persons who, if appropriate, have attended the General Meeting on behalf of partners who are not attending, may obtain certification of the resolutions and minutes of the General Meetings at any time.
3. The directors must present a notarial testimonial of the resolutions that require registration, at the Business Registry, within eight days following approval of the minutes. 27

Article 27.

1. Businesspersons shall present the books they are obliged to keep at the Business Registry of the place where they have their registered office, so that prior to their use, the relevant certification required for the book may be placed on the first page, and the stamp of the Registry on each sheet. In the event of change of registered office, the legalisation by the Registry of origin shall be fully valid.
2. However, performance of entries and annotations by any appropriate certification on the loose sheets that must later be bound to form the mandatory books shall be considered valid, these being legalised before four months have elapsed from the business year end date. With regard to the minutes’ book, the terms set forth in the Business Registry Regulations shall apply.
3. The terms set forth in the preceding paragraphs shall apply to the register book of nominative shares of public limited companies and share partnerships and the register book of shareholders of Private Limited Companies, which may be kept by computer means, according to the terms of the regulations.
4. Each Business Registry shall keep a legalisations book.^28

Article 28.

1. The Book of Inventories and Annual Accounts shall open with the detailed initial balance of the business. At least quarterly, these shall be transcribed with the moneys and balances for checking. The year -end inventory and the annual accounts shall also be transcribed.

(^29) Article 28. See Articles 172 and 193 of the Public Limited Companies Act.

(^30) Article 29.2. See Act 46/1998 dated 17th (^) December, on Introduction of the Euro (Official State Gazette number 302, dated 18th (^) December), just as amended by Article 67 of Act 14/2000, dated 29th^ December (Official State Gazette number 313, dated 30 th^ December), on Tax, Administrative and Social Order Measures. Especially Article 27; Royal Decree 2,814/1998 dated 23 rd^ December, which approves the regulations on accounting aspects of introduction of the euro (Official State Gazette number 307, dated 24 th^ December).

(^31) Article 30. Consider Royal Decree 1,496/2003 dated 28 th (^) November , that approves the Regulations that regulate invoicing obligations, and amend the Regulations on Value Added Tax, as well as Order EHA/962/2007 dated 10 April , that establishes certain provisions on telematic invoicing and electronic conservation of invoices, set forth in Royal Decree 1,496/2003 dated 28th^ November , that approves the Regulations that regulate invoicing obligations (Official State Gazette number 90, dated 14th^ April).

2. The Day Book shall record the daily account of all the operations related to the activity of the business. However, the joint annotation of the total operations shall be valid for periods not exceeding one month, on condition that their detail be recorded on other concordant books or registers, according to the nature of the activity concerned.^29

Article 29.

1. All the accounting books and documents must be kept, whatever the procedure used, with clarity, by order of dates, without blank spaces, interpolations, crossings out or erasures. As soon as errors or omissions suffered in the accounting annotations are noticed, they shall be noted. No abbreviations or symbols whose meaning is not clear according to the Law, the Regulations or generally applicable business practice may be used.
2. The accounting annotations must be made stating the values in pesetas.^30

Article 30.

1. Traders shall keep the books, correspondence, documentation and receipts related to their business, duly ordered, for six years, as of the last entry made in the books, notwithstanding what is established in the general or special provisions.
2. Should the trader cease in his activities, this shall not exonerate him of the duty referred to in the preceding paragraph, and if deceased, this shall befall his heirs. In the event of dissolution of companies, the liquidators shall be bound to fulfil the terms of that paragraph. 31

Article 31. The value as evidence of the traders’ books and other accounting documents shall be appreciated by the Courts according to the general rules of law.

Article 32.

1. The accounts of traders are secret, notwithstanding what is set forth in the provisions of the laws.
2. Notification or general inspection of the books, correspondence and other documents of traders may only be decreed, ex officio , or at the instance of a party, in cases of universal succession, temporary receivership, bankruptcies, liquidations of companies or business entities, redundancy proceedings, and when the partners or legal representatives of the workers are entitled to examine these directly.
3. In any event, outside the cases set in the preceding paragraph, production of the books and documents of traders at the instance of the party or ex officio may be decreed, when the person to whom they belong has an interest or liability in the matter in which production is appropriate. The inspection shall be limited exclusively to the points that are related to the matter concerned.

Article 33.

1. The recognition to which the preceding Article refers, whether general or particular, shall be performed on the trader’s premises, in his presence or that of the person he may appoint, and the appropriate measures must be taken for due conservation and custody of the books and documents.
2. In any case, the person at whose request the inspection is decreed may avail himself of auxiliary experts, in the manner and number the Judge may consider necessary.

3. The statement showing changes in the net assets shall have two parts. The first shall exclusively show the revenue and expenses generated by the business the business year, distinguishing between those reported in the profit and loss accounts and those recorded directly under net assets. The second shall contain all the movements in the net assets, including those due to transactions performed with the partners or owners of the business, when acting as such. It shall also report the adjustments in the net assets due to changes in accounting criteria and correction of errors.
4. The cash flow statement shall show the collections and payments made by the company, duly organised and grouped in categories or types of activities, in order to report on the cash flow during the business year.
5. The annual report shall complete, extend and comment on the information the other documents forming the annual accounts contain.
6. Each one of the items of the annual accounts must record, in addition to the figures for the business year ended, those of the business year immediately preceding. When this is significant to provide the true image of the business, the sections of the annual report shall also provide qualitative data on the status the previous business year.
7. The structure and content of the documents forming the annual accounts shall comply with the models approved in the enacting regulations.
8. The structure of these documents may not be amended from one business year to another, apart from exceptional cases, provided this is duly justified and recorded in the annual report.

Article 36.

1. The elements of the balance sheet include: a) Assets: property, rights and other resources under the economic control of the business, resulting from past events, from which it is probable that the business shall obtain financial benefit in the future. b) Liabilities: present obligations arising due to past events, the extinction of which shall probably give rise to a decrease in resources that may produce economic profit. To these ends, they are understood to include provisions. c) Net assets: this consists of the residual part of the company assets, once all the liabilities are deducted. This includes the contributions made, either at the moment of its incorporation, or in other subsequent ones, by the partners or owners thereof, which shall not be considered liabilities, as well as the accumulated results or other variations that affect this. For the purposes of distribution of profit, for mandatory reduction of the share capital and mandatory dissolution due to losses according to the provisions of the legal regulation on public limited companies and private limited companies, the net assets shall be considered the amount classified as such according to the criteria to prepare the annual accounts, increased by the amount of the share capital underwritten but not called, as well as the amount of the face value and issue premiums, or share capital undertakings underwritten, which is registered on the books as a liability.
2. The elements of the profit and loss accounts and the statement showing the changes in net assets in the business year include: a) Revenue: Increases in the net assets during the business year, whether due to inclusions or increases in the value of the assets, or decrease of liabilities, provided they have their origin in contributions by the partners or owners. b) Expenses: decreases in the net assets during the business year, whether in the form of removals or decreases in the value of the assets, or increase in the liabilities, provided these do not have their origin in distributions to the partners or owners. The revenue and expenses in the business year shall be assigned to the profit and loss account and shall form art of the result, except when it is appropriate to apply them directly to the net assets, according to the terms foreseen in this section, or in an enacting regulation thereof.

Article 37.

1. The annual accounts must be signed by the following persons, who shall certify their veracity: 1º. By the business owner himself, if an individual; 2.º By all the partners who are unlimitedly liable for the corporate debts; 3.º By all the company directors.
2. In the cases referred to in numbers 2 and 3 of the preceding section, if the signature of any of the persons stated therein were to be missing, this shall be stated on the documents on which it is missing, specifically mentioning the reason.
3. The signatures shall be preceded by the date on which the accounts were drawn up.

Article 38. The registration and valuation of the elements forming the different items forming the annual accounts must be performed according to the generally accepted principles of accounting. In particular, the following rules shall be observed: a) Except for evidence to the contrary, it shall be assumed that the business is a going concern; b) The valuation criteria shall not change from one business year to another; c) The principle of valuation caution shall be applied. This principle requires accounting only for the profit obtained up to the business year- end date. However, all the risks arising in the business year or any previous one must be taken into account, even if only known between the date of closing the balance sheet and that of the accounts being drawn up, in which case complementary information shall be provided in the annual report, notwithstanding the record that might arise in other documents forming the annual accounts. Exceptionally, if those risks were known between the formulation and before approval of the annual accounts, and these have a highly significant effect on the true image, the annual accounts must be drawn up again. In any case, the depreciation and value corrections due to deterioration of the value of the assets must be taken into account, regardless of if the business year ends with profit or with a loss; Likewise, caution must be applied in the estimates and valuations to be performed under uncertain conditions. d) The expenses and revenue shall be applied to the business year in which they occur, regardless of the date of their payment or collection; e) Apart from the exceptions foreseen in the enacting regulations, the items of the assets and liabilities, or those of expenses and revenue, may not be compensated, and they shall be valued separately from the elements forming the annual accounts; f) Notwithstanding the terms set forth in the following Articles, the assets shall be accounted for by acquisition price, or by production cost, and the liabilities by the value of the consideration received in exchange for debt, plus the interest accrued pending payment; the provisions shall be accounted for by the present value of the best estimate of the amount necessary to deal with the obligation, on the date of closing the balance sheet; g) Operations shall be accounted for when, fulfilling the circumstances described in Article 36 of this Code for each one of the elements included in the annual accounts, their valuation may be performed with an adequate degree of reliability; h) The elements forming the annual accounts shall be valued in the currency of their economic environment, notwithstanding their presentation in Euros; i) Non-strict application of some accounting principles shall be allowed when the importance with regard to the variation that event causes is scarcely significant and, thus, does not alter the statement of the true image of the assets, the financial situation of the and results of the business.

Article 38.bis.

1. The following elements of the assets shall be valued at their reasonable value: a) The financial assets forming part of a trading portfolio are classified as available for sale, or are derivative financial securities; b) The financial assets forming part of a trading portfolio, or derivative financial securities.
2. In general terms, the reasonable value shall be calculated based on a reliable market value. In elements for which a reliable market value may not be determined, this shall be obtained by application of the valuation models and techniques according to the requisites the regulations determine. The elements that may not be reliably valued according to the terms established in the preceding paragraph shall be valued according to the terms set forth in section f) of Article 38.
3. At the year- end, and notwithstanding the terms of Article 38, section c), the variations in value arising from application of the reasonable value criteria shall be applied to the profit and loss accounts. However, that variation shall be included directly in the net assets, in a heading to adjust the reasonable value, when: a) It is a financial asset available for sale; b) The element involved is a coverage instrument according to a coverage accounting system that allows all or part of those variations in value not to be recorded in the profit and loss accounts, under the terms determined in the enacting regulations.
4. The accumulated variations in reasonable value, except those assigned to the result of the business year, must be recorded under the reasonable value adjustment heading, up to the moment when removal, deterioration, disposal or cancellation of those elements takes place, in which case the accumulated difference shall be assigned to the profit and loss accounts.

A group exists when a company holds, or may hold, directly or indirectly, the control over one or several others. In particular, there shall be presumed to be control when a company, which shall be classified is controlling, is in a relation with another company, which shall be classified as dependent, in which any of the following situations arise: a) It holds the majority of the voting rights; b) It has the power to appoint or dismiss the majority of the members of the governing body; c) It may dispose, by virtue of agreements entered into with third parties, of the majority of the voting rights; d) It has used its votes to appoint the majority of the members of the governing body who hold office at the moment when the consolidated accounts must be drawn up and during the two business years immediately preceding. In particular, that circumstance shall be assumed when the majority of the members of the governing body of the governing body of the controlled company are members of the governing body or top management of the controlling company, or of another company controlled by it. In that event, consolidation shall not arise if the company whose directors have been appointed is bound to another in any of the cases foreseen in the first two letters of this section. For the purposes of this section, the voting rights of the controlling company shall be added to those it holds through other dependent companies, or through persons acting in its own name, but on account of the controlling company, or other dependent ones, or those with which it has made arrangements through any other person.

2. The obligation to draw up the consolidated annual accounts and management report does not exonerate the companies forming the group preparation of their own annual accounts and the relevant management report, according to their specific regime.
3. The company obliged to draw up consolidated annual accounts must include the companies forming the group in them under the terms established in section 1 of this Article, as well as any other company controlled by these, whatever the legal form and regardless of the registered office thereof.
4. The General Meeting of Shareholders of the company obliged to draw up the consolidated annual accounts must appoint the accounts auditors who are to audit the annual accounts and the management report of the group. The auditors shall ensure the management report matches the consolidated annual accounts.
5. The consolidated accounts and management report of the group must be submitted for approval by the General Meeting of Shareholders of the company obliged to simultaneously consolidate the annual accounts of the company. The shareholders of the companies belonging to the group may obtain the documents submitted for approval by the Meeting from the company obliged to draw up the consolidated annual accounts, as well as the management report of the group and the auditors’ report. The deposit of consolidated accounts, the management report of the group and the auditors’ report at the Business Registry and its publication shall be performed according to the terms established for the annual accounts of the public limited companies.
6. What is set forth in the next section shall be applicable to cases in which any individual or corporation voluntarily formulates and publishes consolidated accounts. Likewise, these rules shall be applied, whenever possible, to cases of formulation and publication of consolidated accounts by any individual or corporation other than those considered in section 1 of this Article.

Article 43. Notwithstanding what is set forth in the preceding Article, the companies included therein shall not be obliged to perform consolidation if they fulfil any of the following situations:

1. When the closing date of the business year of the company bound to consolidate the set of the companies thereof does not exceed, in its last annual accounts, two of the limits set forth in the Public Limited Companies Act for formulation of the abbreviated profit and loss accounts, except if any of the companies in the group has issued securities admitted to trading on a regulated market in any member State of the European Union.
2. When the company bound to consolidate under Spanish Law is also dependent on another that is governed by that legislation, or by that of another member State of the European Union, if the latter company holds 50 per cent or more of the corporate shares thereof, and the shareholders or partners who hold at least 10 per cent have not requested formulation of consolidated accounts six months before the business year- end. In all cases, the following requisites must be fulfilled: a) For the company dispensed from formalising consolidation, as well as all the companies that it should include in the consolidation, to be consolidated in the accounts of a larger group whose controlling company is subject to the legislation of a member State of the European Union; b) For the company dispensed formalisation of the consolidation to include the mention in its accounts that it is exempt of the obligation to establish consolidated accounts, the group to which it belongs, the company name and the registered office of the controlling company;

(^37) Article 43. See Article 190 and Final Provision 1.4. of the Public Limited Companies Act and Article 48.2 of this Code.

(^38) Article 44.5. See Act 46/1998, dated 17th (^) July, on Introduction of the Euro (Official State Gazette number 302, dated 18th (^) December), as amended by Article 67 of Act 14/2000, dated 29 th^ December (Official State Gazette number 313 dated 30 th^ December), on Tax, Administrative and Social Order Measures, especially Article 27, Royal Decree 2,814/1998, dated 23 rd^ December, that approve the regulations on the accounting aspects of introduction of the euro (Official State Gazette number 307, dated 24 th^ December).

c) For the consolidated accounts of the controlling company, as well as the management report and auditors’ report to be deposited at the Business Registry, translated into one of the official languages of the Autonomous Community where the company dispensed has its registered office; d) For the company dispensed formalisation of consolidation not to have issued securities admitted to trading on a regulated market in any member State of the European Union. 37

Article 43 bis. The consolidated annual accounts must be drawn up according to the following regulations: a) If, on the closing date of the business year, any of the companies in the group has issued stock admitted to listing on a regulated market in any member State of the European Union, the international financial reporting standards adopted by the Regulations of the European Union shall apply. Notwithstanding this, Articles 42, 43 and 49 of this Code shall be applicable to them. Likewise, the consolidated annual accounts must include the information contained in indications 1 to 9 of Article 48 of this Code. b) If, at the closing date of the business year, none of the companies in the group has issued securities admitted to listing on a regulated market in any member State of the European Union, they may opt for application of the accounting regulations included in this Code and its enactment regulations, or by the international regulations on financial information reporting adopted by the Regulations of the European Union. If opting for the latter, the consolidated annual accounts must be prepared continuously according to those Regulations, and the terms of the last paragraph of letter a) of this Article shall also be applicable to them.

Article 44.

1. The consolidated annual accounts shall include the balance sheet, the profit and loss accounts, a statement recording the changes in the net assets during the business year and an annual report, all consolidated. These documents shall form a unit. The consolidated management report shall be attached to the consolidated annual accounts.
2. The consolidated annual accounts must be drawn up clearly and provide a clear image of the assets, of the financial situation and results of the set constituted by the companies included in the consolidation. When application of the provisions of this Code is not sufficient to provide a true image, in the sense indicated above, the annual report shall provide the necessary complementary information to achieve that result. Under exceptional cases, if application of a provision contained in the following Articles is incompatible with the true image the consolidated accounts must provide, that provision shall not be applicable. In those cases, the annual report must state that lack of application, be sufficiently motivated and explain its influence on the assets, the financial situation and results of the group.
3. The consolidated annual accounts shall be established on the same date as the annual accounts of the company obliged to consolidate. If the business year- end date of a company within the consolidation differs by more than three months from the relevant one of the consolidated accounts, its inclusion in these shall be made by means of the intermediate accounts referred to on the date when the consolidated ones are established.
4. When the composition of the companies included in the consolidation has varied considerably over the course of a business year, the consolidated annual accounts must include the necessary information in the annual report so the comparison of the successive consolidated financial statements shows the main changes that have taken place between business years.
5. The consolidated accounts must be formulated stating the figures in Euros. 38
6. The consolidated accounts and management report shall be signed by all the directors of the company obliged to draw them up, who shall certify their veracity. If the signature of anyone of them is missing, this shall be stated on the documents on which it is missing, explaining the reason why.

Article 45.

1. The elements of the assets, liabilities, revenue and expenses included in the consolidation must be valued following uniform methods, according to the criteria included in this Code and its enactment regulations.

a) When the equivalence setting procedure is applied for the first time, the book value of the stake in the consolidated accounts shall be the relevant amount of the percentage represented by that stake, at the moment of the investment, on the reasonable value of the assets acquired and liabilities undertaken, including, when appropriate, the provisions of the terms that are determined in the regulations. If the difference arising between the cost of the stake and the value to which the reference is made is positive, it shall be included in the investment amount on the books and be recorded in the annual report, the terms provided in Article 46 being applicable to it. If the difference is negative, it must be applied directly to the consolidated profit and loss accounts. The rules laid down in the enacting regulations of the accounting treatment shall apply in the case of successive stakes. b) The variations undergone in the current business year in the net assets of the company included in the consolidated annual accounts by the equivalence setting procedure, after elimination of the relevant proportion for the results generated in transactions between that company and the company that holds the stake, or any other of the companies in the group, that are not performed with regard to third parties, shall increase or decrease, as appropriate, the accounting value of that stake in the relevant proportion, once the depreciation and deteriorations arising from the date on which the method was applied for the first time are considered. c) The profit distributed by the coordinate included in the annual accounts consolidated by the equivalence setting procedure shall reduce the accounting value of the stake in the consolidated balance sheet.

Article 48. In addition to the mentions established by other provisions of this Code and by the Public Limited Companies Act, the consolidated annual report must include at least the following indications: 39 1.ª The name and registered office of the companies included in the consolidation; the stake and percentage of voting rights held by the companies included in the consolidation, or by the persons acting in their own name, but on behalf of them in the capital of other companies included in the consolidation other than the controlling company, as well as in the case of Article 42 on which the consolidation has been based, identifying the link applicable to them to configure them within a group. These mentions must be given with regard to the companies in the group that are left out of the consolidation, because they do not have a significant interest for the true image that must be provided in the consolidated annual accounts, stating the reasons for the exclusion. 2ª. The name and registered office of the companies to which the equivalence setting procedure applies, or method of participation by virtue of the terms set forth in section 3 of Article 47, stating the fraction of their capital and percentage of voting rights held by the companies included in the consolidation, or by a person acting in his own name, but on the account of these. The same indications must be provided in relation to companies that have waived the terms set forth in Article 47, when the stakes in the capital of these companies have no significant interest with regard to the true image that must be stated by the consolidated accounts, and a reason must be given for which that method has not been applied. 3ª. The name and registered office of the companies to which the proportional integration method has been applied by virtue of the terms set forth in sections 1 and 2 of Article 47, the elements on which the joint management is based, and the fraction of their capital and percentage of voting rights they have in the companies included in the consolidation, or a person acting on his own behalf, but on account of these. 4ª. The name and registered office of other companies not included in the preceding sections, in which the companies included in the consolidation hold a direct stake, or one through a person acting in his own name, but on their behalf, with a percentage of not less than 5 per cent of their capital. The stake in the capital and percentage of the voting rights shall be indicated, as well as the amount of the net assets and result of the last business year of the company, the accounts of which have been approved. That information may be omitted when they only have a negligible interest with regard to the true image the consolidated accounts must provide. 5ª. The average number of persons employed in the course of exercise by the companies included in the consolidation, distributed by categories, as well as, if not mentioned separately in the profit and loss accounts, the personnel expenses related to the business year. A separate mention shall be made of the average number of persons employed in the course of the business year by the companies to which the terms set forth in sections 1 and 2 of Article 47 apply.

(^39) Article 48. See Articles 34 and 35 of this Code and 200 of the Public Limited Companies Act.

6ª. The sum of the wages, per diems and remunerations of any kind accrued during the business year by the top management staff and members of the governing body, both of the controlling company, whatever their reason, as well as the obligations contracted in matters of pensions, or payment of life insurance premiums for former and present members of the governing bodies and top management staff. That information may be given globally by remuneration item. When members of the governing bodies are corporations, the above requirements shall refer to the individuals representing them. 7ª. The sum of the advances and loans granted to the top management staff and members of the governing bodies, both of the controlling company, by any company in the group, stating the interest rate, their essential characteristics and the eventual moneys reimbursed, as well as the obligations undertaken on their account as any kind of guarantee. The advances and loans granted to the top management staff and company directors by companies outside the group referred to in sections 1 and 3 of Article 47 shall also be reported. This information may be reported globally by each category. When the members of the governing body are corporations, the above requisites shall refer to the individuals who represent them. 8ª. The nature and business purpose of agreements not included on the consolidated balance sheet, as well as the financial impact of those agreements, to the extent that such information is significant and necessary to determine the financial situation of the companies included in the consolidation considered overall. 9ª. The sum broken down by items of the auditing fees and other services provided by the auditors, as well as those of the persons or firms linked to the auditor, pursuant to the terms of Act 19/1988, dated 12th July, on Accounts Auditing. 10ª. Significant transactions other than the ones within the group, performed by any of the companies included in the group with related third parties, stating the nature of the link, the sum and any other information with regard to the transactions that is necessary to determine the financial situation of the companies included in the consolidation considered overall.

Article 49.

1. The consolidated management report must contain the true presentation of the evolution of the business and situation of the set of companies included in the consolidation, along with a description of the main risks and uncertainty faced. The presentation shall consist of a balanced, exhaustive analysis of the evolution and results of the business and the situation of the companies included in the consolidation considered overall, taking into account the magnitude and complexity of the venture. To the extent necessary for comprehension of the evolution, the results or situation of the company, this analysis shall include both key indicators of the financial results, as well as, when appropriate, non financial ones, that may be relevant with regard to the specific corporate activity, with inclusion of information on maters related to the environment and personnel. On providing this analysis, the consolidated management report shall provide, if appropriate, complementary references and explanations on the sums detailed in the consolidated accounts.
2. It must also include information on: a) Important events that have arisen after the closing date of the business year of the companies included in the consolidation; b) The foreseeable evolution of the set formed by those companies; c) The activities of that set in matters of research and development; d) The number and face value or, failing that, the book value of the set of shares or stake in the controlling company held by it, by subsidiaries, or by a third person acting in his own name, but on account of these.
3. With regard to the use of financial instruments, and when relevant for valuation of assets, liabilities, financial situation and results, the management report shall include the following: a) Objectives and policies for management of the corporate financial risk, including the policy applied to cover each significant type of transaction foreseen, for which coverage accounting is used; b) The exposure the company has to price risk, credit risk, liquidity risk and cash flow risk;
4. When the company obliged to draw up consolidated annual accounts has issued securities admitted to trading on a regulated market in any member State of the European Union, it shall include its corporate governance report in a separate section of the consolidated management report.
5. The information the management report contains shall not justify its absence from the annual accounts when such information must be included therein pursuant to what is set forth in the preceding Articles and the enacting regulations.