Provenance DiligenceIndependent buy-side risk screen · Spain & Portugal
Decision Memo
Illustrative sample
This is a sample. It shows the exact format, depth and arithmetic a client receives — a two-page Decision Memo plus an evidence annex. The deal (café, town, prices, staff) is illustrative: no real client, seller or business is named, and the deal figures are worked examples. What is real: every statute, every legal rate and formula, and every benchmark — each is cited and traceable. In a client memo the same arithmetic runs on your deal's real numbers. Spain-law specimen — Portuguese deals run the identical protocol against the Portuguese stack (Código do Trabalho Art. 285 succession, AT & Segurança Social certidões, trespasse regime): see the published Portuguese practice memo →
The verdict · Only-If
Only-If
The café is a working business — but two of the seller's own claims sit in documented tension (Findings F-3 and F-4: both survive only if the papers explain the gap), and buying a going concern in Spain means you can inherit the seller's hidden tax debts unless one specific certificate is requested before closing (F-1). The deal survives only on the conditions below.
1Resolve first: Art. 175.2 tax certificate requested (with the seller's written consent) + TGSS social-security clearance — before any LOI, deposit or signature. Modelled downside if skipped: €20,000–35,000 of inheritable debt (F-1).
2Negotiate: claimed revenue fails the capacity test by €47,000–76,000/yr (F-3); rent passes the viability threshold only at the claimed figure (F-4); the landlord's +20% traspaso uplift adds €3,480/yr (F-5). Each is a priced lever at the table.
3Monitor: an 11-year employee transfers with the business — a contingent severance exposure of ≈ €18,200 that you inherit on day one (F-6).
Walk away if: the seller refuses written consent for the F-1 certificate, or refuses 24 months of till and IVA records (F-3). Both refusals convert this verdict to Walk — no further analysis needed.
What I am accountable for
- Searching every public source this tier covers — competently, and honestly reported
- Every fact traced to a named source, with the date it was retrieved
- The four named parts of this memo — or your fee back
- Printing "not retrieved" where a source did not answer — never a guess in its place
What no desk report can be accountable for
- Whether the seller's documents are genuine
- How the business performs once you own it
- What only an on-site visit, or your lawyer, can establish
- Your decision to buy
I stand behind the search, the sources, the reasoning and the checklist. The seller's honesty, the future of the business and the decision are not mine to carry — which is exactly why this memo names what to demand, and from whom, before your money moves.
The result at a glance
Scope of this Screen
What a desk screen covers — and what comes next. A large part of any deal lives in the seller's papers and your lawyer's checks; this memo tells you exactly what to demand, and from whom.
Public records — checked here (registry, insolvency, licence, activity signals)
Needs the seller's documents — tax & social-security certificates, accounts, lease
Only your lawyer can reach — the blind spots named on page 3
Where the risk sits
A quick read by area, mapped to the numbered findings. Green does not mean "safe" — it means nothing surfaced in the public records.
| Registry & insolvency | Nothing in public records |
| Activity licence | On record |
| Tax & social security | F-1 — resolve first |
| Revenue plausibility | F-3, F-4 — negotiate |
| Lease (traspaso terms) | F-5 — negotiate |
| Local competition | F-2 — test the winter |
| Staff liabilities | F-6 — monitor, size it |
| Real owners · live court cases | Can't see from a desk |
Red resolve before any signature · Amber a priced flag to act on · Green no public warning sign — this does not mean "safe" · Hollow not visible in public records — your lawyer runs it.
Who handles what
Me
Find and price the commercial red flags visible in public records — and name the ones that aren't visible.
Your lawyer & accountant
Transfer, enforceability, the full tax review and completion. Findings F-1 and F-6 go on their desk with this memo.
Only the seller's papers
Can prove the real numbers. Findings F-3/F-4 tell you exactly which papers force the truth out.
Provenance Diligence · Illustrative sample · Memo p. 1 of 2
Provenance DiligenceDecision Memo · illustrative sample
Findings — with the arithmetic shown
Six findings · severity-ordered · every number traceable
F-1You can inherit the seller's hidden tax debt — the shield expires at closingResolve first
ObservationThe business is sold as a going concern. Spanish law makes the acquirer jointly liable for the seller's business tax debts — and the tax office can claim the full amount from you directly. (Art. 42.1.c Ley General Tributaria)
EvidenceTax debts are not public — no registry shows them. Liability reaches back through the 4-year assessment window (Art. 66 LGT), plus penalties of 50–150% of the unpaid quota (Art. 191 LGT).
What it means in €Scale illustration — a stress test of the risk, not a prediction and not a number to negotiate with: if a cash café under-declared a modest €20,000/yr of takings → 4 yrs × €20,000 × 10% IVA (hospitality-services rate) = €8,000 + income tax on the hidden profit ≈ €7,600–15,200 + late-payment interest + penalties of 50–150% graded by concealment (Arts. 187, 191 LGT) → inheritable pile ≈ €20,000–35,000 = 24–41% of the €85,000 asking price, on top of it. The 4-year window can be interrupted and restarted (Art. 67 LGT) — your tax adviser confirms the live position.
ActionYou (not the seller) file for the Art. 175.2 certificado detallado with the seller's written consent, before closing. If it lists debts, your liability is capped at those. If it lists none — or the AEAT fails to issue it within the three months art. 175.2 allows — the statute says the applicant "quedará exento": exempt from that liability, not merely capped. Requested after closing: zero legal effect. And know the shield's edges: it caps state-tax succession only — social-security debt needs a separate TGSS clearance, and labour succession (F-6) is untouched by both.
F-2The street is 17% more crowded than the national average — and this town has a winterNegotiate
Observation14 comparable food-and-drink venues within a 400 m radius of the premises (mapped and listed in the appendix, count dated).
EvidenceCatchment inside that radius ≈ 2,100 residents (municipal census section; tourist footfall excluded — it raises demand and competition alike). Spain's national base rate is roughly 1 venue per ~175 residents, the densest bar market in Europe (sector-association yearbook, named with edition in client appendices).
What it means in €2,100 residents ÷ 14 venues = 1 venue per 150 residents → ≈17% denser than the national base rate (175÷150 = 1.17) — in a seasonal town where winter footfall drops sharply. Density is a context lens, never load-bearing on its own — but it sets the question F-3 answers: the claimed €210,000 must be earned mostly in ~5 high-season months → €210,000 × ~70% ÷ 5 = €29,400/month in season, tested against F-3's physical ceiling.
ActionDemand 24 monthly IVA form-303 declarations — not annual totals — to see the winter floor with your own eyes before pricing the goodwill.
F-3The claimed revenue is 29–64% above what the room can physically produceNegotiate
ObservationSeller claims €210,000/yr. The premises seat 36 (28 inside + 8 terrace per the terrace licence on record).
EvidencePhysical-capacity model — the standard plausibility test for seat-based hospitality, run on figures visible from the listing and the licence record.
What it means in €Capacity ceiling = seats × rotations/day × average ticket × trading days = 36 × 2.0 × €9.50 × 340 = €232,560/yr at 100% utilisation — a level real venues never sustain. At a realistic 55–70% utilisation → plausible band €128,000–163,000/yr. Claimed €210,000 sits 29–64% above the plausible band (210÷163−1 = 29% · 210÷128−1 = 64%): a €47,000–82,000/yr gap the seller must document, not assert.
AssumptionsEvery input is printed on purpose so it can be attacked: 2.0 rotations, €9.50 blended ticket, 340 trading days are stated assumptions, not facts — a strong breakfast, takeaway or delivery mix moves the band, and the seller is welcome to move it with documents. The model is a pressure test, never an earnings figure: it decides what the seller must prove, not what the café earns.
ActionDemand 24 months of till (POS) Z-reports + the terrace licence seat count. If the till can't produce them, the number was never real — reprice from the plausible band.
F-4The rent only works if the revenue claim is true — the seller's two numbers contradict each otherNegotiate
ObservationRent is €1,450/month = €17,400/yr (listing figure, to be confirmed against the lease).
EvidenceHospitality viability benchmark: occupancy cost should stay under ~10% of sales; above it, margins thin to fragility (sector benchmark, cited in appendix).
What it means in €At the claimed €210,000: rent ratio = 17,400 ÷ 210,000 = 8.3% — within the comparator band this desk screen uses. At the plausible band from F-3 (€128–163k): 10.7–13.6% — above the threshold. The seller's two numbers sit in documented tension: both survive only if the papers explain the gap. Until they do, treat the pair as an evidence demand — and as negotiation leverage, priced by this ratio.
ActionThe full lease + last 12 rent receipts. Then re-run this ratio on documented revenue — it takes one minute and decides the price conversation.
F-5The landlord is entitled to +20% rent the day the business changes handsNegotiate
ObservationOn a traspaso (assignment of the existing business lease), the landlord may raise the rent by 20% (Art. 32 Ley de Arrendamientos Urbanos — 10% for a partial sublease). This applies to assignment of the existing lease; if you sign a fresh lease instead, the clause doesn't apply — but then every term is open, which is its own finding.
What it means in €€1,450 → €1,740/month = +€3,480/yr, permanently. Over a 5-year horizon that is €17,400 — another 20% of the asking price hiding in one statutory clause. It also pushes the F-4 rent ratio further past the viability line.
ActionGet the landlord's written position before the deposit; price the uplift into your offer, or negotiate a fresh lease directly.
F-6Two employees transfer with the business — with ≈€24,000 of severance seniority attachedMonitor
ObservationWhere the business transfers as the same economic entity — the normal traspaso pattern — staff transfer with it: contracts, seniority and debts included (Art. 44 Estatuto de los Trabajadores; asset-only structures can fall outside it — your lawyer confirms which this is). The listing states two employees; one has 11 years of seniority.
What it means in €Statutory severance formula (unfair dismissal, service accrued after 12 Feb 2012): 33 days' salary per year of service, capped at 24 months. Employee 1 — 11 years at €1,500/month: 11 × 33 ÷ 30 = 12.1 months × €1,500 ≈ €18,150. Employee 2 — ~4 years at €1,350/month: 4 × 33 ÷ 30 = 4.4 months ≈ €5,900. Together ≈ €24,000 of contingent liability you inherit on day one. One date to verify on the staff list: any service before 12 Feb 2012 accrues at 45 days/yr (transitional rule) and raises the figure.
ActionStaff list with start dates and salaries + any dismissals in the previous 12 months (pre-sale dismissals can be attributed to the transfer and land on you).
Provenance Diligence · Illustrative sample · Memo p. 2 of 2
Provenance DiligenceDecision Memo · illustrative sample
Annex — the shield · the demand list · the evidence
How the F-1 shield works — timing is everything
How an unpaid tax debt becomes yours — and how the certificate stops it
Request it after the sale and it has zero legal effect. It covers state taxes only — social-security debt is separate (TGSS clearance). And a public listing showing no debt means nothing: tax debts are not public records.
Demand these before any LOI, deposit or contract
Seller's written consent for the Art. 175.2 tax certificate, filed before completion → F-1
Social-security clearance (TGSS) + staff history — the seller must request this; you can't → F-1, F-6
24 monthly IVA (form 303) declarations — the winter floor, not the annual average → F-2
24 months of till (POS) Z-reports — the physical revenue record → F-3
The full lease + 12 rent receipts — term, transfer clause, landlord consent, the +20% uplift → F-4, F-5
Staff list with start dates + payroll, 12–24 months, incl. dismissals → F-6
Municipal tax status (local rates) — not covered by the tax-office certificate → F-1
What stays your call — neither of us can see this from a desk
These aren't in any public record. I name them so they're never mistaken for "checked and clear" — and so you know exactly what to put in front of your lawyer, and in what order.
- Who really owns and controls the business→ your lawyer requests a beneficial-ownership check before you sign anything
- Court cases not yet decided→ your lawyer requests a litigation certificate directly from the court
- The seller's past directorships→ your lawyer runs a director search on the named owner
- Private credit and bank liabilities→ demand a CIRBE credit-liability report, which only the seller can authorise
A "clear" result means "nothing showed up in the records I can see" — it is not a certificate that the business is safe to buy.
Before you rely on this memo — please confirm: ☐ I understand this Screen covers public records only; it does not cover the seller-dependent documents and the blind spots named above, and I will not rely on it alone to complete a purchase.
Your next moves — the order that protects your money
Demand the documents above (I can give you a ready Document Request Pack to forward). How fully and fast the seller answers is itself information.
Book your lawyer and accountant for the transfer, lease and tax review — hand them this memo and the demand list. Findings F-1 and F-6 go on their desk.
Get the landlord's written position on the transfer and the +20% uplift, and the town hall's written confirmation on the licence — before any deposit.
Only after the demand list clears: reprice from the documented numbers and discuss a deposit — conditional and refundable, in writing, through your lawyer. If a core document never appears, treat that as the answer.
Evidence appendix — every number's source, dated
| Source | What it evidences | Retrieved | Source strength |
|---|---|---|---|
| Company registry (BORME) | Registered owner & entity; no insolvency entry returned on that date, searched by name + tax number (a search result, not a certificate — and not who really controls it) | date | High |
| Municipal licence register | Activity licence + terrace licence (8 seats) on record → F-3 seat count | date | Medium |
| Statutes (BOE) | Art. 42.1.c & 175.2 & 66 & 191 LGT · Art. 32 LAU · Art. 44 ET — the F-1/F-5/F-6 formulas | date | High |
| Maps + street count | 14 comparable venues in 400 m → F-2 density arithmetic (venue list in working file) | date | Medium |
| Sector benchmarks | ≈1 venue per 175 residents (national base rate) · ≤10% occupancy-cost threshold → F-2, F-4 | date | Medium |
| Tax-office public status | No public flag — but this is not a shield: tax debts aren't public (F-1) | date | Low* |
| Listing + activity signals | Asking, rent, staff, claimed revenue — the seller's claims under test | date | Low* |
*A "Low" is a property of the source (a listing asserts; a status check can't show hidden debt) — not a gap in the work. Low-strength sources are never load-bearing: they are what the findings test, not what they rest on.
Grig Kochedykov
Founder, Provenance Diligence · I personally review & sign every file · no commission on the deal
Verdict key · Walk · Only-If · Resolve-first · No public-record blocker
Severity key · Resolve first · Negotiate · Monitor
Severity key · Resolve first · Negotiate · Monitor
I stand behind the public-record checks listed here. This is a commercial risk screen — not legal, tax, investment or financial advice, and not a valuation; it is decision support, not a decision: walk-away triggers and levers are prompts for you and your advisers to test, not instructions. Your lawyer and accountant complete the picture, and full engagement terms apply. A clear result is not a clearance. Illustrative sample: the deal figures (prices, seats, rent, staff) are worked examples so the arithmetic can be shown end-to-end; no real party is named or implied. The statutes and rates (Arts. 42.1.c, 66, 175.2, 191 LGT · Art. 32 LAU · Art. 44 ET · 10% hospitality IVA · severance day-rates) are real and traceable to the BOE. In a client memo, every input comes from your deal and every row of this appendix carries its retrieval date.
Provenance Diligence · Illustrative sample · Evidence annex