What measures does the draft law on Creation and Growth of Companies bring in?
Published on 22nd Mar 2022
The draft law on Creation and Growth of Companies, currently being negotiated in the Spanish Parliament, aims to boost the incorporation of new companies and foster their growth by improving regulation and removing obstacles to the economic activities, as well as by financially supporting business growth.
Measures to speed up and facilitate the incorporation of new companies
- Incorporation of private limited liability companies (sociedades de responsabilidad limitada) starting from 1 Euro
The draft law on Creation and Growth Law ("Proyecto de Ley Crea y Crece"; "Creation and Growth Law") amends the consolidated text of the Spanish Companies Act to enable the incorporation of private limited liability companies with an initial share capital of only 1 Euro, instead of the current amount of 3,000 Euros, thus aligning Spain with many of its surrounding countries (where no minimum share capital is required) and supporting entrepreneurship.
This amendment entails the elimination of the successive incorporation regime, since it is a regime designed to make it possible to set up a private limited liability company with a share capital below the legal minimum of 3,000 Euros, which is eliminated.
Two specific rules are introduced to safeguard the interest of the creditors of those private limited liability companies whose share capital is less than 3,000 Euros: the obligation to allocate at least 20% of profits to the legal reserve, until the sum of the legal reserve and the share capital reaches the amount of 3,000 Euros; and the joint and several liability of the shareholders for the difference between the amount of 3,000 Euros and the amount of the subscribed share capital in the event of liquidation if the company's assets were insufficient to meet the company's obligations.
Incorporation of private limited liability companies entirely online
The Creation and Growth Law also introduces changes to facilitate and boost the incorporation of private limited liability companies in a fast, agile manner and entirely online through:
- the creation of the Entrepreneur's Contact Points ("PAE"): electronic or in-person one-stop counters through which it will be possible to carry out the procedures to set up, run and cease a business activity;
- the Single Electronic Document ("DUE"): an electronic document containing all the information needed to incorporate and start-up a company (replacing the multiple forms required by the administrative bodies involved in the process of business creation); and
- the Information Centre and Business Creation Network ("CIRCE"): an information system that allows the incorporation and start-up procedures of certain commercial companies in Spain to be carried out online.
CIRCE's reform will be completed by the forthcoming transposition of Directive (EU) 2019/1151 of the European Parliament and of the Council, of 20 June 2019, amending Directive (EU) 2017/1132 as regards the use of digital tools and processes within the scope of company law. This Directive requires, among others, that a private limited liability company can be entirely registered online within certain periods.
To improve CIRCE, the obligation for all public notaries to be available in the Notarial Electronic Agency set forth in Article 8 of Royal Decree 421/2015 of 29 May, which regulates the standard bylaws and public deed forms for private limited liability companies, the Notarial Electronic Agenda, and the Database of reserved company names, is reinforced.
Measures to fight against late payments in commercial transactions
As a measure of digitalisation and fight against late payments in business transactions, the use of electronic invoices in all business relationships between companies and self-employed is enhanced.
Along with this measure, complying with payment deadlines is included as a requirement for access to subsidies, and as a cause for termination and penalisation in public tendering.
Also, a National Late Payment Observatory will be created, which will be responsible for monitoring the evolution of payment data and promoting good practices in this area.
Measures to improve regulation and remove obstacles to economic activities
The Creation and Growth Law includes measures to improve the efficiency of the regulatory framework for economic activities by simplifying existing legislation, eliminating unnecessary regulations, and establishing more streamlined procedures.
Along these line, the catalogue of economic activities exempt from licensing is extended to include those activities that have been considered innocuous by at least one Autonomous Community.
Measures to financially support business growth
The Creation and Growth Law includes measures to reinforce, strengthen and make more flexible the instruments for financing business growth as an alternative to bank credit, such as:
- crowdfunding (adapting the national regulation to European rules - introducing more flexibility for these platforms to provide their services in Europe; strengthening investor protection; allowing the creation of vehicles to pool investors to reduce management costs; and raising the thresholds for the amounts allowed per funded project and per investor to broaden the range of eligible business projects);
- collective investment (extending the recognised schemes for closed-end funds, including structures with a long track record in other countries around Spain); and
- venture capital (extending the type of companies these entities can invest in, including financial companies with a high technological component).
Adoption and entry into force
The Creation and Growth Law must pass through the parliamentary process until its approval, which is expected to occur in year 2022.