Key Changes in the Business Creation and Growth Act

On October 19, 2022, Law 18/2022 of September 28 on the Creation and Growth of Businesses entered into force following its approval by the Spanish Parliament. Its main objectives are as follows:

Improve the business climate to promote business creation and growth by adopting measures to streamline the process of starting a business
Improving regulation and removing barriers to economic activity
Reducing Commercial Delinquency
Improving Access to Financing

To achieve these objectives, the legislation introduces a series of new provisions, which are detailed below:

Incorporation and Digitization of Companies

The legal minimum of 3,000 euros required to form a limited liability company is now 1 euro, but the following must be taken into account:

An amount equal to at least 20 percent of the profit must be allocated to the company's legal reserve until that reserve, together with the share capital, reaches 3,000 euros.
In the event of liquidation, if the company’s assets are insufficient to cover its obligations, the partners shall be jointly and severally liable for the difference between 3,000 euros and the amount of the subscribed capital.

This first measure aims to promote the creation of businesses by lowering their incorporation costs (both registration and notary fees), expanding the options available to founding partners regarding share capital in accordance with their needs and preferences, and reducing any incentives to establish businesses in other countries with lower incorporation costs.

In addition, reforms are being introduced to facilitate and promote the formation of companies in a fast, streamlined, and electronic manner through the Information Center and Business Creation Network (CIRCE) and by using the Single Electronic Document (DUE), thereby reducing registration and notary fees.

Measures to Combat Commercial Delinquency

Excessive payment delays are common in our country, with small businesses having the highest rates of late payments and defaults because they lack the economic and financial strength of large companies.

To foster a change in corporate culture, the government will first establish the National Delinquency Observatory, which will be responsible for monitoring trends in payment data and promoting best practices.

Second, since electronic invoicing is a useful tool for reducing transaction costs and facilitating access to information on payment terms, its scope of use will be expanded; as a result, it will be mandatory for all companies and self-employed individuals to issue and send electronic invoices in their business transactions.

It is important to note that, today and for several years now, the use of electronic invoices has been widespread among businesses and individuals. In fact, since January 2015, electronic invoices (e-invoices) have been mandatory for all businesses that have commercial relationships with public administrations and whose transactions exceed 5,000 euros.

Consequently, the legislature’s intent is to make its use mandatory in all commercial transactions between companies and self-employed individuals in our country, with a transition period to be established by regulation issued by the Ministries of Economic Affairs and Digital Transformation and of Finance and Public Administration, with the aim of setting forth the technical and information requirements, the minimum interoperability requirements, and the security, control, and standardization requirements for the devices and computer systems that generate the documents. The deadline for its approval will be six months from the publication of the Law in the Official State Gazette (BOE), that is, until March 29, 2023.

In this regard, one year after its adoption, its use will be mandatory for business owners and professionals with annual revenue exceeding eight million euros, while two years after its adoption, it will be mandatory for all other business owners and professionals.

Third, grant programs are being proposed that will enable the widespread acquisition and implementation of digitization solutions (e.g., the adoption of electronic invoicing), notably the Digital Toolkit Program, which has been allocated more than 3,000 million euros in grants.

Finally, an average payment period (60 days, as established in Article 4.3 of Law 3/2004, which establishes measures to combat late payment in commercial transactions) is included as a requirement for accessing grants and as grounds for termination and a criminal offense in public procurement.

Therefore, companies and self-employed individuals seeking grants exceeding 30,000 euros will only be eligible for such assistance if they meet the payment deadlines, which are 60 days for business-to-business transactions; compliance must be demonstrated by submitting a sworn statement.

Crowdfunding platforms

A new legal framework is being introduced for this type of platform, which seeks to raise funds from a variety of sources for the purpose of financing a specific project, based on Regulation (EU) 2020/1503 of the European Parliament and of the Council of October 7, 2020, on European providers of crowdfunding services for businesses.

The main change introduced by the law is that these types of organizations will be able to provide their services freely without having to obtain a separate authorization in each Member State.

In other words, these platforms will have to apply to the competent authority of the Member State in which they are established for authorization to operate as a crowdfunding service provider. They will then be required to notify the European Securities and Markets Authority (ESMA) so that they may operate throughout the European Union.

In addition, some of the main changes introduced by the regulation regarding the obligations of these types of operators are as follows:

Portfolio Management: The crowdfunding service provider will be permitted to invest funds on behalf of the investor.
Per-investor limit: A single individual investment limit per project is established for retail investors, set at the higher of 1,000 euros or 5% of net worth (excluding real estate and pension funds). There is no issue with investing above these limits, but investors will be warned of the risks.
Total limit: Previously , the maximum amount of funds that could be raised per project could not exceed 2,000,000 euros within a 12-month period.

With the entry into force of the aforementioned European Regulation and, consequently, of this Act, that limit is raised to 5,000,000 euros, provided that investments exceeding that amount will require the issuance of a specific prospectus, the requirements for which are succinctly set forth in Regulation 2017/1129 on the prospectus to be published in the event of a public offering or admission to trading of securities on a regulated market

These types of platforms may establish and group investors into a limited liability company whose corporate purpose will be to hold shares in the company in which it invests.

Collective Investment and Venture Capital

On this point, a series of reforms is being introduced that aim to promote and improve collective investment and venture capital in Spain—a sector that needs regulations enabling it to contribute even more to overall economic activity and to protect investors, particularly individual investors.

By way of example only—and this list is not exhaustive—we highlight the following:

The introduction of a type of vehicle derived from European legislation calledthe “European Long-Term Investment Fund (ELTIF),” which is designed to give retail investors access to investments in unlisted small and medium-sized enterprises, allowing them to invest in asset classes (such as syndicated loans and private debt) that have, until now, been available only to institutional investors.

Recognition of“debt funds,”which, in the context of economic recovery, can help alleviate companies’ debt burdens and facilitate their growth; additional obligations and requirements are established for their formation.

In other words, the range of options for closed-end funds is being expanded to include structures that have a long track record in other countries in our region.

Economic Activities

The legislation expands on cooperation and mutual trust among the various public administrations and strengthens the channels through which companies can file complaints when they believe that public administrations are not adhering to the principles of sound economic regulation.

In addition, the list of economic activities exempt from licensing requirements is being expanded, helping to reduce bureaucracy. This list is incorporated into the national list of activities that have been deemed harmless by at least one Autonomous Community.

To this end, numerous articles of Law 20/2013, on Guaranteeing Market Unity, are amended, as well as Article 7 of Law 29/1998, Regulating Contentious-Administrative Jurisdiction, and Article 8 of Law 12/2012 on Urgent Measures to Liberalize Trade and Certain Services.

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In conclusion, and pending the adoption of implementing regulations, this law aims to promote the creation of businesses and facilitate their growth and expansion, viewing this as an essential step toward business growth and as one of the most important reforms of the government’s Recovery, Transformation, and Resilience Plan, all with the goal of increasing productivity, improving job quality, and fostering the internationalization of the Spanish economy.

Alberto López Cazalilla, attorney at ELZABURU

Bibliography

Key Provisions of the Business Creation and Growth Act