In recent years, the economic policy institutions of the European Union have carried out an in-depth analysis and reflection on the importance of SMEs in the Eurozone. As a result, they set up tools for European Governments to create a new, reinforced strategic framework aimed at creating more sustainable companies which will develop and become fully established. This new approach follows the guidelines established in the 2030 Agenda for Sustainable Development of the United Nations, which aims to guide governments in their actions for a more committed, responsible and sustainable economy with their companies, supporting them in all phases of their life cycle.
In this context, Law 18/2022, of 28 September, on the creation and growth of companies comes into play in Spain. It amends important regulations in the commercial and financial sphere, including the Law on Capital Stock Companies (LSC), Law 14/2013 of 27 September on support for entrepreneurs and their internationalisation and Law 15/2010 of 5 July, which establishes measures to combat late payment in commercial transactions. All of these regulations aim to (i) promote entrepreneurship, the formation of companies and their development, (ii) reduce financial costs, and (iii) facilitate access to credit and cushion economic risks, granting special protection to entrepreneurs’ assets. Now we will examine the most important changes one by one.
With regard to the LSC, the most notable reform is the amendment to Article 4 regarding the minimum share capital. Thus, the mandatory minimum share capital of EUR 3,000 has disappeared and under the new law, a limited company can be set up with a symbolic share capital of EUR 1. To protect creditors’ interests, the new Law 18/2022 foresees the following regulations for companies with a share capital of less than EUR 3,000:
- At least 20% of the company’s profit must be transferred to the legal reserve until the sum of the legal reserves and the share capital equals EUR 3,000.
- In the event of voluntary or compulsory liquidation, if the assets of the company are insufficient to meet the company’s debts, the shareholders will be jointly and severally liable for the difference between the amount of EUR 3,000 and that of the subscribed capital.
This is consistent with approaches in other legal systems both inside and outside the European Union, since in many countries there is no minimum capital requirement when setting up a company. The new law offers the founding shareholders more possibilities when choosing the amount of the initial share capital, without detracting from the function of a company’s share capital to act as a guarantee and provide financing.
The new law also enhances the role and involvement of legal operators such as notaries, who are recognised as being of fundamental importance in commercial transactions. Notaries must now be available in the Electronic Notarial Diary and in a position to carry out the incorporation of companies through the CIRCE application, something which, until the entry into force of the new Law 18/2022, was considered optional by the General Council of Notaries.
This possibility encourages the formation of companies in a fully electronic manner using standardised forms, making registration possible within six hours.
Another important reform is that of the Law 14/2013 of 27 September on support for entrepreneurs and their internationalisation, which amends Article 8 regarding the effectiveness of the limitation of liability with respect to what is known as “limited liability entrepreneurs”. For natural persons who come within this category, their habitual residence will benefit from the exemption from liability as long as its value does not exceed EUR 300,000. In this regard, the habitual residence will be valued in accordance with the provisions of the taxable base of the capital transfer tax and stamp duty at the time of registration.
Law 15/2010 of 5 July 2010, which establishes measures to combat late payment in commercial transactions, promoting the use of electronic invoicing and obliging all commercial companies to expressly include their average supplier payment period in their annual accounts, is also amended. In addition, in order to combat late payment, the regulation seeks to promote transparency with respect to payment periods for commercial operations. To this end, the Government has created an ad hoc State Observatory on Late Payment in the Private Sector, in which various stakeholders and associations and institutions linked to late payment will be represented The State Observatory will act as a consultative body for the Ministry of Industry, Trade and Tourism.
Undoubtedly, this new regulatory framework will make life easier for SMEs, removing obstacles and making them more resilient. It is desirable that these new lines of action lead to a more entrepreneurial society, with a more business-minded culture, similar to those of neighbouring countries. Based on this new framework, it is the responsibility of institutions to develop financial support instruments and bodies that facilitate access to credit for Spanish companies. In turn, it is the Government’s responsibility to move towards a more responsible and sustainable financial and trade policy, with Spanish companies as their flagship.