New law to facilitate the incorporation of companies in Spain

Spain has adopted Law 18/2022 of 28 September on the incorporation and growth of companies (so-called "Ley Crea y Crece"), which aims to facilitate the incorporation of companies, reduce regulatory obstacles, combat late payments and promote company growth and expansion. The law will come into force on 19 October 2022.

Facilitating the incorporation of companies in Spain

The main innovation is to simplify and accelerate the incorporation of a Spanish limited liability company (Sociedad de Reponsabilidad Limitada - SL).  To this end, the possibility is created to establish a limited liability company with a share capital of 1 euro, in contrast to the previously applicable statutory minimum share capital of 3,000 euros. This is intended to promote the incorporation of companies by lowering the incorporation costs and to give the founding shareholders the opportunity to determine their share capital according to their needs. The funds freed up by the reduction in formation costs can be used for other purposes. It is also intended to prevent founders from moving to other countries where the costs of incorporation are lower than in Spain.

The possibility to incorporate a company for 1 euro is subject to two conditions due to creditor protection considerations: 1) at least 20% of the profits must be allocated to the legal reserves until the sum of the legal reserve and the share capital reaches the amount of 3,000 euros, and 2) the shareholders are jointly and severally liable for the difference between the amount of 3,000 euros and the amount of the subscribed capital in the event of liquidation, if the company's assets are insufficient to meet the company's liabilities.

Other measures

The new law also includes measures to combat late payment in commercial transactions, one of the causes that has the greatest impact on the liquidity and profitability of many Spanish companies.

To this end, the obligation to issue and transmit electronic invoices in all business relations has been extended to companies and self-employed persons, which should ensure better traceability and control of payments.

Similarly, the law provides that companies that do not respect the payment deadlines established by the Late Payments Act (Law 3/2004 of 29 December, which provides for measures to combat late payment in commercial transactions) will not have access to public subsidies or contracts if they have debts not only to the Ministry of Finance or Social Security, as before, but also to a supplier.

Finally, within six months of the law coming into force, a state observatory for private payment arrears will be set up to monitor and analyze data on payment deadlines. Its actions will include the publication of an annual list of defaulting companies (a list of companies with unpaid invoices of more than €600,000 or 5% of overdue invoices).

The Companies Act and the Late Payment Act require large companies to disclose in their annual accounts the average payment period for their suppliers or the number of invoices paid within a shorter period than the maximum limit set in the late payment regulations.

The regulation also contains measures to improve instruments for financing business growth as an alternative to bank financing, such as crowdfunding. The main innovation of the law is that crowdfunding providers can now freely offer their services without having to obtain a separate authorization in each Member State.

Autor: Axel Roth