The "Create and Grow" Law

The Create and Grow Law responds to the recommendations made by different international organisations to improve the business climate and increase the productivity of companies in Spain and is part of the Recovery, Transformation and Resilience Plan, through which the aim is to establish an appropriate legal framework to promote economic growth and creation of jobs, as well as to strengthen resilience and cohesion in the European single market.

The measures introduced by the Law are grouped into different chapters according to their specific purpose: (i) to facilitate the creation of companies; (ii) to promote business growth by improving regulation and eliminating obstacles to economic activities; (iii) to fight against late payment; and (iv) to facilitate access to financing.

The aforementioned date of entry into force does not apply to certain aspects of the Law; specifically, the regulations on crowdfunding platforms will be applicable as of 10 November 2022, and the applicability of the obligation to issue electronic invoicing between entrepreneurs and professionals is subject to the regulatory development of the interoperability requirements.

Measures to facilitate business start-ups

In order to boost the creation of companies, measures are adopted to simplify the process of setting up limited liability companies (sociedades de responsabilidad limitada), among others: 

• The minimum share capital for the incorporation of a limited liability company is reduced to €1 (compared to the previously required minimum capital of €3,000), although certain safeguards are regulated to protect creditors: (i) the company must allocate 20% of the profits to the legal reserve until this, together with the share capital, has reached the amount of €3,000 and (ii) the shareholders will be joint and severally liable for the difference between the amount of €3,000 and the amount of the subscribed capital in the event that the company reaches liquidation without sufficient assets to pay the company's obligations; and
• The creation of limited liability companies via Internet is promoted, through the use of the Single Electronic Document ("DUE") and the Information Centre and Business Creation Network ("CIRCE"); as well as the use of the Entrepreneur Service Points ("PAE").

Moreover, the Law provides for the possibility of registering civil companies incorporated under ordinary, regional or special law, in the Commercial Register, and recognizes the concept of common benefit and common interest companies (although the benefits attributed to them are not contemplated). 

Also of interest is the elimination of both the concept of the new limited company (sociedad limitada nueva empresa) and the possibility of setting up limited liability companies on a successive formation basis (sociedades limitadas en régimen de formación sucesiva).

Measures to promote business growth by improving the regulation and eliminating obstacles to economic activity

In order to promote the growth of companies, the legislator amends the Market Unity Guarantee Law to reinforce the principle that any company authorised to operate in any part of Spain can operate throughout the country without the need for authorisation or additional requirements, except for justified reasons.

Likewise, the legal standing to defend freedom of establishment and movement is extended so that any natural or legal person may file claims in the event of infringement of this right without the need to be an interested party. An Observatory of Good Regulatory Practices has also been created to control the actions of different administrations.

Moreover, certain amendments are introduced to the Law Regulating the Contentious-Administrative Jurisdiction, in particular, to the procedure for the contentious-administrative appeal that the Spanish National Markets and Competition Commission may bring against any provision or action carried out by any competent authority that is considered to be contrary to freedom of establishment or movement.

Finally, the catalogue of activities exempt from the licensing requirement is extended to include, among others, cleaning services, market research companies and comprehensive postal and telecommunications services.

Measures to combat late payment

In order to mitigate the existence of bad practices in relation to the payment of suppliers, the Law promotes transparency with respect to the payment periods of commercial operations by including, among others, the following obligations:

• Listed and unlisted companies that don't present abbreviated annual accounts will have to include in their report the monetary volume and number of invoices paid in a period shorter than the maximum established period in the regulations on late payment, as well as the percentage it represents of the total number of invoices and of the total monetary payments to their suppliers (if applicable, this must be published on the company's website). The aforementioned obligation reinforces the existing duty of information that requires companies to expressly include their average supplier payment period in the notes to their annual accounts.
• Businesses and professionals must issue, send and receive electronic invoices in their business relations with other businesses and professionals.

Likewise, compliance with payment deadlines is also promoted by making it a condition for obtaining public subsidies and by including the possibility of penalising public sector contractors in the event that they do not pay fees to subcontractors.

It provides for the creation of a State Observatory on Private Late Payment and introduces repeated non-compliance with the rules on combating late payment in commercial transactions as an act of unfair competition.

Measures to facilitate access to finance

Crowdfunding platforms (plataformas de financiación participativa)

The Law introduces a new legal regime for crowdfunding platforms to adapt Spanish legislation to the legal regime established at  European level (Regulation (EU) 2020/1503) of the European Parliament and of the Council).

In particular with the entry into force of the Create and Grow Law, it is intended that the harmonised crowdfunding platforms that have authorisation to provide their services in Spain can provide them freely throughout the territory of the European Union; as well as that harmonised crowdfunding platforms that have the respective authorisation from a Member State can provide their services in Spain without requiring an authorisation from the Spanish administration. However, non-harmonised crowdfunding platforms whose purpose is (i) to provide services exclusively to project promoters who are consumers or (ii) intermediation in crowdfunding offerings of more than 5 million euros, calculated over a 12-month period, will not be able to provide their services on a cross-border basis. Apart from this, the most relevant aspects introduced by the Law and Regulation (EU) 2020/1503 of the European Parliament and of the Council in relation to crowdfunding platforms are the following:

• The securities eligible for the development of the services of crowdfunding platforms and investment service firms are extended to include shares in limited liability companies (sociedades de responsabilidad limitada).
• Providers of crowdfunding services shall be required to provide potential investors with a key investment information sheet, as set out in Article 24 (1) of Regulation (EU) 2020/1503 of the European Parliament and of the Council.
• Crowdfunding services providers´ faculties are extended to include the  offer of individualised loan portfolio management services and the investment in funds on behalf of the investor; they may also pool investors in groups whose sole corporate purpose and activity consists of holding the shares of the investee company.
• A single individual investment limit per project for retail investors is set at the higher quantity of €1,000 or 5% of the individual's wealth (excluding real estate and pension funds). Retail investors will still be able to invest above the new limit, but will receive a risk warning and must expressly consent.
• The maximum fundraising amount per project is increased from 2 million euros within 12 months (5 million euros for accredited investors) to 5 million euros in all cases.

Collective investment institutions and venture capital and private equity firms

In order to promote and improve collective investment and venture capital in Spain, the Law introduces a set of reforms, among which the following stand out:

• Management companies of collective investment institutions (SGIIC) and management companies of closed-end collective investment institutions (SGEIC) may take the form of limited liability companies (sociedades de responsabilidad limitada).
• In order to simplify the management of SGIIC, the obligation to publish a quarterly report is eliminated, which becomes voluntary, and telematic means become the default form of communication with regard to unitholders or shareholders.
• The necessary references to the European long-term investment funds (FILPE) regulated by Regulation (EU) No 2015/760 of the European Parliament and of the Council are added.
• A specific regulation is introduced for debt funds or closed-end collective investment undertakings (EICCP), whose main purpose is to invest through invoices, loans granted at least 3 years in advance, credits and commercial papers commonly used in the course of commercial trade.
• Investment in financial institutions whose activity is mainly based on the application of technology to new business models, applications, processes or products (fintech) is added as a possible extension of the main purpose of venture capital and private equity firms (ECR).
• The maximum number of employees of companies in which ECR-Pyme can invest is increased to 499 (from the previous limit of 250).
• The minimum capital required to be paid up for the incorporation of venture capital or private equity companies (SCR) is reduced to 25% (compared to the 50% previously required); however, the period for making the pending payment is reduced to 1 year from registration with the Spanish National Securities Market Commission (compared to the 3 years provided for before the Law).
• The minimum investment requirement for retail investors in Spanish ECR is reduced to  €10,000 (from the previous minimum investment requirement of €100,000), provided that the investment results from a personalised recommendation by an intermediary providing the advisory service and that the investment does not represent more than 10% of the investor's financial assets, which may not exceed €500,000.