Start-ups law introduces corporate measures for emerging companies in Spain

The Start-ups Law entered into force on 23 December 2022 to provide a specific regulatory framework to boost the creation and growth of innovative start-ups through the implementation of tax, labour, corporate and regulatory measures.

Measures implemented by the Start-ups Law only apply to emerging companies that qualify as start-up companies according to the definition provided for in the law.

Greater publicity

The Commercial Registry will offer greater publicity for this type of company  and will enable a free online consultation procedure for any person interested in finding out whether a company is a start-up, which will include date of incorporation and registration of the start-up company, tax identification number, company name and address, and status of emerging company.

Treasury Stock

The Start-up Law addresses treasury stock in private limited liability companies. The general shareholders' meeting of a limited liability company may authorise the acquisition of treasury stock for its delivery to directors, employees or other collaborators of the company solely in the context of executing a compensation plan.

This is possible as long as certain requirements are met. The treasury stock shall not exceed 20% of the share capital of the company. The remuneration system through the delivery of shares shall be provided for in the articles of association and approved by the general shareholders' meeting by means of a resolution that shall include the maximum number of shares that may be assigned to this remuneration programme  each year, the shares value taken as a reference and the duration of the plan.

The shares to be acquired shall be fully paid up; the net worth of the company pursuant to the acquisition shall not be lower than the amount of the share capital plus restricted, legal or statutory reserves. And the acquisition shall take place within five years  following the authorisation resolution from the general shareholders' meeting; otherwise, the shares acquired by the company must be redeemed within a maximum period of one year.

It could be a difficult task to make this measure fit in certain provisions of the Capital Companies Law. Since only derivative acquisitions of treasury stock are legally permitted, it is understood that, as it has become standard practice in the Spanish market, the founders, an investor or a third party will likely be the ones subscribing these shares first in a share capital increase, and then subsequently transfer the shares to the company once the capital increase is registered. However, this mechanism does not quite fit in with the provisions of articles 156 et seq. of the Capital Companies Law, which provide for the nullity of this type of agreements.

Registration rules

There have been changes to the rules for start-ups and their registration of corporate documents and agreements in the Commercial Registry. The term for the registration of corporate documents related to emerging companies is reduced to five days. This is counted from the day the relevant documents are submitted for registration, unless the company uses standardised templates of articles of association, in which case the term for registration will be reduced further (six business hours following the electronic receipt of the deed of incorporation). If compliance with such deadlines is not possible for a justified cause (technical reason or complexity of the matter), the registrar will notify the interested party of this circumstance before the indicated deadlines expire.

Registrars and notaries have been critical of this measure because more time is often needed to evaluate documents carefully and accept or reject their registration in a well-founded manner when complex transactions are involved. Also, the prioritisation of certain documents over others may affect the work of the registrars. It can therefore be expected that these deadlines will not be met in a significant number of cases.

Shareholders' agreement registration

If they do not contain clauses contrary to the law, shareholders' agreements shall be registrable and be publicly published in the registry. Likewise, clauses in the articles of association regulating the shareholders' obligation to abide by the provisions of a certain shareholders agreement will be registrable, provided that the content of the shareholders agreement is identified in such a way that it can be known not only by the current shareholders but also by future shareholders.

Registrars and notaries have expressed surprise at the insufficient regulation of this provision, for example, it is not clear whether or not such agreements must be accepted by all the shareholders.

Standardised articles and charges

The regulation provides that different templates of standardised articles of association will be approved by Royal Decree within a period of 3 months from the publication of the law in the Spanish Official State Gazette. It also establishes that notary and registry fees will be reduced to €60 and €40, respectively, if the start-up company uses standardised articles of association and the electronic processing system of the Centre for Information and Business Creation Network, and its share capital is lower than €3,100. In addition, these companies will be exempt from paying publication charges when publishing documents at the Spanish Commercial Registry Gazette.

Dissolution for losses

During the first three years after their incorporation, emerging companies shall not incur in cause of dissolution for losses that reduce the net worth to an amount less than half of the share capital, provided that it is not mandatory for them to file for a bankruptcy procedure.