Recently, the Government has approved the draft Law on Business Creation and Growth. A law whose main objective is to promote the creation of companies and encourage the expansion of existing companies, through regulatory improvement, the elimination of obstacles to economic activities, the fight against commercial delinquency and financial support for business growth.

Highly anticipated, one of the main novelties of this Law of Creation and Business Growth is that it allows to start a society for only one euro.

This is one of the most important reforms of the Recovery Plan (Boost to Small and Medium Enterprises), which aims to improve the conditions for the full development of business activity, as well as reduce the eventual incentives to create companies in other countries.

News of the Law on Business Creation and Growth

Incorporation of a Limited Liability Company for a single euro

One of the main advantages of the Business Creation and Growth Law is that the process to create a new company will be much simpler,reducing both the time and cost to carry it out.

Undoubtedly, the most important measure to promote the creation of companies is that it allows to constitute a Limited Liability Company with only one euro of share capital. A very outstanding advantage, if we take into account that until now the legal minimum was 3,000 euros.

This regulation includes certain safeguards for creditors,and sets up a much more flexible regime than the current successive formation regime, which is completely eliminated.

This will mean a considerable reduction in the cost of creating a new company,which is expected to promote the creation of new businesses, thus allowing the resources released to be allocated in alternative uses, aligning Spanish regulations with those of the countries with more favorable regimes for entrepreneurship.

On the other hand, within the framework of the promotion of digitalization, the creation of companies is promoted electronically through the Information Center and Network for Business Creation (CIRCE). This will reduce incorporation times, as well as registration and notarial costs.

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Measures to combat late payment

One of the objectives of the Law on Business Creation and Growth is to change the culture of Spanish companies and orient it towards prompt payment, and for this purpose establishes measures to combat delinquency,which is one of the main causes of liquidity and profitability problems in our country.

Currently, the legal payment period between companies is 60 days,but the truth is that this period is not always met, especially among SMEs and the self-employed, who in many cases are forced to accept longer payment terms for fear of deteriorating business relations.

And, with the aim of protecting them, the new law establishes a series of measures to combat delinquency:

  • Promotion of the adoption of electronic invoicing: theobligation to issue and send electronic invoices to all companies and freelancers in their commercial relations is extended, which guarantees greater traceability and control of payments between them. This measure will allow reliable and agile information to be obtained to know the effective payment terms, an essential requirement to reduce delinquency effectively.
  • Penalties for companies that do not comply:those companies that do not meet the payment deadlines will not be able to benefit from public subsidies.
  • Creation of a Late Payment Observatory: an observatory is created that will be responsible for monitoring and evolving payment data and promoting good practices in this area.

Better regulation and removal of obstacles to economic activity

This new law improves the efficiency of the regulatory framework of economic activities,with the aim of simplifying existing legislation, eliminating unnecessary regulations and establishing more agile procedures.

The Law on Trade Liberalization Measuresis amended, expanding the catalog of economic activities exempt from licensing, and incorporating activities considered harmless by at least one Autonomous Community to the list of basic state regulations.

The Law on the Guarantee of Market Unity is also modified,to deepen cooperation and trust between the different Public Administrations, and strengthen the windows in which companies can claim when they consider that the Administrations do not comply with the principles of good economic regulation.

Financial support for business growth

Finally, the law establishes a series of measures to improve the financing instruments of business growth alternative to bank financing:crowdfunding, collective investment or venture capital, among others.

On the other hand, the catalog of economic activities exempt from license isalso expanded, and a set of modifications is included for the promotion of the venture capital industry.

Likewise, the figures for recognized closed-end funds are expanded,including structures with extensive experience in other countries. This consists of debt funds that can invest in loans, invoices or business effects.

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