Law for the Creation and Growth of Enterprises. “Create and Grow” Law.

The Spanish economy has been weakened in recent years by the state of health emergency caused by the outbreak of COVID-19. With the aim of refloating the Spanish business network and boosting its expansion and growth, measures such as the "Create and Grow" Law have arisen.
  Last Thursday, 15 September, the Law for the Creation and Growth of Companies - commonly known as the "Create and Grow" Law - was finally approved by the Spanish Congress of Deputies.
This new law is part of the Government's Recovery, Transformation and Resilience Plan and its main objective, through a regulatory change that focuses on streamlining procedures and reducing costs, is to encourage the creation and growth of new companies.
Among the main novelties introduced by the "Create and Grow" Law, the following points should be highlighted:
 

1. Reduction of the amount of share capital to be subscribed to incorporate Limited Liability Companies.

The entry into force of the legal text will allow Spain to set up a much more flexible regime for the creation of Limited Liability Companies than the present one as, together with the elimination of the successive formation regime, it will allow L.L.C's to be incorporated with a share capital of just one euro, as opposed to the €3,000 that has traditionally been required.
However, it should be noted that, by amending Article 4 of the Capital Companies Act, clauses are also included to safeguard the interests of creditors as it is established that (i) "a figure at least equal to 20 percent of the profit must be allocated to the legal reserve until said reserve together with the share capital reaches the amount of three thousand euros", as well as imposing (ii) joint and several liability of the shareholders in the event of liquidation of the company for the amount resulting from the difference between the three thousand euros and the share capital effectively subscribed.
 

2. Streamlining the procedures for setting up a company.

One of the aims pursued by the "Create and Grow" Law is to remove obstacles and speed up the procedures to incorporate capital companies. This objective is achieved through the introduction of measures to encourage the incorporation of such entities, with certain limitations, quickly and telematically through the Information Centre and Business Creation Network (CIRCE), which will be the place from which applications and administrative procedures will be electronically managed.
 

3. Introduction of measures to combat late payment.

Another of the novelties implemented by the Law on the Creation and Growth of Companies is the introduction of rules to combat late payment. The most notable of these is the promotion of the use of electronic invoicing as a means of guaranteeing greater traceability and control of collections and payments made between companies, or between companies and the autonomous workers, in the development of their commercial relations.
Together with this measure, incentives are also introduced to reduce average payment periods through, for example, their assessment in access to public subsidies.
 

4. Facilitating access to funding.

Finally, the Law incorporates measures to provide entrepreneurs with alternatives for accessing financing other than that offered by banks by giving greater legal coverage to obtaining financing via crowdfunding or participatory financing  collective investment or Venture Capital entities.
With regard to crowdfunding, the law adapts European regulations to make the conditions under which these types of entities provide their services more flexible by creating, for example, vehicles for grouping these investors.
Similarly, the law expands the figures recognised for closed-end collective investment funds and makes the regime under which venture capital entities may operate in Spain more flexible, broadening the type of companies that may be the object of their investments (including financial companies with a high technological component).

As a result of the above, it is clear that the “Create and Grow” Law, which joins the Start Up Law in an attempt by the government to modernise the Spanish legislative framework to encourage the birth of new companies, was created with the aim of boosting the process of creating start-ups, thus reinforcing their role in the growth process of the Spanish economy, above all by reducing costs, derived from the measures mentioned in the previous points, so that start-ups have more resources to allocate to the development of their activity.