The Create and Grow Law speeds up company formations in Spain

On 29 September 2022, the Official State Gazette (BOE) published Law 18/2022 of 28 September, on the establishment and growth of companies. The also known as Create and Grow Law (Ley Crea y Crece) came into effect on 19th October in Spain and aims, among other issues, to speed up company formations in Spain.

The Create and Grow Law is one of the main reforms within the Recovery, Transformation and Resilience Plan to develop a legal framework that promotes the creation and growth of companies in Spain:

  • Removing obstacles to economic activities
  • Reducing late payment practices in business transactions
  • Financially supporting business growth

Company Formation of Limited Liability Companies (Sociedades de Responsabilidad Limitada) starting from one euro

Undoubtedly, one of the most significant measures of the Create and Grow Law is the possibility to incorporate Limited Liability Companies (S.L.) with a share capital of one euro instead of the €3,000 previously required. Thus, the Spanish legislation aligns with other jurisdictions such as France, Ireland, the United States, Japan, Canada, and the United Kingdom.

In this regard, the Create and Grow Law requires the fulfilment of the following conditions, as long as the share capital does not exceed €3,000:

  • Allocate an amount equal to at least 20% of the company’s profits to a legal reserve until the reserve, together with the share capital, reaches €3,000.
  • If liquidation occurs, whether voluntary or mandatory and the company’s assets are insufficient to face its debts, the shareholders shall be jointly and severally liable for the difference between the share capital amount and the amount of €3,000.

Removal of Successive Formation Limited Liability Companies (Sociedades Limitadas de Formación Sucesiva)

By removing the minimum share capital of €3000, establishing a Successive Formation Limited Liability Company (S.L.F.S.) becomes useless.

Removal of New Companies with Limited Liability (Sociedades Limitadas Nueva Empresa)

The Sociedades Limitadas Nueva Empresa (S.L.N.E.), a type of company no longer in use, becomes now unnecessary. These companies will henceforth be considered Limited Liability Companies (S.L.) and will be subject to the rules that apply to this legal form.

Registration of Partnerships (Sociedades Civiles)

The Create and Grow Law permits registering partnerships (S.C.) in the Mercantile Registry under its standards.

The entry form may also include:

  • The appointment, dismissal, and resignation of directors
  • General powers of attorney
  • Admission of new shareholders
  • Separation or exclusion of existing shareholders
  • The transfer of shares between shareholders
  • Judicial or administrative decisions affecting the company’s management

Obligations for notaries and those involved in company formation

The Create and Grow Law requires notaries and any other parties involved in company formation to inform entrepreneurs of the possibility of using the Spanish Information Centre and Business Creation Network (CIRCE) to carry out the incorporation of the company electronically.

Furthermore, it requires the authorisation and registration of articles of association in a standardised format and with model articles.

For further information regarding the Create and Grow Law in Spain,

Please note that this article is not intended to provide legal advice.

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