Law14/2013 amends the Corporations Law to regulate a new company form in Spain: the Successive Formation of a Limited Liability Company (S.F.L.L.C.), with a social capital below the required minimum (less than 3,000 euros. Please note that it cannot be zero).
Moreover, it is not necessary to report the cash contributions of members in the constitution of the S.F.L.L.C. However, the founders and third parties who acquire its shares will have to jointly answer to the board of directors and shareholders and to creditors for their contributions.
The legal status of an S.F.L.L.C. will be the same as that of a limited liability company. However, it will have the obligation to strengthen its own resources and boost the growth of the S.F.L.L.C. through self-financing while working to meet the required € 3,000 minimum share capital.
While the € 3,000 share capital minimum is not yet reached (Law 14/2013 does not mention a deadline for the company to reach the minimum capital), the limited liability company is subject to the successive formation framework, and must comply with the following rules:
- An amount equal to at least to 20% of its profits for unlimited amounts must be allocated to the legal reserve
- Once the law or the corporate bylaws are covered, dividends may only be distributed to the shareholders if the value of the equity is not, or as a result of the distribution leads to, less than 60% of the minimum legal capital.
- The amount of dividends paid to the shareholders and directors for the performance of duties during the fiscal year is not to exceed 20% of the net assets of the relevant year, except for compensation that may correspond to them as workers, or earned in their capacity as services professionals.
- In case of voluntary or forced termination, if the company’s assets are insufficient to pay its obligations, the partners and directors of the company will be held jointly liable for payment of the minimum capital established in the Corporations Law.
- It is not necessary to substantiate the disbursement of monetary contributions of partners during the successive formation of a limited liability company, resulting in the founders and those who purchased any of the shares during the constitution of the company to be jointly and severally liable for the company and its creditors for the actual amount of the contributions.
In the case of limited liability companies under a successive formation, while the amount of capital is below the required minimum, the company bylaws must contain an express statement of the company’s subjection to the relevant framework. The Commercial Registrars shall include, ex officio, this circumstance in any registrable document pertaining to the company and on the certificates issued.
This article is not considered as legal advice