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Law 18/2022: Measures to speed up creation of companies

Aware that one of the structural weaknesses of the Spanish economy is related to the costs associated with the process of setting up new companies, Law 18/2022 sets as one of its main objectives the streamlining of company incorporation.

Although the ultimate objective is not to increase business size per se, as this depends on the interaction between the entrepreneur and the market response, it is intended to facilitate the process of business creation through the following measures set out in Chapter II:

  • Reduction of the minimum share capital for the incorporation of Limited Liability Companies (“LLCs”)

A new minimum share capital for the incorporation of an LLC is defined as ONE (1) EURO (€).

This is a symbolic amount, which has been chosen over the option of simply eliminating the requirement of a legal minimum, given that capital company law is based on the logic that such companies are set up with a share capital of strictly more than zero.

In order to safeguard the interests of creditors, two rules apply to LLCs incorporated with a share capital of less than €3,000:

i. Legal reserve: an amount equal to at least 20% of the profit must be set aside until the sum of the legal reserve and the share capital reaches €3,000.

ii. Liquidation of the company (voluntary or compulsory): in the event that in a liquidation the equity is insufficient to meet the payment of the obligations, the partners are jointly and severally liable for the difference between €3,000 and the amount of the subscribed share capital.

Amendment of art. 4 Royal Legislative Decree 1/2010.

  • Abolition of the Limited Company in successive formation

In addition to the reduction of the minimum share capital, the possibility of setting up a limited company by successive formation is abolished because of the lack of minimum share capital, as is any reference to such companies.

This regime was designed to make it possible to set up an LLC with a share capital of less than €3,000.

    • What is the status of LLCs set up under the successive formation regime upon the entry into force of Law 18/2022?

These companies may be governed by the new rules established for LLCs incorporated with a minimum share capital of €1 but less than €3,000.

If they do not make use of this option, i.e. do not amend their articles of association and until they reach the share capital of €3.3,000, they shall be subject to the following rules: (i) they must allocate to the legal reserve an amount equal to at least 20% of the profit for the financial year, without any limit on the amount; (ii) after the legal or statutory requirements have been met, dividends may only be distributed to members if the value of the net assets is not less than €800; iii) the annual sum of the remuneration paid to shareholders and directors for the performance of those offices during those financial years may not exceed 20% of the net assets of the corresponding financial year, without prejudice to the remuneration to which they are entitled as employees; iv) in the event of liquidation, if the company’s equity is insufficient to meet the payment of obligations, the shareholders shall be jointly and severally liable for the payment of the amount of the capital plus the difference between this and the figure of 3.000€.

Deletion of art. 4.bis, and amendment of arts. 5 and 23 Royal Legislative Decree 1/2010. Second transitional provision Law 18/2022.

  • Abolition of the New Business Limited Company (“SLNE”).

The figure of the New Business Limited Company (“Sociedad Limitada Nueva Empresa”), which was a speciality of the LLC, with simplified administrative formalities, whose name consisted of the two surnames and the name of one of its founding partners together with a unique alphanumeric code, and which had to appear as SLNE, was eliminated.

    • What is the status of existing LLCs as SLNEs upon the entry into force of Law 18/2022?

These companies shall be governed by the provisions governing LLCs and shall use that denomination.

Repeal of Title XII and the fourth, fifth and sixth additional provisions Royal Legislative Decree 1/2010. Third transitional provision Law 18/2022.

  • New obligations for notaries
    • Information obligation

It establishes the obligation for notaries and intermediaries involved in the creation of an LLC to inform about the advantages of using the Entrepreneur Service Points (“PAE”) and the Information Centre and Business Creation Network (“CIRCE”).

Art. 3 Law 18/2022.

    • Obligation to comply with CIRCE procedures

On the other hand, in order to improve the functioning of CIRCE, the obligation of Notaries to be available in the Electronic Notarial Agency (regulated by RD 421/2015) is established, as well as the obligation to attend to all incorporation procedures initiated through the CIRCE system and the Single Electronic Document (“DUE”).

With regard to the Electronic Notarial Agency, it is established that three months after the entry into force of Law 18/2022, the Ministry of Industry, Trade and Tourism will draw up a quarterly list of the number of appointments received through the agency, the number of rejected appointments and the number of authorised copies.

Art. 4 and Third Additional Provision Law 18/2022.

  • New measures to speed up the procedures for the incorporation of LLCs:
    • Incorporation of an LLC with standard articles of association

For the incorporation of the company, a public deed in the standardised format and with coded fields shall be used. In addition, simplified models of powers of attorney in the standardised format may be used.

In the event that the Registrar detects defects or obstacles to registration, he will issue a negative rating note and notify CIRCE, which will forward it to the founders and the Notary.

The publication of the company’s registration in the Official Gazette of the Commercial Register is also free of charge.

    • Incorporation of an LLC without standard articles of association

In these cases, a public deed with standardised format and coded fields will also be used. On the other hand, the deadline for the Registrar to definitively register the deed of incorporation in the Commercial Register has been reduced to 5 days.

In the event of a negative assessment of defects that can be remedied, the founders may grant the notary the power to remedy the defects electronically, provided that this is in accordance with the assessment and the will expressed by the parties.

In order to streamline procedures, development is pending:

    • Creation of a remote service in each Mercantile Register to enable the public to consult on the registrability of lawful clauses or agreements in the articles of association.
    • Definition of the deed of incorporation with standardised format and coded fields for LLCs that are incorporated through the DUE and adopt the board of directors formula as their management system.
    • Definition of the procedure for setting up an LLC entirely by telematic means through CIRCE (to be implemented as from the entry into force of the transposition of Directive (EU) 2019/1151 as regards the use of digital tools and processes in the field of company law).

Modification of articles 15 and 16 Law 14/2013. Fifth Additional Provision, and Sixth Additional Provision Law 18/2022.

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