On October 19,
Law 18/22 on Company Creation and Growth came into force, as part of the reforms driven by the Recovery, Transformation and Resilience Plan, with the aim of
facilitating the creation of new companies and improving regulation and access to financing to foster their growth.
According to the latest
Doing Business 2020 Report, prepared by the World Bank, Spain ranked 97th among countries where it was easiest to open a business. Or, to put it another way,
Spain ranked 94th among countries where it was most difficult to open a business. To give you an idea, we were in similar conditions to countries like Gabon or Guatemala.
Well, the flagship measure of this new law to facilitate company creation is the reduction of the minimum share capital required to form a limited company, which
decreases from 3,000 € to 1 €, a symbolic amount.
In this area, the law also strongly promotes the telematic processing of the single window of the Center for Information and Network for Business Creation (CIRCE) of the Electronic Single Document (DUE), successfully implemented in 2003, and establishes the bases for expanding the catalog of harmless activities exempt from obtaining an activity license.
With these measures, the Government anticipates a positive effect on the creation of new companies, first, because it is no longer necessary to have 3,000 € of capital to form a company, and second, due to the
reduction in the number of incorporation procedures, their duration, and their cost.
But what will be the real impact of this new law?
Surely, this Law will help Spain gain some positions in international rankings and reduce the number and intensity of headaches for entrepreneurs during the initial procedures, but will it have any effect on the number of companies created? Honestly, no.
The reduction of the minimum share capital required to form a limited company will, at most, lead entrepreneurs who previously registered as self-employed to avoid an initial outlay of 3,000 € to decide to operate through a company,
without generating any additional impact on wealth and employment creation.
On the other hand, the reduction in the number of procedures, their duration, and their cost will not be significant, as most entrepreneurs, especially those with fewer resources, already used the single window for company formation, and the cost reduction for a company will be a minor amount, less than 100 €.
The law also establishes
other reforms in the areas of commercial late payment and access to financing, to improve conditions for the growth of small and medium-sized enterprises, among which stand out:
- The generalization of the use of electronic invoicing, which will be mandatory in commercial relations between companies and professionals with other companies and professionals.
- Transparency regarding payment periods, which companies must publish in their annual accounts.
- The inclusion of compliance with current regulations against late payment as an assessment criterion for access to subsidies and public procurement.
- The flexibilization of the regulation of alternative financing mechanisms, such as crowdfunding, collective investment, and venture capital, to adapt it to European directives.
All of these are steps in the right direction, small advances that improve conditions for doing business in Spain, bringing them somewhat closer to more advanced countries, but which will hardly have a significant impact on business growth, job creation, and the number of people who say “I am what I want to be.”
