A new law introduced on 19 October allows business owners to set up a Spanish company with just €1 capital behind it. The measure comes into play in the bid to facilitate company creation and access to financing within the wider context of improving the business climate in Spain.
New rock-bottom capital to set up a Spanish company
The latest measure is part of the Crea y Crece Law (Create & Growth), designed to make it much easier to set up a company in Spain. In the capital department, it removes the obligation to have a minimum capital of €3,000 behind any limited company.
As of 19 October 2022, you can set up a limited company (sociedad de responsabilidad limitada in Spanish) with just €1. This new rock-bottom minimum opens the doors to fledging businesses that previously lacked the original capital to become a company.
Caveats to the new minimum capital for companies
The €1 capital does, however, come with certain conditions. These aim to protect the interests of creditors or third parties with financial interests in the company. These requirements are as follows:
- 20% of the company’s profit must be put aside as a ‘legal reserve’ as part of the company capital until it reaches €3,000.
- If the company folds and the capital is not enough to pay creditors, shareholders must make up the difference between the capital and €3,000.
Electronic invoicing
The new law also contemplates the set-up of electronic invoicing in all businesses in Spain, including companies and self-employed professionals. Electronic invoicing allows companies to access reliable and systematic information on payment terms quickly and easily. As a result, it reduces late payments in business transactions.
Businesses and professionals with a turnover in excess of €8 million a year must set up electronic invoicing within a year of the law, i.e. by October 2023.
Businesses and professionals with a turnover under €8 million a year must implement it within two years of the law, i.e. by October 2024.
Awareness of late payment
In addition, the new law facilitates access to information on companies that regularly fall behind in payments or pay outside the stipulated date. For example, under the new regulations:
- Companies who fail to comply with the law on late payments (Ley de Morosidad) may not access public funding and grants.
- An annual list will be published of companies whose unpaid invoices exceed 600,000.
- Large companies must indicate the average time they take to pay suppliers in their annual reports. Alternatively, they must state the number of invoices the company paid earlier than stipulated by law.
Advice on setting up a company
At Costaluz Lawyers, we welcome the latest law and believe it will facilitate business considerably, particularly businesses at the early stage of development. However, the requirement for just €1 capital does not mean you can forego professional advice when you set up your company.
Our expert team believes that getting the right information and following the correct procedure remain fundamental pillars of a company’s success. We’re available to provide that advice – get in touch now for a free consultation.
Maria Luisa Castro
