On Thursday June 30, the Congress of Deputies approved in plenary session the creation of the new legal form for Benefit and Common Interest Companies. A name that legally recognises those companies that meet the highest standards in social, environmental, transparency and good corporate governance matters. In other words, companies which, in addition to economic profitability, also generate a positive social and/or environmental impact through their business model.
B Lab Spain, a non-profit organisation, has been in charge of promoting the #EmpresasConProposito (Companies with a Purpose) initiative and achieving the legal recognition of Benefit and Common Interest Companies in Spain, as is already the case in other countries such as France and Italy. The project was presented as a compromise amendment, which has been included in the Ley Crea y Crece (Create and Grow Law).
What is the Ley Crea y Crece?
The Ley Crea y Crece is part of the Spanish government’s Recovery, Transformation and Resilience Plan, which outlines the road map for the modernisation of the Spanish economy, the recovery of economic growth and job creation, for a solid, inclusive and resilient economic reconstruction after the COVID crisis, thanks to the funds granted by the European Union, also known as Next Generation Funds.
The main goal of the Law on Business Creation and Growth is to promote the creation of businesses and facilitate their growth and expansion, especially SMEs (PYMES).
Improving the process of business growth is essential to increase productivity, quality of employment and internationalization.
For this reason, the Law:
- Reduces and streamlines the procedures and conditions for the incorporation of a Limited Liability Company.
- Encourages its growth through regulatory improvement.
- Generalises the use of electronic invoices.
- Promotes the fight against late payment in commercial transactions.
- Advocates alternative financing such as crowdfunding, collective investment or venture Capital.
The economic costs and formalities for the incorporation of companies are reduced.
The possibility of setting up a Limited Liability Company with a share capital of €1 is established, compared to the legal minimum of €3,000 established until now. This will allow companies to invest their resources in the creation of new businesses and, consequently, encourage entrepreneurship.
It also facilitates the online incorporation of companies through the one-stop shop of the Information Centre and Business Creation Network (CIRCE), which guarantees a reduction of the time frame of setting up a company and notary and registry costs.
The draft bill also improves the efficiency of regulation of economic activities by simplifying existing legislation, eliminating unnecessary regulations and establishing more streamlined procedures.
Measures against late payment
It also includes advanced measures in the fight against late payments in commercial transactions, one of the main problems in terms of liquidity and profitability that affects most Spanish companies, mainly SMEs (PYMES).
To ensure greater traceability and control of payments, the Law makes it compulsory to issue and send invoices electronically in all commercial relations carried out by the company. This not only reduces transaction costs, but also encourages the digitisation of the company’s operations and makes possible to obtain reliable, systematic and agile information on effective payment deadlines.
However, it is established that companies that do not comply with the payment deadlines established in the Late Payment Act will not be able to access a public subsidy or be a collaborating entity in their management.
Finally, the creation of a State Observatory on Private Arrears is envisaged, which will be responsible for monitoring and analysing data on payment periods and promoting good practice. It will be also publishing annual list of defaulting companies.
Reinforcement of funding
As mentioned above, measures are incorporated to improve the instruments for financing business growth specifically, in the area of crowdfunding, the Ley Crea y Crece introduces more flexibility for these platforms to provide their services in Europe.
Additionally, investor protection is strengthened and the creation of vehicles to pool investors is allowed in order to reduce management costs. It also boosts the venture capital industry, broadening the type of companies in which these entities can invest, including financial companies with a high technological component.
It is worth to mention that the figures recognised for closed-end funds are extended. These are debt funds that can invest in loans, invoices or trade bills, contributing to and improving the business financing of companies whose financial structure has deteriorated as a result of the health crisis.
Meanwhile, the establishment of the new legal figure of Benefit and Common Interest Companies and its incorporation in the Ley Crea y Crece reinforces the objective of the Spanish state, to promote and encourage the growth of companies and the Spanish economy after the economic crisis caused by pandemic.
In OBN& we want to help you in case you have any questions or would like to receive more information about this new legal figure. Please do not hesitate to contact us.