Preliminary Bill on Support for Entrepreneurs I – New developments in the corporate/commercial area
The Spanish Prime Minister today unveiled the Preliminary Bill on Support for Entrepreneurs and their Internationalization before a hundred odd small businessmen and entrepreneurs. The aim of this piece of legislation is to boost entrepreneurial and business activity in Spain and, to this end, introduces a range of major changes in different areas having a bearing on the creation and start-up of new ventures.
In terms of the professional advice that entrepreneurs will need to take full advantage of the raft of measures to be ushered in by the Preliminary Bill, the main new developments can categorized according to the three major practice areas: corporate/commercial, labor and employment, and tax.
The following corporate/commercial-related measures are worthy of note:
- The creation of the concept of a limited liability entrepreneur (ERL), a truly new departure from the principle of the unlimited liability of individuals whereby, subject to certain restrictions and conditions, individual entrepreneurs registered as ERLs will no longer be personally liable, to the extent of their principal residence, for debts incurred in the course of their business or professional activities.
- The creation of a new type of company known as a limited liability successive formation company (SLFS), which may be set up with a capital stock of less than €3,000. To counterbalance this and protect third-party creditors, 20% of period earnings must be set aside for the legal reserve, the annual amount of dividends or compensation paid to shareholders and directors cannot exceed 20% of equity in the relevant year and, in the event of liquidation of the SLFS, the shareholders and directors will be jointly and severally liable for the SLFS’s debts up to the limit of any uncalled/unpaid capital stock, until the amount of €3,000 is reached. Particularly striking (and unprecedented in Spanish corporate law) is the exemption from the obligation to evidence the actual existence of monetary contributions from shareholders expressly provided for in the Preliminary Bill, as is the potential liability of directors in the liquidation of an SLFS referred to above, not due to a breach of their duties and obligations as such, but rather to the extent of any uncalled/unpaid part of the capital stock until the figure of €3,000 has been reached.
An update on the new developments from the labor and employment and tax standpoints will follow shortly.
Garrigues Corporate/Commercial Law Department