Incorporation of a Limited Liability Company with One Euro of Capital

On September 29, Spanish Government has approved Law 18/2022 on the incorporation and growth of companies, which amends the Spanish Company Act, this new Law establishes as main points the following:

1) Purpose of the Law: the technological development of the last decade, together with the Covid-19 pandemic caused is producing an accelerated digitalization of the Spanish economy and society. This is the way there is a hud for a digital transformation of the incorporation of the companies. This new Law aims to boost the creation of companies more agile and reduce the costs associated with their incorporation.

At the same time, facilitate the incorporation of start-ups, especially small and medium-sized companies and reduce obstacles to growth, it may also increase competition, productivity, and job creation capacity, all to the benefit of consumers.

2) Requirements for a capital contribution of one euro and main amendments to the Spanish Capital Companies Act.

a) Modification of the minimum share capital and requirements for its contribution.

The minimum amount of capital for the incorporation of limited liability company changes from three thousand euros to one euro. In order to safeguard the interest of creditors, the Law introduces two requirements:

- A sum equal to at least twenty percent of the profit must be transferred to the legal reserve until this reserve -together with the share capital- reaches the amount of three thousand euros.

- In the event of disolution of the company and if the company`s assets are insufficient, the shareholders shall be jointly and severally liable for the difference between the amount of three thousand euros and the amount of the share capital.

b) Principal amendments to the Spanish Capital Companies Act.

- The new law elimnates the possibility of setting up limited liability companies on a “régimen de formación sucesivo” as this regime was designed to enable the formation of limited liability companies below the minimum of three thousand euros. 

In this sense, the Law establishes a transitional period for the companies to be reconverted. During this transitional period, -as long as these companies do not reach a share capital of three thousand euros- they will have special obligations:

> To allocate to the legal reserve an amount equal to at least twenty per cent of the profit for the financial year;

> Once the legal reserve or statutory reserve have been met, dividends may only be distributed to shareholders if the value of the net assets is not less than one thousand eight hundred euros;

> The annual sum of the remuneration paid to the directors for the performance of such duties during those financial years may not exceed twenty per cent of the net assets of the corresponding financial year; and

> In the event of dissolution of the company and if the company`s assets are insufficient to meet its obligations, the shareholders and directors of the company shall be jointly and severally liable for the payment of the amount of the capital plus the difference between this amount and the figure of three thousand euros.

- The articles dedicated to the “sociedad limitada nueva empresa” are repealed, given that this has been superseded by other forms that allow for greater advances in the company formation process.

3) Entry into force of the Law. All the above amendments shall enter into force twenty days after their publication in the Spanish Official State Gazette on 29 September 2022.

Marta Batalla

martabatalla@gentile.law

+34 91 435 45 19