What is a startup according to Spain’s Start-Up Law?

The Start-Up Law (Ley 28/2022, de 21 de diciembre, de fomento del ecosistema de las empresas emergentes) aims to strengthen the Spanish ecosystem of emerging companies by attracting capital and foreign talent so that they become part of this ecosystem, which is so important for the growth and spread of knowledge and for the economic and business structure of Spain.

Among the different objectives set by the Law for Start-Up’s, we will highlight the following:

1. Promote the creation, growth and relocation
2. Attract talent and international investment capital for the development of the Spanish ecosystem
3. Stimulate public and private investment
4. Promote the affiliation between companies, financing agents and territories, with special attention in rural environments and especially in areas that are losing population.
5. Eliminate gender gaps
6. Support the development of attraction poles for companies and investors

 

To achieve these objectives, the formula used by the legislators is mainly the establishment of incentives and tax, commercial and labor benefits for entrepreneurs, investors, and workers.

In order to benefit from all of these incentives, the Spanish Start-Up Law requires start-up company to meet the following conditions:

• Be newly created or does not exceed five (5) years from its registration in the Mercantile Registry (or Commercial Registry) or seven years in the case of companies in the sectors of biotechnology, energy, industrial or that have developed their own technology designed entirely in Spain.
• Not be a company resulting of a restructuring operation (merger, division , transformation) from companies that are not considered start-ups.
• Not having had any distributed dividends
• Not listed on a regulated market
• Have its registered office or permanent establishment in Spain
• Have 60% of the workforce with an employment contract in Spain.
• Develop an innovative entrepreneurship project that has a scalable business model.

 

Additionally, the emerging company and its investors will not be able to take advantage of the benefits of the Law when:

• Any of the above requirements cease to be met and at the end of five (5) or seven (7) years.
• The company is extinguished before that term.
• The company is acquired by another that does not have the status of emerging company
• The annual turnover of the company exceeds the value of 10 million euros.
• Carry out an activity that generates significant damage to the environment.
• Partners who, directly or indirectly, own at least 5% of the share capital or administrators who have been convicted by a firm sentence of any of the criminal types of unfair administration crime, punishable insolvency, corporate crimes, money laundering crimes capital, financing of terrorism, crimes against the Public Treasury and Social Security, among others.

 

In order to be considered a Start-up, it is also essential to be accredited as such, establishing a procedure to obtain an emerging company certification.

 

You can find the Information about this procedure in the following link 

The details of the tax benefits can be found in our blog article in the following link.

The innovations introduced in terms of companies to attract foreign investment and loyalty of talent can be found at the following link.

By Esther Barneda