Spain: The reform which reduces the minimum capital required to set up a limited liability company from 3,000 euros to 1 euro has been published

Law 18/2022 of September 28, 2022 on the creation and growth of businesses was published in the Official State Gazette (BOE) on September 29, 2022. This Law, among other matters, amends the revised Capital Companies Law, approved by Legislative Royal Decree 1/2010 of July 2, 2010, to bring about the following changes:

1. To modify the minimum amount of capital required for the formation of limited liability companies, reducing it from the 3,000 euros previously required to 1 euro. The aim is to reduce formation costs in order to promote the creation of businesses and allow the founding shareholders to decide on the amount of share capital which should be subscribed, in accordance with their needs and preferences.
2. As a consequence of the foregoing, to eliminate the possibility of setting up limited liability companies under the entrepreneurial regime, establishing a transitional period so that companies of this type currently in existence can undergo the necessary conversion. During this transitional period, and to the extent that the capital of such companies falls short of 3,000 euros, they shall be subject to the following special obligations: (i) to allocate to the legal reserve an amount equivalent to at least 20% of the profit for the year, with no limit being applicable; (ii) once the appropriations required by law and by the bylaws have been made, they may only distribute dividends to their shareholders if their net worth is not less than 1,800 euros or is not reduced to below this figure as a result of the distribution; (iii) the annual sum of remuneration paid to the shareholders and directors for the performance of their duties of office during these years may not exceed 20% of the equity figure for the corresponding year, without prejudice to any remuneration which may correspond to them as employees of the company or for the provision of professional services pursuant to an agreement formalized between the company and such shareholders and directors; and (iv) in the event of liquidation, whether voluntary or compulsory, if the company's equity is insufficient to enable it to meet its payment obligations, its shareholders and directors shall be severally liable for disbursement of the capital figure plus the difference between this figure and the amount of 3,000 euros.
3. In order to protect the interests of creditors, to require companies with a capital of less than 3,000 euros to (i) set up a legal reserve of an amount equal to least 20% of profits until the sum of the legal reserve and the share capital figure reaches 3,000 euros, and (ii) make the shareholders severally liable, along with the company, up to the difference between the amount of 3,000 euros and the share capital subscribed if, in the event of liquidation, the company's equity is insufficient to pay its corporate obligations.
4. To repeal title XII of the Capital Companies Law in relation to the new business limited company, since other forms have since been introduced which advance more effectively the process of formation of companies. It is clarified in the transitional provisions that new business limited liability companies in existence when this new law comes into force shall be regulated by the legislation on limited liability companies.

This law comes into force, insofar as relates to the changes described above, twenty days after its publication in the Official State Gazette.