Law to support entrepreneurs and their internationalisation. Amendments in corporate and insolvency matters.

The BOE of 28 September published Law 14/2013, of 27 September, on support for entrepreneurs and their internationalisation.

As its explanatory memorandum states, this legal text aims to respond to the main problems of our business fabric.

• Firstly, the high rate of youth unemployment and the lack of greater entrepreneurial initiative among the youngest.
• Secondly, the regulatory and institutional environment in which business activities are carried out, in which access to and the exercise of economic activities are subject to compliance with a complex legal framework made up of commercial, sectorial and local regulations, dispersed in European regulations, national, regional and local laws and regulations, compliance with which often requires not only the hiring of consultancy services, but also the dedication of human resources for this purpose, which is particularly burdensome for smaller companies.
• Thirdly, the difficulties in accessing finance, which makes it essential to promote both bank and non-bank financing channels to help alleviate the effects of the credit crunch on firms.
• Fourthly, improving the environment for research, development and innovation, as well as in the use of information and communication technologies, which are essential for growth and competitiveness.
• Fifth, international markets as an essential source of growth in a context of globalisation characterised by increasing market integration. Reforms in corporate matters These are mainly contained in Chapter 3 of Title I, comprising Article 12 -EDL 2013/178110-, but there are more amendments in corporate matters scattered throughout the legal text. These changes came into force the day after the regulation was published, i.e. on 29 September. Article 12 -EDL 2013/178110- provides for the creation of a new type of company, the Sociedad Limitada de Formación Sucesiva (SLFS), with no minimum capital, whose regime will be identical to that of Limited Liability Companies, except for certain specific obligations aimed at guaranteeing adequate protection for third parties.

Thus, the new art. 4 bis LSC -EDL 2010/112805- states that until the minimum share capital figure (the 3,000 euros set in art. 4 LSC) is reached, the limited liability company will be subject to the successive formation regime, in accordance with the following rules:

• a) A sum at least equal to 20 per cent of the profit for the financial year must be transferred to the legal reserve without limit as to amount.
• b) Dividends may only be distributed to members after the legal or statutory requirements have been met if the value of the net assets is not less than 60 per cent of the minimum legal capital, or is not less than 60 per cent as a result of the distribution.
• c) The annual sum of the remuneration paid to shareholders and directors for the performance of those offices during those financial years may not exceed 20 per cent of the net assets of the corresponding financial year, without prejudice to the remuneration to which they may be entitled as employees of the company or through the provision of professional services which the company itself arranges with those shareholders and directors.

Furthermore, contrary to the general regime of Article 62 LSC -EDL 2010/112805-, which requires proof of the reality of the monetary contributions to be provided before the Notary Public authorising the deed of incorporation of the company, paragraph 3 of this Article 4 bis states that it will not be necessary to provide proof of the reality of the monetary contributions of the shareholders in the incorporation of successively formed limited liability companies.

However, and as a guarantee, Article 4 bis.3 itself establishes that the founders and those who acquire any of the shares assumed in the incorporation will be jointly and severally liable to the company and to the company's creditors for the reality of these contributions.

The amendment to Article 23 of the LSC -EDL 2010/112805-, which requires that the bylaws governing the operation of limited liability companies under a successive formation regime, insofar as the amount of capital is lower than the minimum set in Article 4, contain an express declaration that the company is subject to this regime, also serves to publicise the company to third parties.

Mercantile Registrars shall, ex officio, record this circumstance in the dispatch notes of any registrable document relating to the company, as well as in the certificates they issue.

Finally, this new Article 4 bis, section 2 -EDL 2010/112805- establishes that in the event of voluntary or compulsory liquidation of a successively formed limited liability company, if the company's assets are insufficient to meet the payment of its obligations, the shareholders and directors of the company will be jointly and severally liable for the payment of the minimum capital figure established in the Law.

Apart from this new type of company, Law 14/2013 -EDL 2013/178110- also modifies the system for setting up Limited Liability Companies, allowing the founders to opt for the incorporation of the company by means of a public deed with standardised articles of association in a standardised format, the content of which will be developed by regulation, a procedure that is regulated in Article 15 of Law 14/2013; or by incorporation without standard articles of association, in which case the provisions of Article 15 will apply with the special features provided for in Article 16 of Law 14/2013.

Finally, another important novelty in corporate matters is contained in art. 17 of Law 14/2013 -EDL 2013/178110- which allows the necessary formalities for the registration and commencement of activity of individual entrepreneurs and trading companies to be carried out using the Single Electronic Document (DUE) regulated in add. 3ª LSC -EDL 2010/112805-.

The procedure is set out in art. 17 itself. Additional Provision. 3ª LSC, in the wording given by Law 14/2013, initially provides for the incorporation of limited liability companies, although the provision itself, in its amended text, already contemplates that the specifications and conditions for the use of the DUE for the incorporation of any type of company will be established by regulation or, where appropriate, by means of the conclusion of the relevant agreements between the competent Public Administrations.

Reforms in insolvency matters are included in Chapter 5 of Title I -EDL 2013/178110-, comprising Article 21, and mainly dedicated to the regulation of the out-of-court payment agreement. In this way, Law 14/2013 -EDL 2013/178110-, apart from other minor changes in line with the main one, introduces a new Title X in the Insolvency Act, which covers the new articles 231 to 242, in which a mechanism for out-of-court negotiation of debts of entrepreneurs, whether natural or legal persons, similar to those existing in neighbouring countries, is provided for.

The procedure is very flexible and is settled out of court, in a very short period of time, before officials with the appropriate experience and qualifications, such as the Commercial Registrar or the Notary, although, as in the case of refinancing agreements, they will be limited to appointing a suitable and independent professional to promote the settlement and to ensure that the necessary publication and registry publicity requirements are met to achieve the aims pursued with the agreement. It is the responsibility of the negotiator to promote the formalities of a simple procedure in which, at least, the summons of all the creditors of the common debtor, who are encouraged to attend the meeting, is minimally disciplined.

At the meeting, in view of a proposal put forward by the negotiator, the payment plan or the possible agreement on the assignment of assets in payment of debts is discussed.

On the other hand, the Law is generous in its recognition of the possibilities of debt negotiation, so that reductions of up to twenty-five percent of the credits and delays of up to three years can be agreed.

The procedure fails if no agreement is reached or if the negotiator finds that the debtor has defaulted. In these cases, the procedure serves as a transition to insolvency with the appropriate specialisations.

The reform includes sufficient regulation of the exoneration of residual debts in cases of liquidation of the debtor's assets that, whether declared in direct or consecutive insolvency proceedings, have not been declared guilty of insolvency, and provided that a minimum threshold of satisfied liabilities remains. These new developments in insolvency matters do not come into force until 20 days after the publication of Law 14/2013, i.e. on 18 October, as indicated in letter a) of its 13th final provision. Consult our lawyers in Madrid.

Source: G.Elias y Muñoz Abogados