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Set up a company with €1 in capital in 10 days: New legislation in the pipeline
31/07/2021
STARTING a company may only need as little as €1 in capital once a planned new law comes into effect and which is seeking to encourage entrepreneurs and provide greater protection against insolvency through non-payment by corporate clients.
The forthcoming Law of Business Creation and Growth, currently being discussed and worked on in the Council of Ministers, seeks to 'remove obstacles' in the 'establishment and economic viability' of companies.
One issue that most threatens this 'viability', the government recognises, is lack of cashflow and solvency where firms are not paid by their clients within the legal maximum of 60 days – which reduces to 30 days in some circumstances.
This is a particularly serious problem for the self-employed, sole traders and small businesses, where they are owed money by big companies they do work for and effectively allow these to fail to pay up on time – or even at all – since they fear losing a major customer or ruining their relationship with the corporation, the Council of Ministers argues.
For this reason, the unpaid worker 'does not tend to demand the compensation they are legally entitled to' in these situations, such as the costs of chasing up the debt and interest payments, 'even though it puts pressure on their profit margins'.
Given that this imbalance of power renders penalties and punishments pointless in most cases, the government intends to introduce incentives for prompt payment in the new legislation.
Another aid to early payment will be the launch of the so-called 'digital invoice', the form and structure of which has not been detailed as yet, but will make settlements more transparent, as it will be much easier to see when a company has paid a trader who has carried out work for it.
Even if the trader does not use this as clear proof of a corporate client's late payment or non-payment, the figures will be accessible by public authorities.
This will come accompanied by a general rule that firms which pay their workers', suppliers' or contractors' invoices late, or fail to do so, will not be eligible for any public funding they may otherwise be entitled to.
The system will allow for fines and penalties for those firms which fail to pay on time, and as public authorities will detect these situations and apply the punishments, it will not be up to the person or small business waiting for the money to take action at their own expense and risk of losing a corporate client – they will not be able to prevent, or have any influence in, these fines and penalties.
Also, the legislation will create an out-of-court system for conflict resolution, which will mean a sole trader or small company will not have to risk hundreds or thousands of euros in suing a corporation for money it is rightfully owed and lose these expenses if the debtor still does not pay up.
One major change the Law of Business Creation and Growth will bring in is to end the requirement for a minimum capital sum of €3,000 for setting up a limited company – for young adults especially, with innovative new ideas and plans for a start-up venture, this figure is likely to be way beyond their reach, but it is expected that they will soon be able to register their firm for the nominal sum of €1.
And they will be able to create the company online and in as little as 10 days, rather than waiting months to get off the ground and incurring costs whilst not earning in the meantime.
The Council of Ministers is also examining a wider range of sources of finance for businesses, since the immense majority of firms are totally reliant on commercial loans from high-street banks.
It plans to set up a Sectorial Conference on Regulatory and Climate Improvement for Business, which will act as 'middleman' between the government, regional governments, and local traders and companies.
'Business Climate', in this case, refers to the entrepreneurial environment or micro-economy, and the government hopes to improve this across the board to tackle the problems Spanish firms have to deal with constantly and which stifle their growth, prevent them from going international, and even, in some cases, bar them from restructuring a debt.
Eliminating these hurdles, especially the latter, could mean a crisis was 'merely a surmountable obstacle' rather than a 'death sentence' for the firm, the Council of Ministers argues.
Over a third of Spain's workforce is self-employed, and more than 75% of companies are small or medium-sized, usually family-run or sole trader-run, meaning they have limited capacity for creating jobs and financial setbacks can threaten their very existence.
“The bigger the size of the company, the more it can increase its productivity, the greater its resilience in the face of potential crises, and the greater its capacity for making the necessary investments to continue to be competitive in the face of the fast-moving double commercial transformation – the 'digital' and the 'green' evolution,” the brief for the draft law text reads.
This abstract highlights the fact that Spain currently ranks 30th out of 190 countries in the World Bank's Doing Business report, in terms of the ease of setting up and running a company and the level of entrepreneurship nationwide.
“The lack of an efficient procedure for tackling a company restructure in order to guarantee its future viability is signalled as an element of legal insecurity and vulnerability that hinders growth, whilst the excessive level of non-payment prevents many sole traders and small businesses from guaranteeing a solid financial base and cashflow that would allow them to implement growth strategies,” the text continues.
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STARTING a company may only need as little as €1 in capital once a planned new law comes into effect and which is seeking to encourage entrepreneurs and provide greater protection against insolvency through non-payment by corporate clients.
The forthcoming Law of Business Creation and Growth, currently being discussed and worked on in the Council of Ministers, seeks to 'remove obstacles' in the 'establishment and economic viability' of companies.
One issue that most threatens this 'viability', the government recognises, is lack of cashflow and solvency where firms are not paid by their clients within the legal maximum of 60 days – which reduces to 30 days in some circumstances.
This is a particularly serious problem for the self-employed, sole traders and small businesses, where they are owed money by big companies they do work for and effectively allow these to fail to pay up on time – or even at all – since they fear losing a major customer or ruining their relationship with the corporation, the Council of Ministers argues.
For this reason, the unpaid worker 'does not tend to demand the compensation they are legally entitled to' in these situations, such as the costs of chasing up the debt and interest payments, 'even though it puts pressure on their profit margins'.
Given that this imbalance of power renders penalties and punishments pointless in most cases, the government intends to introduce incentives for prompt payment in the new legislation.
Another aid to early payment will be the launch of the so-called 'digital invoice', the form and structure of which has not been detailed as yet, but will make settlements more transparent, as it will be much easier to see when a company has paid a trader who has carried out work for it.
Even if the trader does not use this as clear proof of a corporate client's late payment or non-payment, the figures will be accessible by public authorities.
This will come accompanied by a general rule that firms which pay their workers', suppliers' or contractors' invoices late, or fail to do so, will not be eligible for any public funding they may otherwise be entitled to.
The system will allow for fines and penalties for those firms which fail to pay on time, and as public authorities will detect these situations and apply the punishments, it will not be up to the person or small business waiting for the money to take action at their own expense and risk of losing a corporate client – they will not be able to prevent, or have any influence in, these fines and penalties.
Also, the legislation will create an out-of-court system for conflict resolution, which will mean a sole trader or small company will not have to risk hundreds or thousands of euros in suing a corporation for money it is rightfully owed and lose these expenses if the debtor still does not pay up.
One major change the Law of Business Creation and Growth will bring in is to end the requirement for a minimum capital sum of €3,000 for setting up a limited company – for young adults especially, with innovative new ideas and plans for a start-up venture, this figure is likely to be way beyond their reach, but it is expected that they will soon be able to register their firm for the nominal sum of €1.
And they will be able to create the company online and in as little as 10 days, rather than waiting months to get off the ground and incurring costs whilst not earning in the meantime.
The Council of Ministers is also examining a wider range of sources of finance for businesses, since the immense majority of firms are totally reliant on commercial loans from high-street banks.
It plans to set up a Sectorial Conference on Regulatory and Climate Improvement for Business, which will act as 'middleman' between the government, regional governments, and local traders and companies.
'Business Climate', in this case, refers to the entrepreneurial environment or micro-economy, and the government hopes to improve this across the board to tackle the problems Spanish firms have to deal with constantly and which stifle their growth, prevent them from going international, and even, in some cases, bar them from restructuring a debt.
Eliminating these hurdles, especially the latter, could mean a crisis was 'merely a surmountable obstacle' rather than a 'death sentence' for the firm, the Council of Ministers argues.
Over a third of Spain's workforce is self-employed, and more than 75% of companies are small or medium-sized, usually family-run or sole trader-run, meaning they have limited capacity for creating jobs and financial setbacks can threaten their very existence.
“The bigger the size of the company, the more it can increase its productivity, the greater its resilience in the face of potential crises, and the greater its capacity for making the necessary investments to continue to be competitive in the face of the fast-moving double commercial transformation – the 'digital' and the 'green' evolution,” the brief for the draft law text reads.
This abstract highlights the fact that Spain currently ranks 30th out of 190 countries in the World Bank's Doing Business report, in terms of the ease of setting up and running a company and the level of entrepreneurship nationwide.
“The lack of an efficient procedure for tackling a company restructure in order to guarantee its future viability is signalled as an element of legal insecurity and vulnerability that hinders growth, whilst the excessive level of non-payment prevents many sole traders and small businesses from guaranteeing a solid financial base and cashflow that would allow them to implement growth strategies,” the text continues.
Related Topics
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