If you are an entrepreneur, you will have followed with interest the process and approval of the well-known Law Create and Grow, call to correct the many obstacles to business creation that have reduced the agility and competitiveness of our productive fabric.
An expected and necessary law that contemplates measures of a different nature, but in which one has monopolized most of the headlines: the reduction of the share capital to 1 euro for the formation of a limited company. Start with 1 euro. But have we stopped to reflect on the feasibility of creating a company with such derisory social capital?
If we want a powerful and competitive business market in our country, surely the most suitable measure is not to facilitate a company that only contemplates the initial costs of notary public and registration, which, although they are necessary for its constitution, they are not enough. Therefore, we would be exposed to a possible dissolution of the company, either due to serious losses that would leave its net worth reduced to less than half of the share capital, as well as due to the responsibility for the social debts of the administrators for not promoting the dissolution of the entity.
Let us remember that Spain was, during 2021, the second country in the European Union with the most business bankruptcies, increasing by 22.1% compared to 2020, according to Eurostat. Situation that does not improve during 2022, since the health crisis, the economic crisis and the hardening of the situation increase the risk as the registration of more companies in bankruptcy.
The intentions of this regulation are, as I have said, positive and very necessary. But this striking measure, which aims to make us equal to neighboring countries such as the United Kingdom in terms of administrative agility, will remain take if it is not accompanied by other initiatives that help to face the main costs it bears Who decides to set up a company?
These have to do with the increase in the cost of raw materials and shortages; the high labor cost -where greater exemptions and bonuses should be promoted-; and taxation -where greater incentives could be implemented-. We do not deny that today there are reduced tax rates, but, on many occasions, they are insufficient and respond to very limited deadlines. Taking into account that most companies need an injection of capital by their founders in their first two years of activity, perhaps we should consider rethinking these measures, since that is where we should focus them.
Alternative financing measures
The Law Creates and Grows also incorporates, with success, measures on alternative financing. With interest rates on the rise, companies will need to access the alternative financing market to obtain liquidity that will allow them to move forward. However, this market is still unknown to many entrepreneurs and, while bank financing is the main source of financing for our entrepreneurs, a share capital of 1 euro practically rules them out from the start.
Entrepreneurs must, yes or yes, look for new ways of financing. Let’s make it easier by giving them access to rigorous information on the existing alternatives together with the advice of professionals that allow them to obtain the adequate resources to carry out their activity.
This rule, in terms of the trend and commitment of the administration and the company in the digitization of processes, will also provide greater agility in the procedures, reinforcing the initiatives that already existed since the entry into force of the previous Entrepreneur Law: Point PAE and CIRCE, which allows you to set up and register a simple company practically in a single day. In addition, it will promote electronic invoicing, its traceability and its processing, although once again we find ourselves with an obstacle: the high cost of contracting platforms to carry out invoicing digitally.
Let us not, therefore, fall into the siren song of wanting to undertake with one euro because, even if the entire process is reduced and cheaper as much as possible, the entrepreneur must have a clear strategy and the necessary resources to face that first stage of launch. Let’s avoid having a bulky company registry without activity, known as ‘zombie companies’, since then we will not be fulfilling the objective of the standard or building that strong business fabric that we so much need.
Javier Milara, director of the Commercial Area at CE Consulting.
