Spain: Promoting finance and entrepreneurship

Agustín Cerdá	Miguel Cruz

With our economy finally showing clear and consistent signs of recovery, the Spanish legislator has responded to an old demand from entrepreneurs and representatives of some of the most relevant small and medium-sized enterprises (SMEs) in the country. It has finally enacted Law 5/2015, which facilitates the financing of such entities (Ley de Fomento de la Financiación Empresarial or LFFE). The legislation is mainly devoted to enhancing access to alternative sources of financing to the traditional banking system, on which Spanish companies have been historically dependent. The LFFE alleviates and simplifies some of the requirements for these entities to access debt capital markets and gives additional flexibility to new financing structures in Spain that will play a key role in this field, such as crowd-funding.

On the debt capital markets front, the LFFE establishes important new measures regarding securitisation by adapting the legal framework to the European standard and enabling a more flexible system, permitting active management of the securitisation fund. It also strengthens transparency and investor protection requirements as it allows for a creditors committee, defines the role of management companies, and modifies the supervision regime.

Important changes have also been made to the bond issuance regime, permitting access to debt capital markets by limited liability companies, which until now were not legally entitled to issue notes. Further, the LFFE eliminates most restrictions for public limited companies to such issuances. Some formal requirements have been removed, such as the publication of an announcement detailing the issue in the Official Gazette of the Mercantile Registry (BORME). The creation of a noteholders' syndicate and the appointment of a commissioner are now only necessary in very specific scenarios.

Therefore, Spanish securitisation and notes issuance market is now more open, flexible and investor-friendly, with attractive opportunities for both issuers and domestic and international investors.

Last but not least, the LFFE has regulated a very flexible legal regime for crowd-funding activities, permitting companies to raise financing from individuals through crowd-funding platforms for an amounts as high as €5 million ($5.7 million). This regime demands that minimum requirements are complied with by the platform (which is required to maintain a minimum capital level and fulfill some regulatory requirements) and the investors (which for certain amounts of financing are required to be so-called credited investors). This source of financing has already proven to be very successful and we expect it to be applied to increasingly more relevant and costly projects.

We are confident this package of measures will boost both entrepreneurship and access to financing in Spain, creating an ecosystem of growing companies and a favourable climate for investment in the country.

Agustín Cerdá and Miguel Cruz

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