Spain

The for-profit organizational forms most commonly used in Spain are public limited liability companies (sociedades anónimas; “SA”) and private limited liabilities companies (sociedades de responsabilidad limitada; “SL”).

In both of them, shareholders’ liability is generally limited to the contributions they make to the capital of the company, and they participate in decision-making processes and the company’s profits or losses in proportion to those capital investments.

While SA have a minimum share capital of €60,000, their shares (acciones) can be listed on a stock exchange and they may issue bonds or other securities to acknowledge or create debt, SL have a minimum share capital of €3,000, their share capital is represented by participaciones, they cannot issue debt and they cannot be publicly traded.

Spain also has some for-profit organizational forms that have a social focus in that they are worker-owned. These are the labor companies (sociedades laborales; “SLab”) and cooperatives (sociedades cooperativas; “SCoop”).

SLab are a special type of SA or SL in which no one worker can own more than one third of the share capital but all the workers together have a majority share. The workers are directly remunerated for the work they do.

In a SCoop, partners not only own the Enterprise but also contribute with their work. The Enterprise is directly managed by its workers and they all have the same weight in decision-making processes. SCoop must set up two mandatory funds: the reserve fund and the education and promotion fund. SCoop benefit from a special tax regime. While there is national legislation regulating SCoop, there are also regional provisions, which may vary from one autonomous region to another. While in general partners are not liable for the Enterprises’ debts, in some regional regulations liability is extended to them.

a. Enterprises that will seek financing from investors will tend to take the form of an SL or SA, because of the limitation on the shareholders’ liability to what they invest in the share capital. Of the two, SL are more commonly used owing to the greater flexibility they offer.

As said, even though there are fewer restrictions on the transfer of shares in an SA (making it easier to invest and divest in an SA) and they can be listed on a regulated market and issue debt, SL offer multiple advantages: their share capital can be successively subscribed and paid out, the voting and economic rights that a shareholder is given need not be proportional to the nominal value of their shareholding, and there is flexibility as to independent experts’ valuations of certain matters.

b. In Spain there is no form that has been specifically designed for Social Enterprises. The most commonly used organizational forms by social enterprises are SCoop, associations and foundations. However, owing to the constraints or difficulties that these forms pose to perform economic activities and in terms of decision making, conventional Enterprises (SA and SL) and SLab are being used more and more; in many occasions as a vehicle used by foundations or other social entities. In that cases, the articles of association tend to reflect the social aims of the Enterprises, both in their corporate objects and the creation of funds financed with their profits.

Spanish regulations on SL and SA consider their main purpose to be to prioritize shareholders’ interests. That being said, there are academics and some case law that argue that the corporate object can include a social element in the sense that some profits can be reinvested with social aims. This allows management to also consider these other interests in some decisions.

Large Enterprises that exceed statutory thresholds (linked to volume of staff, turnover and assets) must prepare and publish a non-financial statement (Estado de información no financiera; “NFS”) that fairly reflects, amongst others, their social, environmental and good corporate governance aspects.

No, there is no organizational form specifically designed for Social Enterprises.

However, Act 5/2011 of March 29 on the social economy (Ley de Economía Social; “ASE”), which was passed with the aim of configuring a legal framework that gives visibility to the social economy and greater legal certainty to its operators, lists a catalogue of entities that operate in the social economy.

The ASE establishes the requirements that “social economy entities” must meet. They must be private entities, perform an economic activity according to business criteria, pursue the public interest, directly or in conjunction with the interests of its user members, and act in accordance with certain structural and functional principles. Finally, social economy entities must be of a type listed in the catalog included in the ASE (which must be still completed by the Government).

The types currently listed in the ASE catalogue are SCoop, mutual societies, foundations and associations engaged in economic activity, SLab, integration enterprises, special employment centers, fishermen associations, agricultural processing companies and other entities to which the Social Enterprise principles regulated in the ASE apply.

The number of special employment centers (Centros Especiales de Empleo), which create employment for disabled people, has increased since Royal Legislative Decree 1/2013 of 29 November approving the General Act on the rights and social integration of disabled people (Texto Refundido de la Ley General de derechos de las personas con discapacidad y de su inclusión social) was passed. It obliges Enterprises with more than 50 employees to hire a specific percentage of disabled people. This can be done directly or through contracting goods or services from special employment centers.

According to the ASE, the Government will prepare a definitive list of types of entities to be included in the catalog. This has yet to be done. In fact, the Spanish Strategy of Social Economy 2017-2020 approved by the Government on March 15, 2018, promotes the definition of this catalog.

No, since there is not a specific organizational form for Social Enterprises, they cannot be formed and operate as Nonprofits.

However, some social economy entities, such as SCoop and associations, can qualify as Nonprofits if they meet the requirements to benefit from a special tax regime, and foundations, which are always Nonprofit.

Does your jurisdiction allow for worker-owned Enterprises, such as cooperatives? If so, please describe any material benefits of, and/or restrictions on, using such forms.

Spain has for-profit Enterprises that are worker-owned, such as the SLab and SCoop described in question 2.  

No, because there is not special legal recognition or form for Social Enterprises in Spain.

No, because there is no specific legal form or special recognition.  

There are no specific ESG requirements, but there are some provisions designed to promote their fulfillment.

They basically encourage transparency from large or listed Enterprises that meet certain thresholds (on assets, volume of staff and turnover). They must issue a non-financial the NFS informing on the environmental impact of their business, social matters and human rights, inclusion of disabled people, and issues focused on transparency vis-à-vis investors. Listed Enterprises must also issue an Annual Corporate Governance Report (Informe de Gobierno Corporativo, “ACGR”), which covers matters such as compliance with the voluntary Good Governance Code (Código de Buen Gobierno. “GGC”). This code sets out good practices.

Finally, certain ESG criteria are imposed in sector regulations. An example is the fact that Enterprises with more than 50 employees are obliged to hire a specific percentage of disabled people. This can be done directly or by contracting goods or services from special employment centers.

There are no specific ESG requirements for Social Enterprises in Spain.

However, the ASE provides that Social Economy entities must follow the following principles: (i) the primacy of people and social purposes over capital; (ii) sharing out results according to the work contributed and service or activity carried out by the members, or where appropriate, to the corporate object; (iii) encouraging solidarity within the Social Enterprise and with society to favor commitment with local development, equal opportunities between men and women, social cohesion, the inclusion of people at risk of social exclusion, creating stable, quality employment, striking a balance between personal, family and work life, and sustainability; and (iv) being independent from public authorities.

Finally, to be considered a public interest SCoop, it must have a social objective focused on the “promotion, encouragement and development of cooperative societies and their structures of economic and representative integration”.

No.

Major investor classes are not required to look at ESG issues when investing. However, investors are increasingly considering these factors.

Spain has become a member of the independent organization that brings together the national advisory boards on impact investment of several countries, plus the EU’s Global Steering Group on Impact Investing (GSG), with the idea of crystalizing social impact investments.

A number of Spanish banks, including BBVA —which is among the founders— and Santander, have signed the United Nations Principles for Responsible Banking, which works to integrate sustainability at the heart of their businesses and align their commitments to the Paris Agreement on Climate Change and the Sustainable Development Goals. These entities must analyze ESG criteria when selecting their investment portfolio. Additionally, the certificate in ESG Investing issued by the CFA Society, which delivers the knowledge and skills required by investment professionals to integrate ESG factors into the investment process, is now available in Spain.

Finally, there are factors that investors tend to consider that reflect a balance between traditional investment, which prioritizes financial returns, and philanthropy, which seeks to generate a social. Investors that consider ESG issues tend to seek, among others:

• An Enterprise that proposes a differential value that solves a specific social problem and that this impact can be measured.
• Stability in their investment, traceability of the money invested and diversification of risk.
• Enterprises that have a long-term business model for growth (for instance, this would include analyzing the remuneration of directors to detect factors that might make them not focus on the company’s long term profitability or minority rights).
• Transparency.

At this point in time, philanthropic funding for Enterprises and entities pursuing a social purpose or social projects generally comes in the form of private donations, which receive special tax treatment. Traditional capital investment that considers the social purpose of the Enterprise is becoming more common. In fact, some business school studies have concluded that there is positive momentum in Spain in this regard and it is poised to have a greater impact.

The Spanish Association of Foundations has identified a number of foundations that it calls personal or family philanthropic foundations that channel donations to social projects.

In terms of capital investment and financing, some funds and fund managers (such as Gawa Capital, CREAS and Inuit Fundación) have been created that specialize in managing microfinance funds in social projects. In fact, CREAS raised the first impact fund approved by the National Stock Market Commission (Comisión Nacional del Mercado de Valores). There are also social incubators and accelerators, such as Fundación Ashoka, Ship2B and Social Nest, which provide capacity building, access to funding and other important resources to early-stage social Enterprises or social entrepreneurs. They are increasing their presence and impact in Spain.

There are various incubation programs and awards for Enterprises adopting ESG values, which are generally promoted by the private sector and provide financial and non-financial support. This is something very common in Spain and evidences the increasing social responsibility of Enterprises. Examples include “Convocatoria Empleaverde”, promoted by EMPLEA, which provides financial assistance to employers to take on unemployed people; “Acelera tu empresa con energía", promoted by Endesa and mentorDay, which is an acceleration program that reviews Enterprises’ business models and helps them to explore internationalization; “Momentum”, offered by BBVA, which supports social impact entrepreneurship through a five-month program that provides visibility, training, access to funding, strategic support and networking; “Premios Innovación Social”, run by Fundación MAPFRE, for social innovation programs; or the support provided by Santander Solidarity Investment Fund to social and labor market inclusion projects for groups at risk of social exclusion, as well as to social economy and international cooperation projects.

New for-profit impact investments are structured through traditional instruments, such as share capital investment and debt, even mezzanine, for consolidated Enterprises, and are increasing in Spain.

In fact, many prominent investors, such as banks and insurance companies, are including ESG criteria in portfolio investment selection criteria and running initiatives in this area, as well as considering the participation in the management to promote ESG criteria. As explained above, a number of Spanish banks, including BBVA and Santander, have signed the United Nations Principles for Responsible Banking.

There is no government funding specifically available to Social Enterprises since there is no specific legal form or legal recognition of Social Enterprises.

There is however governmental funding for companies that invest in ESG criteria at a national and regional level. For instance, in Galicia, there are subsidies for equality plans and labor conciliation measures. The Autonomous Community of Madrid has recently implemented impact bonds (the first in Spain), and other regions are defining impact bonds for specific projects.

Governmental funding through specific financing entities such as the Official Credit Institute (Instituto de Crédito Oficial) is available to small and medium Enterprises and Nonprofits.

Finally, support is given through awards and programs promoted by the public sector, such as the national award for sustainable mobility in which the Ministry of Transport, CONAMA Foundation and the Royal Academy of Engineering are involved (it gives awards to Enterprises that adopt good practices and initiatives in mobility).

No. However, there are several initiatives linked to publicly traded Enterprises meeting ESG principles and leading IBEX-35 companies such as Telefónica, Acciona or Iberdrola follow ESG criteria.

The National Stock Market Commission (la Comisión Nacional del Mercado de Valores) has authorized a social securities exchange crowdfunding platform called “La Bolsa Social PFP”, which is the first participatory financing platform authorized by this Commission and grants a two month investment period to accepted Enterprises (selected based on their social impact, business model and scalability or future potential profitability).

An index identifying listed Enterprises that adopt corporate responsibility practices has been created in collaboration with the Madrid Stock Exchange. It is called FTSE4Good IBEX Index for Enterprises demonstrating strong management of ESG values.

Publicly traded Enterprises are required to submit the ACGR, which includes an analysis of GGC recommendations, amongst others.

Spain is showing an increasing interest in impact bonds and some initiatives have crystalized in 2020.

The Regional Government of Navarra has developed a Sustainable Finance Framework to define how Sustainable Finance instruments are to be set up within the Navarra Government. This framework is valid for Sustainable Finance Instruments including Green, Social or Sustainability Bonds, Loans and any other financial instrument to which eligible projects are allocated. Navarra aims to play an important role in the development of the Sustainability Bond and Loan Market and to promote responsible and efficient finance to address the environmental, economic and social challenges in the region. In this regard, it promotes Impact Bonus for children in care. The Municipality of Madrid entered into an agreement with the European Investment Advisory Hub, funded by the European Commission and the European Investment Bank (“EIB”), in July 2020, by means of which the EIB has assisted the Municipality of Madrid to launch a social impact bond aimed at improving the effectiveness of services for vulnerable people residing in temporary accommodation. The agreement was the first of its kind in the context of the Advisory Platform for Social Outcomes Contracting.

Lanbide, the public employment service of the Basque Country, seems to be considering making a call for tenders to implement a Social Impact Bond on the prevention of long-term unemployment, with the support of BBK Foundation. The Generalitat of Catalunya and Barcelona City Council are designing their first Social Impact Bonus, focused on avoiding children ending up in the social care system, which has the support of La Caixa Foundation. The regional governments of the Valencian Community and Castilla-La Mancha are also exploring the model.

Finally, CREAS Fund together with the social entity Upsocial and others is analyzing the possibility of issuing an impact bond.

No.

Crowdfunding is legal in Spain. Examples of crowdfunding platforms are “Iniciativas Solidarias”, “Lanzanos” and “la Bolsa Social PFP”, the latter having been authorized by the National Securities Market Commission (Comisión Nacional de Mercado de Valores).

Crowdfunding is regulated in Act 5/2015 of April 27 on promoting business finance (Ley de Fomento de la Financiación Empresarial).

No, owing to there not being a specific legal form for Social Enterprises. However, there are tax benefits and exemptions for Nonprofits.

Act 49/2002 of December 23 on the tax regime for non-profit organizations and tax incentives for patronage (Ley de régimen fiscal de las entidades sin fines lucrativos y de los incentivos fiscales al mecenazgo) establishes a set of tax benefits for Nonprofits and patronage/sponsorship. In accordance article 3 of Act 49/2002, the entity must meet several requirements:

• Pursue the public interest, dedicating at least 70% if its income to pursuing public interest goals.
• Management positions within the entity cannot be remunerated and the entity’s activity must not management personally or their family members.
• The entity must be registered in the Non-profit Entities Registry (Registro de Entidades sin Ánimo de lucro) and must fulfill special accounting and reporting obligations.
• Following the entity’s dissolution, remaining assets must be dedicated to general interest activities.

Various types of revenues and activities are exempt from CIT in a qualifying Nonprofit. Along with the revenues from the non-profit activity itself, income derived from donations, advertising activities, membership fees, dividends and royalties (among others), as well as capital gains derived from transmission, are exempt from taxation.

Act 20/1990 of December 19, on the taxation of cooperatives (Ley sobre Régimen Fiscal de las Cooperativas) establishes a preferential tax regime for SCoop that includes specific exemptions. The tax benefits are granted regardless of the nature of the SCoop’s activity. As described in Section I above, SCoop in Spain is not expected to have specific social or environmental objectives and may carry out a normal business activity. Therefore, they cannot be deemed Social Enterprises.

Yes. For Corporate Income Tax purposes, and pursuant to article 20 of Act 49/2002, donors may deduct 35% of the value of the donation (40% if the amount exceeds the amounts donated in the previous two years). The same amounts apply to Personal Income Tax, but the deduction is up to 80% for the first EUR 150. Finally, for Non-resident Income Tax, the deduction cannot exceed 10% of the taxable income declared in the same tax year.

Most of the revenues of a Nonprofit may benefit from a CIT exemption provided that they meet some requirements. In addition, a special 10% CIT rate is applied to non-exempt revenues. The general CIT rate in Spain is 25%.

Nonprofits are exempt from most local taxes, including the property tax on real estate when the property is used for non-profit activities.

No special benefits are granted to Nonprofits in relation to VAT. However, some of the services typically provided by Nonprofits may benefit from VAT exemptions under Article 20.One of the Spanish VAT Act (services related to health, education, youth and sports, among others).

No. Only delegations of foreign foundations registered in the Spanish Register of Foundations may apply the special tax regime. This has been challenged before the European Court of Justice on the grounds of discrimination (against foreign Nonprofits operating in Spain).

No for Social Enterprises.

However, on November 14, Law 7/2020 on the digital transformation of the financial system (Ley 7/2020, de 13 de noviembre, para la transformación digital del sistema financiero) entered into force creating the first national Regulatory Sandbox. Since the aim is to reduce costs and increase accessibility to financing, this may be very useful for small and medium Enterprises.

There is also regional regulation on Regulatory Sandboxes. That is,  Catalan Act 19/2014 of December 29 on transparency, access to public information and good governance (Ley de transparencia, acceso a la información pública y buen gobierno), which states that public authorities can conduct pilot tests prior to approving regulatory measures to verify their suitability. Again, although not linked to social matters, initiatives in this area may use this option.

As explained above, operational support, resources, training and services mainly take the form of awards and programs promoted by the public sector, which are open to small companies with a social purpose or project.

In addition to the projects mentioned in the answer to question II.2., there is the “Premio Madrid Impacta”, which rewards social entrepreneurs with business solutions to problems caused by COVID-19 and is run by the City Council of Madrid with the collaboration of Impact Hub Madrid and UnLtd Spain. “Labean Sariak” is a contest to generate social innovation in rural areas promoted by the Basque Government.

There are also grants available at a national and regional level to Enterprises and entities promoting social initiatives.

No.

Although not exclusively focused on Social Enterprises, there are several government agencies and departments that promote Social Economy or ESG values, such as:

• The National Corporate Social Responsibility Council (Consejo Estatal de Responsabilidad social empresarial), which is a consultative and advisory body linked to the Work and Social Economy Ministry that promotes public policies to encourage social responsibility in Enterprises.
• The Social Economy Council (Consejo para el Fomento de la Economía Social), which is a consultative and advisory body. Amongst other activities, it carries out studies, compiles statistics, and assists the Work Ministry and other ministries in relation to social matters.

They all are very active in analyzing the status of the Social Economy and proposing new initiatives.

No.

An SA or SL can be incorporated in 24 hours if it is done using a notary public and an on-line process (maximum share capital, form of management body and other requirements must be met).

The standard incorporation process can take from four weeks to two months, since it involves registering the corporate name in the Central Commercial Registry, preparing articles of association, executing the deed of incorporation, paying fees, obtaining a provisional and then definitive tax identification number, and registering with the Commercial Registry. Powers of attorney must be granted if the process is done through a representative. If the people incorporating an Enterprise or appointed as its directors are foreigners, they must obtain a foreigners’ identity number in Spain.

There are administrative and notarial costs to incorporate an Enterprise, which depends on its initial share capital. Based on the minimum share capital for an SL, the average notary, registration and tax costs are between EUR 500 and EUR 700.

No public or private certifications afford beneficial tax status or other benefits.

However, there are certifications that may help bolster the Social Enterprise’s social impact claims. They provide potential investors and stakeholders with additional information to accurately assess the social impact that the Enterprise makes. These certifications are:

•  BCorporation Certification: issued by B Lab, which is an independent Nonprofit. To become a “B Corporation”, an Enterprise must:

(i) change its articles of association to reflect social purpose; (ii) take the B Impact Assessment; (iii) sign a term sheet agreement with B Lab; and (iv) pay the required fees. To maintain the certification, B Corporations must pay annual fees and comply with ongoing reporting requirements.

• International standard of Social Responsibility ISO 2600: which requires fulfilment of the following seven principles of social responsibility: a) accountability, b) transparency, c) ethical behavior, d) respect for the interests of stakeholders, e) respect for the principle of legality, f) respect for international standards of behavior, g) respect for human rights. To obtain ISO 2600, a supervisory body carries out an audit to verify the fulfilment of the certification requirements.
• Certificate SG21 Standard: which verifies the existence of a culture of Corporate Social Responsibility regarding environmental factors, social environment, employee development and good governance of organizations.
• Certificate IQNet Standard: which main purpose is to certify social responsibility management in Enterprises.

Finally, on March 15, 2018, the Government adopted the Spanish Social Economy Strategy for 2017-2020, which is intended to promote a definitive and complete National Catalog of Social Economy Entities under the ASE (Catálogo Nacional de las Entidades de la Economía Social) and to promote the creation a social Enterprise Stamp (Sello de Entidad de la Economía Social) to give more visibility to entities acting in the Social Economy.

Startups and other entrepreneurial Enterprises can easily form and flourish in Spain in certain areas. Entrepreneurial activity and the creation of startups have increased in recent years due to several factors, such as:

• European and national financial support (such as Horizonte 2020, Horizonte PYME or Einsa) focused on I+D+i;
• public-private collaboration;
• 24-hour incorporation of Enterprises;
• the specific regulations for entrepreneurs enacted in 2013 (Act 14/2013 of September 27 on support entrepreneurs and their internationalization (Ley de Apoyo a los Emprendedores y su Internacionalización)), which seeks to reduce formalities;
• the country’s physical infrastructure and services; and
• access to the European market.

Despite the formalities to be met, Spain was still ranked in 16th place for favorable environments to set up business in the 2019 Global Entrepreneurship Monitor ranking (which is an international observatory that analyzes entrepreneurial phenomenon on an international level and evaluates conditions for entrepreneurs).

Levels of entrepreneurial activity vary from region to region, in part due to the policies adopted by regional governments. For instance, Catalonia is considered as a leader for tech Enterprises and attracts much foreign investment in this sector (according to FGI Intelligence, The Next Web, EU-Startups 2020 or Tech Cities of the Future reports), and has several public initiatives such as “Emprenedoria Barcelona” that run incubation programs and provide information and orientation on how to set up Enterprises or access resources. The Autonomous Community of Madrid also offers a favorable environment for entrepreneurs thanks to good access to funding, its commercial and professional infrastructure and its government programs to support entrepreneurship.

Although Spain is not as advanced as other countries such as the UK or USA, Social Enterprises can be formed and flourish in Spain with increasing importance being placed on ESG criteria.

Some factors that may help Social Enterprises to be created and flourish in Spain are: increasing consumer interest in Enterprises that adopt these criteria; the increasing number of certifications that verify ESG criteria application by Enterprises; private initiatives offering financing and nonfinancial resources; regional regulations and initiatives that show that ESG criteria and social responsibility are being strongly considered by the public sector (for instance, there are impact bonds in the Autonomous Community of Madrid and Navarra, Castilla y León has passed Act 7/2019 of November 29 on the circular economy (Ley de Economía Circular) and the Regulatory Sandboxes in Catalonia).

Directors and officers must use their powers in the best interests of the Enterprise and its shareholders. While they are not prevented from considering other interests, such as the environment or the larger community, it would be better if it were easier for them to consider those interests. There is recent case law in this regard, but a legal framework would help.

No. In 2020 Spain was in the 19th position of the global ranking of the World Justice Project Rule of Law Index, which ranks 128 countries and measures, among other factors, the absence of corruption in government.

The following changes could help Social Enterprises to flourish within the current framework:

1. Implementing a uniform set of standards for ESG policies at a national level.

2. Promoting public sector grants.

3. Making funding more accessible to small and medium Enterprises.

4. Requiring major investors or funds to consider ESG criteria when approving investments.

5. Promoting the involvement of Social Enterprises in public sector contracts.

6. A legal form for Social Enterprises that offers tax benefits or special recognition (like a seal or stamp).

7. Providing tax benefits to for-profit Enterprises that follow ESG criteria.

While in 2013 a draft bill for an Act promoting social entrepreneurship was presented, it was not finally approved Some years later there was also an attempt to create a special tax regime for Enterprises with social purposes.

1. Implementing a uniform set of standards for ESG policies at a national and European level to facilitate comparisons and evaluations.

2. Adopting banking rules to encourage investments in social projects.

3. Promoting educational programs which include training in ESG criteria and social management of Enterprises.

4. Providing tax benefits to for-profit Enterprises that follow ESG criteria.

Platforms such as Social Economy Europe and the European Social Action Plan 2020, which purpose is to create a social welfare system, are promoting and helping advancements in social matters and Social Enterprises. But this is not enough. It is crucial that we all work to promote the social economy and socially responsible Enterprises. This is especially true in countries like Spain, where entrepreneurial activity is increasing and environmental values and conditions favor the creation of new Enterprises.

Some business schools have already begun conducting research and are training future professionals in emerging fields. It is important that public authorities support them.

If we want to speed up this process, private initiatives that increase awareness have an important part to play as does a more favorable regulatory framework.