How venture capital firms and funds work in Spain

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1. The law regulates Venture Capital Entities, which are Venture Capital Societies and Funds, and their management companies. Their main activity is taking temporary stakes in non-financial companies not listed on the stock exchange, granting participative loans and advising those companies.
2. To start operating, these entities need prior authorization from the Minister of Economy and Finance, at the proposal of the National Securities Market Commission, plus registration in the Mercantile Registry and in the administrative registries of the CNMV. Applications must be resolved within three months and can only be denied for failing to meet the requirements or for serious difficulties in obtaining information.
3. Venture Capital Societies and Funds must keep at least 60% of their assets in stakes in companies, of which up to 30 percentage points may go to participative loans. They may not invest more than 25% of their assets in a single company or more than 35% in companies of the same group, and they may not invest in companies of their own group.
4. Economic requirements are set: Venture Capital Societies need minimum capital of 200 million pesetas, Funds need minimum assets of 275 million, and management companies need minimum capital of 50 million, paid in under the rules for each type.
5. The National Securities Market Commission supervises and inspects these entities and handles sanctioning proceedings. Offenses are classified as very serious, serious and minor, with fines, public or private warnings, revocation of authorization and penalties for responsible executives.
6. On tax matters, Venture Capital Societies and Funds enjoy a 99% exemption in Corporate Income Taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings. on income from the transfer of stakes in companies, from the third year through the twelfth, extendable exceptionally to the seventeenth. The VAT exemption is also extended to the management of assets of these societies.

Who it affects

• Venture Capital Societies and Funds: They must obtain authorization, meet minimum investment percentages, report to the CNMV and have their accounts audited.
• Management companies of Venture Capital Entities: They manage the Funds and the assets of the Societies, answer for breaches, and need minimum capital of 50 million pesetas.
• Management companies of Collective Investment Institutions: They may also manage Venture Capital Funds and assets of Venture Capital Societies, subject to this law.
• Non-financial, non-listed companies: They are the recipients of investments, participative loans and advice from these entities.
• Businesses and credit institutions: The third additional provision strengthens the protection of business credit assignments against the insolvency of the assignor, a feature of factoringFactoring A financial activity in which a business assigns its outstanding receivables to a credit institution in exchange for getting paid earlier..

Words worth knowing

Capital-riesgo (venture capital)

Financial activity of providing medium and long term money to companies that struggle to get financing elsewhere, in exchange for a stake in their capital for a limited time.

Préstamo participativo (participative loan)

A loan where the lender can also earn a return tied to the results of the borrowing company.

CNMV (Comisión Nacional del Mercado de Valores)

The Spanish public agency that supervises financial markets and keeps the registries of these entities.

Factoring

A financial activity in which a business assigns its outstanding receivables to a credit institution in exchange for getting paid earlier.

Coeficiente de inversión (investment coefficient)

The minimum percentage of assets these entities must keep invested in certain assets.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries