Rules for firms that invest money in unlisted companies

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1. The law regulates venture capital entities, which can be either companies or funds, and the management companies that run them. Their main activity is taking temporary stakes in the capital of non-financial companies that are not listed on the stock exchange.
2. Entities can operate under the common regime or the simplified regime. Simplified regime entities can only raise money privately, with a minimum commitment of 500,000 euros per investor and no more than twenty investors.
3. To start operating, entities need prior authorization from the Comisión Nacional del Mercado de Valores (the Spanish securities regulator) and registration in its records. If the CNMVCNMV Comisión Nacional del Mercado de Valores, the Spanish public agency that supervises financial markets. does not respond within two months, the application is deemed denied.
4. Entities must invest at least 60% of their assets in companies that are the target of their activity. They cannot put more than 25% into a single company or more than 35% into companies of the same group.
5. Venture capital companies need minimum capital of 1,200,000 euros and funds need minimum assets of 1,650,000 euros. Funds are pools of assets with no legal personality, managed by a management company.
6. Management companies must be public limited companies with minimum capital of 300,000 euros. They are liable to participants or shareholders for damages caused by breaking the law.
7. The law sets penalties based on how serious the violation is: very serious violations carry fines of 150,000 to 300,000 euros and even revocation of authorization, while minor ones carry fines of up to 6,000 euros.
8. Venture capital entities get a 99% exemption from corporate income taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings. on gains from selling stakes, if they hold the investment between the second and the fifteenth year.

Who it affects

• Innovative companies looking for funding: They can receive investment from venture capital entities, which buy temporary stakes in their capital.
• Investors and savers: Anyone investing in these entities has the right to full information and is protected by diversification limits and the penalty regime.
• Venture capital companies and funds and their managers: They must be authorized, registered, and meet capital, investment, and information requirements, with penalties if they do not.
• Comisión Nacional del Mercado de Valores (Spanish securities regulator): It is the main supervisor: it authorizes, registers, inspects, and penalizes these entities.

Words worth knowing

Capital-riesgo (venture capital)

Money invested in companies with growth potential in exchange for a stake in their capital, accepting the risk that the business may fail.

Sociedad gestora (management company)

A company that administers and manages venture capital funds and the assets of venture capital companies on behalf of investors.

Coeficiente obligatorio de inversión (mandatory investment ratio)

The minimum percentage of the entity's money that must be invested in its target companies, here 60%.

CNMV

Comisión Nacional del Mercado de Valores, the Spanish public agency that supervises financial markets.

Préstamo participativo (participative loan)

A loan whose repayment to the lender partly depends on how well the borrowing company performs.

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