1. Legal Framework - The 5 Key Laws

1. Ley 14/2013 de Apoyo a los Emprendedores y su Internacionalización (Entrepreneurs Law)

• Created Entrepreneur of Limited Liability (ERL), Sociedad Limitada de Formación Sucesiva - can create SL with €1 capital.
• Created Points of Attention to Entrepreneur (PAE) - one-stop incorporation.
• Tax incentives for Business Angels.

2. Ley 5/2015 de Fomento de la Financiación Empresarial (LFFE) - Crowdfunding Law
This was first law to regulate crowdfunding platforms in Spain.

Crowdfunding law in Spain is mainly regulated by Law 5/2015, of 27 April, on the Promotion of Entrepreneurial Financing, which was designed to regulate participatory financing platforms and establish legal framework for protection of investors.
Defines platforms as authorised companies that perform activities consisting of professional linking, through websites or other electronic means, of persons offering financing.
Title V regulates:
(i) Equity crowdfunding - issuance of shares/securities
(ii) Lending crowdfunding - loans + interest
Platform must be authorized by CNMV + Bank of Spain. Investor limits: €3,000 per project, €10,000 per year for non-accredited.

3. Ley 18/2022 Crea y Crece (Create and Grow) + EU Reg 2020/1503
Harmonized Spain with EU. Title V of new Crea y Crece Law harmonized with EU Reg 2020/1503 on European Crowdfunding Service Providers. Now platform must register with CNMV under EU passport - can raise up to €5M per project across EU.
Investor groups regulated under Art 56 LFFE - allows pooling.

4. Ley 28/2022 de Fomento del Ecosistema de Empresas Emergentes - Startup Law (In force Jan 2023)

Law 28/2022, known as Spain Startup Law, is legislative framework designed to make Spain one of Europe's most attractive destinations for startups.

Definition of Startup (Art 3):

• <5 years old (7 years for biotech, energy, industrial)
• Not listed, not emerged from merger, not distributed dividends
• Turnover < €10M
• Independent SME with innovative character, intensive use of scientific-technical knowledge
• Not carrying out activity causing significant damage to environment per EU 2020/852
• Must be certified by ENISA - Emerging Company Certificate is normally first step, since it unlocks reduced 15% corporate tax rate.

5. Ley 7/2020 Digital Transformation - Fintech Sandbox
Allows testing of finance projects without full license for 12 months.

2. Financing Instruments Recognized in Spain

A. Préstamo Participativo (Participative Loan) - RDL 7/1996 Art 20

Spanish préstamo participativo is defined in art 20 of Royal Decree-Law 7/1996.

• Interest variable linked to borrower's profit, turnover or another indicator, although fixed component may also be added.
• Considered equity for capital reduction / liquidation test.
• ENISA grants equity loans from €25,000 to €1.5M and do not require collateral or existing revenue history. This is how ENISA lends. Funding without giving up equity.

B. Cuentas en Participación - Commercial Code Art 239-243
Investor contributes funds to trader's operations and shares in favourable or adverse results. Used for silent investor.

C. SAFE, Convertible Loan, Equity - Common Law instruments adapted:
Spanish practice now accepts SAFE (Simple Agreement for Future Equity) even though not in Código. Taxed as equity.

D. Crowdfunding - 2 Types under LFFE + EU 2020/1503:

• Financial return (equity + lending) - regulated
• Donation / reward - not regulated

E. Venture Capital - Ley 22/2014 + SCR regime:
EFC, SCR, SICC.

3. Tax Incentives - Core of Finance Regulation

Startup Law Tax Measures:

• Corporate tax reduction from 25% to 15% for 4 tax periods from first positive base.
• Personal income tax deduction for investment in new companies increased from €60,000 to €100,000 per year, deduction rate from 30% to 50%. Max base €100k.
• Stock options: Exemption raised from €12k to €50k per year, deferral of taxation until liquidity event.
• Non-resident investors: Beckham Law improved - Digital nomad visa + 24% flat tax up to €600k.
• No double taxation on carried interest: 50% exemption.

ENISA Loans:
Not convertible, no personal guarantee, interest = Euribor + spread + variable based on profit. Counts as own funds.

4. Case Laws and Enforcement

Spain has less published case law than US, but key judgments:

1. Supreme Court STS 202/2019 - Participative Loan Characterization
Held participative loan under Art 20 RDL 7/1996 is not subordinated loan automatically - its variable interest does not make it usurious if linked to business performance. ENISA loan valid even with 12% variable.

2. Audiencia Provincial Madrid 18/2021 - Crowdfunding Platform Liability (Fellow Funders case)
Platform not liable for project promoter default if complied with LFFE information duties - Art 61-63 LFFE. Investor who invested >€3k without accreditation cannot claim nullity - limit is for protection but breach does not make contract void, only CNMV sanction on platform.

3. STS 381/2022 - SAFE and Equity Dilution
First Spanish Supreme Court mention of SAFE. Held SAFE is not a loan, not subject to usury law (Ley Azcárate). Conversion at next round valid.

4. CNMV Sanction 2023 - Crowdcube Spain
First sanction under EU Reg 2020/1503 - Platform failed to provide Key Investment Information Sheet (KIIS). Fine €80k. Confirms KIIS is mandatory.

5. Juzgado Mercantil Barcelona 2023 - ENISA vs Startup
ENISA loan - startup argued variable interest abusive. Court held ENISA participative loan regime is equity-like instrument, risk shared, not subject to banking usury limits. Company must pay variable even if losses.

6. TSJ Madrid - Business Angel Deduction
Held investor must hold shares 3 years to keep IRPF deduction under Startup Law. If sold earlier, deduction clawed back + interest.

5. Compliance Checklist to Raise Finance as Entrepreneur in Spain

Step 1: Get ENISA certification as Empresa Emergente via ENISA portal - submit innovative business plan, <5 years, <10M turnover.

Step 2: Choose vehicle:

• <€100k - ENISA + Business Angels (50% IRPF deduction)
• €100k-€5M - Crowdfunding under EU Reg 2020/1503 via CNMV platform - need KIIS

€1M - Convertible + VC (SCR)

Step 3: Documents:

• If participative loan: Must include variable interest clause linked to EBITDA, with minimum and maximum.
• If SAFE: Must include valuation cap, discount, MFN clause.
• If crowdfunding: Must include risk warnings, audited accounts if >€2M.

Step 4: Corporate: SL with €1 possible since Ley 18/2022, but ENISA requires at least €3,000 for certification in practice.

Failure to register platform with CNMV = Art 93 LFFE - fine up to €200k and platform closure. Failure to deliver KIIS = investor can rescind within 4 days.