INTRODUCTION

The financial crisis of 2008 has had many and very different consequences upon the European legal and economic system. For example, the regulations on the financial system are increasing almost on a daily basis because of the need to control the risks assumed by the entities of this sector. On the other hand, the scarcity of credit has brought about the creation of cooperative financing instruments. From time to time, the lawmakers are taking advantage of some of the new regulations in order to create a new legal framework for these financial instruments, which we shall take a look at in the following.

PARTICIPATORY INVESTMENTS

As mentioned in our publication on 10th November 2014, the draft bill on corporate finance advances some interesting developments. Amongst others, it includes the regulation of participatory investment entities, also known as “crowdfunding”.

This type of entity is of an open nature, that is to say, the investors may exit at any time and recuperate their investment. In the draft bill, a legal framework is facilitated for so called “crowdfunding”, with the objective of guaranteeing, in a balanced way, the correct protection of the investors and to promote, at the same time, this new direct financing tool for business projects in their initial phases.

CLOSED COLLECTIVE INVESTMENT (SME –RISK – CAPITAL ENTITIES)

On 13th November 2014 the Official State Gazette published Law 22/2014 on the regulation of risk capital entities. This is a good example of how the legislator, in this case taking advantage of the need to incorporate the regulations required by Directive 2011/61/UE, has created the legal framework necessary for a cooperative financial instrument, the SME risk capital entity or ECR-PYME (according to its Spanish abbreviation).

These entities have been created with the aim of canalising higher volume collective inversion towards smaller business projects. In this way, the ECR-PYME are risk capital entities to all effects, with the exception that their investments should be assigned to companies, which:

  • At the time of the investment are not admitted to trading on a regulated secondary trading market or a　multilateral system of negotiation.
  • At the time of the investment, they have less than 250 employees.
  • At the time of the investment, annual assets do not exceed 43 million Euro, or annual turnover does not exceed 50 million Euro.
  • Are not another collective investment institution.
  • Are not financial or real estate companies.
  • Must be European.

These requirements may also be taken into account also by companies, which are looking for this type of ECR financing.

In exchange for a stricter investment system, the legislator grants more flexibility in the risk that these ECR may assume and in the diversification of their investments.

CONCLUSION

These investment vehicles may be very useful for entrepreneurs who are looking for alternative financing, or for investors who are looking for more secure vehicles for canalising their investment in Spain.

 

 

Vilá Abogados

 

For more information, please contact:

va@vila.es

 

28th November 2014