The Startup Law: ENISA’s accreditation process is now open

The Startup Law: ENISA’s accreditation process is now open

Startups are all the rage. Since the end of last year, when the Congress of Deputies passed Law 28/2022, to promote the startup ecosystem (also known as the “Startup Law“), the entire ecosystem has been waiting for this moment. Entrepreneurs, investors and lawyers have been waiting for ENISA (Empresa Nacional de Innovación SME) to open the certification process for startups. 

This moment has finally arrived. If you are a Startup you can now be accredited as an emerging company and take advantage of the benefits of this Law. We tell you how:

What requirements do I have to meet to be a Startup?

According to the Startup Law, any company that meets the following requirements will be considered an emerging company:

• That the company is based in Spain, either through its registered office or a permanent establishment.
• It must be less than five years old (seven years in certain sectors of biotechnology, energy, industrial and strategic sectors; or even those capable of proving that they have developed their own technology).
• Not originate from a restructuring operation (merger, spin-off or transformation) of companies that are not emerging companies.
• Not distribute or have distributed dividends.
• Not be listed on any regulated market.
• Have a turnover of less than 10 million euros.
• Have at least 60% of the workforce under employment contract in Spain.

It is important to bear in mind that these conditions must be met throughout the business group to which the company belongs, in accordance with Article 42 of the Commercial Code.

Finally, the company must have an innovative project and a scalable business model. This criterion is the most subjective and it will be ENISA who will be in charge of evaluating and accrediting its fulfillment.

What criteria will ENISA apply to consider your project as innovative and scalable?

Entrepreneurs who wish to avail themselves of the advantages and benefits of the Startups Law must prove that they meet the criteria of an innovative and scalable project. ENISA, in charge of issuing accreditations for startups, must evaluate the degree of innovation and analyze the scalability of the project in accordance with the following criteria:

• Degree of innovation. The expenditure invested in R&D&I will be taken into account, as well as the relation between these in the total expenditure of the project during the last two fiscal years. Having received any type of public aid or funding in the last three years will also be considered positively. The team, its specialization, experience and track record will also be taken into account.
• Degree of market attractiveness. Among other aspects, the volume of customers and users, their segmentation, the traction of the project, customer acquisition and repetition ratios, as well as the overall supply and demand of the sector and the existing competition in the same market and its differentiation will be evaluated.
• Project maturity. The maturity level of the project will be evaluated, having to provide and accredit the development of prototypes, minimum viable product (MVP), as well as the level of validation obtained in the market. 
• Project scalability. The business model will be evaluated, analyzing its scalability with respect to its capacity to impact other markets, the number of operations that can be carried out, the expected turnover in the following years, and the dependence on other suppliers, collaborators and other economic operators.

From the time the application is submitted, ENISA will have a period of up to three months to evaluate the above points. Once this period has expired, if it has not issued a resolution in this respect, the Law provides for the application of the positive administrative silence. In other words, if these three months elapse and there is no response from ENISA, the application may be deemed to have been accepted.

What are the main benefits of being an emerging company?

Once the emerging company certification has been requested and the company has been awarded with this consideration. We will be able to benefit from the advantages contemplated by the Startups Law, being mainly important tax incentives among which we can find a reduction of the Corporate Tax from 25% to 15% during the first four years, deductions of between 30% and 50% of the annual investments on the income tax or VAT, or the tax exemption on the stock options up to 50,000 euros per year.

At Letslaw by RSM we count lawyers specialized in commercial law and Startup Law. Do not hesitate to contact us and we will put our experience at your disposal.