On December 22, 2022, Law 28/2022 of December 21, 2022 on the promotion of the startup ecosystem (hereinafter, the “Startup Law”) was published in the Official State Gazette (BOE), with the purpose of fostering the startup ecosystem.
In order to benefit from the support measures provided for in the Startup Law, it is necessary to have the status of “emerging company” and meet certain requirements. The accreditation as an emerging company must be requested before the Empresa Nacional de Innovación SME, S.A. (ENISA).
Ministerial Order PCM/825/2023, of July 20, 2023, establishes the criteria and procedure for the certification of startups that give access to the benefits of the Startups Law.
When is a startup considered an innovative and scalable emerging company?
The Startup Law includes among the necessary requirements to be eligible for support measures, the requirement that the startup develops an innovative entrepreneurial project with a scalable business model.
- Development of an innovative entrepreneurship project: According to Article 3.2 of the Startups Law, a company will be considered to develop an innovative entrepreneurship project when its purpose is to solve a problem or improve an existing situation through the development of products, services or processes that are new or substantially improved compared to the state of the art and that entails a risk of technological, industrial or business model failure.
This issue has been developed by Article 4.3 of the Order, which establishes that the requirement of innovative entrepreneurship shall be deemed to be fulfilled if the applicant company meets at least one of the following conditions:
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- Expenditures on research, development and technological innovation represent at least 15% of the total expenses of the company during the two previous fiscal years, or in the previous fiscal year in the case of companies less than two years old.
- Has been a beneficiary of public investment, financing or aid for the development of RDI or innovative entrepreneurship projects in the last three years without having suffered revocation due to incorrect or insufficient execution of the financed activity.
- It has a reasoned report issued by the Ministry of Science and Innovation, regarding its high degree of innovation.
- Enjoys bonuses in the Social Security contribution for having hired research personnel.
- It has an Innovative SME Seal granted by the Ministry of Science and Innovation or certain certifications issued by AENOR.
Paragraph 4 of the aforementioned Article 4 establishes that, in the event that none of the criteria mentioned in paragraph 3 are met, the certifying entity shall evaluate the character of innovative entrepreneurship taking into account whether the applicant company complies with any of the following aspects:
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- The presence in the company of technological innovation or other rights such as protected software or know-how.
- The presence in the company of innovation in products, processes, services and/or business models.
- Accreditation of the scalable nature of the venture: A scalable business could be defined as one that is based on a niche that allows it to grow, expand and replicate. As established in Article 4.3 of the Startups Law, ENISA will assess the degree of scalability of the startup based on the following criteria that the order develops in more detail:
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- degree of market attractiveness (how much supply and demand there is in the sector, user or customer acquisition strategies and traction generation will be taken into account);
- phase of the company’s life (the implementation of prototypes and obtaining a minimum product or placing the service on the market will be valued, depending on the company’s life phase);
- business model (scalability in the number of operations, the annual invoice or the number of users will be aspects to consider);
- competition (how many companies compete in the same sector, together with the degree of differentiation with respect to these, will be a factor to be taken into account);
- team (the factors to be valued will be the experience and trajectory of the workers. As for who founds or directs the emerging company, its administrative activity must be up to date with the payment of tax obligations, Social Security and must not have a firm conviction for a crime against the administration);
- contracts with suppliers, providers and rental contracts (supply, contracts that generate relationships with other economic operators will be valued to calculate the dependence on third parties);
- customers (segmentation and independence from a few customers with a large turnover will be highly valued).
In this regard, ENISA will consider as a direct approval factor of the scalable nature of the venture, having signed one or more credit policies with ENISA in the last three years, provided that one of them is in force and there are no incidents.
Application procedure for certification as an emerging company
The Order develops the certification procedure and its loss, the main aspects of which are as follows:
a) The application must be submitted electronically in the electronic registry enabled in ENISA’s web portal, together with the required documentation.
Necessary documentation:
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- supporting documentation of the applicant company;
- tax identification number;
- public deed of incorporation;
- closed annual accounts for the last fiscal year;
- certificate of being up to date with payments to the tax authorities;
- certificate of being up to date with Social Security payments;
- responsible statement of compliance with the requirements established in the Startup Law; and
- business plan.
b) ENISA has a maximum period of three months to resolve and notify, if applicable, its status as an emerging company. According to the Startup Law the term counts from the date on which the complete application has been entered in the electronic registry.
c) Positive administrative silence is regulated, i.e., if the file has not been resolved within the corresponding period, the applicant company may consider its request for certification to have been granted.
d) Certification may be denied when the business model presents reasonable doubts of potential reputational, regulatory, ethical or speculative risks, in accordance with article 4.3.i) of the Startup Law.
e) The competent body to resolve is the Chief Executive Officer of ENISA, without prejudice to the possibility of delegation of this power.
f) In the event that the resolution is favorable, the corresponding startup company certificate will be issued. The date of certification determines the date from which the certified company can avail itself of the benefits and specialties of the Startup Law.
g) When the startup ceases to meet any of the requirements for certification, ENISA will initiate ex officio a procedure to terminate the startup certification. The loss of effect of the certification will occur from the moment in which the resolution of loss of effect is notified, without prejudice that the benefits derived from the Startups Law will be lost from the moment in which any of the assumptions included in its article 6 occurs.
h) Tras la obtención del certificado o la pérdida de este, ENISA lo comunicará al Registro Mercantil correspondiente.
i) The startup is obliged to notify ENISA of any change that entails a breach of any of the requirements for obtaining certification, or that could lead to its loss. Non-compliance will lead to the initiation of a procedure for loss of effect of the certification.
j) ENISA may establish control mechanisms to maintain effective monitoring and control of compliance with the requirements to obtain and maintain certification.
This publication does not constitute legal advice.
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