Today, Friday, we await the approval of the entrepreneurs' law. The whole business world is expectant about the practical consequences it will have on job creation, business investment, but above all, on scarce financing.
Funding boost?
In the draft presented at the beginning of the year, the section that was most expected to include measures to increase funding levels is the Measures for business promotion: Garrigues summarised them as follows:
3. Business promotion measures:
– The amendment of the regulations governing private insurance to allow technical provisions to be invested in securities admitted to trading on the Alternative Stock Market (MAB) or another multilateral trading facility to be specified by Royal Decree, subject to certain limits.
– A corresponding amendment to the regulations governing pension schemes and funds to allow pension funds to invest in the MAB.
– The removal, to facilitate access to non-bank financing, of the maximum issue limit (paid-up share capital plus reserves) for bonds or other debt securities, as set out in Article 405 of the Companies Act, where the securities are offered to (i) qualified investors; (ii) investors acquiring a minimum amount of €100,000; or (iii) issues in which the nominal value per security offered is at least €100,000.
“The measures are designed to enable fund managers to invest in SMEs, but through the Alternative Stock Market (MAB) or similar systems. The regulator aims to encourage such investment, but through regulated and stable systems. During 2012, the MAB has seen very little activity, with only five SMEs listing on the market. In our experience, the main reason is the high cost of the process, which leads companies to seek financing through other channels. In other European countries, these markets are highly developed, such as the IAm in London,” says Diego Gutierrez (ABRA INVEST) specialises in corporate finance for SMEs.
Taxation and procurement: other measures with an impact on investment
“Although these measures do not directly expand the scope of funding, we do expect them to encourage greater investment. The fiscal measures include reductions in corporation tax, though only for newly established companies (2013). The tax reduction should generate higher return expectations for business owners and encourage them to invest. In any case, the main cause of reluctance to invest is market risk rather than taxation,” comments Diego Gutierrez.
‘When it comes to making it easier to hire staff, I believe this could have a greater impact on the creation of new initiatives. Social security contributions are so high and inflexible that they make it extremely difficult to create jobs. We believe that if these new forms of recruitment do lead to new initiatives, they will provide young people keen to work with new opportunities.” “The main difficulty we encounter with the projects we are involved in is the lack of professionals trained in specific disciplines; training should be less generalist and more specialised, particularly in the new technologies sector,” points out Diego Gutierrez.