Startup and Scale-up Formation and Governance

The Sociedad Limitada (SL, similar to an LLC) is the most common due to its minimum capital of €3,000, flexibility in articles of association, and favorable tax regime. For startups with international investors, a holding structure may be worth considering.

It is a private contract between shareholders that regulates aspects not covered by the articles of association: vesting, exit clauses, information rights, voting, and anti-dilution. It is essential to avoid conflicts and facilitate investment rounds.

Vesting establishes that founders' shares vest progressively (typically over 4 years with a 1-year cliff). If a founder leaves before the cliff, they lose their unvested shares.

Before any investment round. The data room should contain incorporation documents, shareholders' agreements, key contracts, tax, labor, and intellectual property documentation. We recommend having it ready at least 2-3 months in advance. Investors especially value protected intellectual property.

It is a comprehensive review process of all legal aspects of a company before an investment or acquisition. It includes analysis of incorporation, contracts, intellectual property, litigation, regulatory compliance, and labor and tax risks.

It is essential to register trademarks, patents, and software from the beginning. Additionally, you must implement confidentiality agreements with employees and suppliers, and ensure ownership of all intellectual property rights through appropriate contracts. Visit our complete intellectual property service for a detailed guide.

Essential clauses are: founder vesting, good/bad leaver, investor veto rights, drag-along/tag-along, anti-dilution, liquidation preferences, and dispute resolution mechanisms.

From the early stages to attract and retain key talent. A well-structured plan allows aligning employee interests with those of the company and is fundamental to compete for technology talent.

SAFEs and convertibles are investment instruments that convert into shares in future rounds (generally with a discount). Shares are direct participation from the beginning. The choice depends on the stage and complexity of the operation.

Law 28/2022 for the promotion of the emerging company ecosystem offers benefits such as: reduced 15% corporate tax rate for 4 years, improved stock options taxation (exemption up to €50,000/year), visas for foreign entrepreneurs and investors, and streamlined incorporation.

There is no single formula, but key factors are: each founder's contribution (idea, capital, dedication, experience), vesting with cliff to protect those who stay, reserving an equity pool for employees (10-20%), and a shareholders' agreement governing what happens if a founder leaves. A common mistake is splitting 50/50 without a shareholders' agreement, which creates decision deadlocks.

An Employee Stock Option Plan (ESOP) allows employees to acquire company shares at a fixed price (strike price) if they meet certain conditions (vesting). In Spain, the Startup Law improves taxation: stock options are exempt up to €50,000/year in certified emerging companies. The plan must define: eligibility, vesting schedule, strike price, and exercise conditions.

Anti-dilution clauses protect investors against future rounds at lower valuations (down rounds). The most common are: full ratchet (full adjustment to the new price, very aggressive) and weighted average (proportional adjustment, more balanced). For founders, it is important to negotiate a broad-based weighted average, which is the least dilutive and the market standard.

Yes, it is highly recommended. Although the term sheet is generally non-binding (except exclusivity and confidentiality clauses), it establishes the fundamental investment terms that will later be reflected in binding documents. Mistakes at this stage — such as accepting a participating liquidation preference or a full ratchet anti-dilution without understanding it — are very difficult to correct later.

It is the investor's right to recover their investment before founders in a liquidity event (sale, liquidation). It can be: non-participating (investor chooses between their preference or their pro rata share), or participating (receives their preference first and then participates in the remaining distribution). Participating is much more costly for founders and should be avoided if possible.

The most frequent mistakes are: not signing a shareholders' agreement before incorporation, not assigning vesting to founders, not protecting intellectual property (especially developer contracts), distributing equity without planning future rounds, not separating personal IP from corporate IP, generic articles of association without startup adaptation, and not reserving an equity pool for employees from the start.

If your investors are from the US or UK, they may prefer a holding structure: a parent company in Delaware or UK that owns a Spanish SL operating entity. This facilitates investment in their familiar jurisdiction. For European investors, a direct Spanish SL is usually sufficient. The choice depends on investor origin, exit strategy, and tax implications.

Directors have duties of diligence, loyalty, and conflict avoidance. They must: prepare and approve annual accounts, convene meetings, custody corporate documentation, and comply with tax and commercial obligations. as well as monitoring the company's net equity. Non-compliance can generate personal liability.

It is necessary when: a new investor enters (the most common form), convertible notes or SAFEs convert, stock options are exercised, or net equity needs reinforcement. The process requires: shareholder meeting resolution, public deed, registration at the Commercial Registry, and tax authority notification. In startups, capital increases with share premium reflecting post-money valuation are common.