How an Angel Deal Actually Gets Done in Spain

Most of what a first-time angel reads about early-stage investing comes from the United States: sign a SAFE online, wire the money, wait for the priced round. A business owner on Mallorca who follows that script into a Spanish startup soon finds that the instruments are different, that the company has to hold a shareholders' meeting, and that the deal is not finished until everyone has been in front of a notary or has sent someone with a power of attorney to sign for them.

None of this is difficult, but it is unfamiliar, and unfamiliar steps are where first deals stall. Our piece on ENISA certification covered the conditions for the 50 percent investor deduction, and we will not repeat them here. This piece covers the mechanics of getting the money in.

Participaciones, Not Shares

Almost every Spanish startup is a sociedad limitada (SL). Since 2022 an SL can be formed with share capital of one euro, against 60,000 euros for a sociedad anónima (SA).¹ Its capital is divided into participaciones sociales rather than acciones, and they are not securities in the market sense. They cannot be traded freely, and any transfer of them must be recorded in a public document.¹

The bylaws can set transfer rules, and if they are silent the law does. Transfers between partners, to a partner's spouse, ascendants or descendants, or within a corporate group are free. Any other sale has to be notified to the directors and needs the company's consent through the general meeting, which can block it only by naming another buyer for all the participaciones.¹ An angel should read those clauses before investing, because they also decide how easily the stake can be sold later.

The Money Goes In Through a Capital Increase

An angel almost never buys participaciones from a founder. The company creates new ones in an aumento de capital, and the investor subscribes them. This matters for tax: the Agencia Tributaria requires that shares for the investor deduction be acquired either when the company is formed or through a capital increase, so buying a founder's existing participaciones does not qualify.²

In an SL the increase has to be approved by the general meeting with more than half of the votes attached to the capital.¹ Each existing partner then has a preference right to take up new participaciones in proportion to what they already hold, whenever the increase is paid for in cash, and the period to exercise it cannot be shorter than one month.¹ Existing partners can waive the right, and the meeting can remove it, but in an SL that removal needs two thirds of the votes.¹ In practice that means a founder's co-founders, earlier angels and any family shareholders all have to cooperate for a round to close quickly.

The price is set as nominal value plus a premium, the prima de asunción. As an illustration of our own: if a company's capital is 3,000 participaciones of one euro each and an angel invests 100,000 euros for 300 new ones, the capital rises by 300 euros and the other 99,700 euros is premium. The investor ends up with about 9.1 percent of the company (300 of 3,300).

The increase is then executed in a public deed signed before a notary, and the resolution and its execution are registered together in the Registro Mercantil.¹ For a certified emerging company, the Startup Law sets a five-working-day deadline for registering its corporate acts.³ An angel who cannot attend the signing usually grants a notarised power of attorney to someone who can.

The Documents Around the Deed

The deed records the capital increase. The commercial terms live in two private contracts that are negotiated first: the investment agreement, which sets how the money comes in and what the company and founders warrant, and the shareholders' agreement (pacto de socios), which sets the relationship among partners afterwards.⁴ Garrigues notes that early investors in a startup get no financial guarantees as such, so the rights written into these agreements, such as being repaid first on a sale or liquidation, are what protects them.⁴

A shareholders' agreement normally binds only the people who sign it. The Startup Law changed that for certified emerging companies organised as an SL: their shareholders' agreements can be registered, as long as they contain no clauses contrary to law, and so become visible to future partners.³

Garrigues puts a typical funding round at four months to more than a year, including legal, financial, technical and intellectual property due diligence.⁴ A local angel round is smaller, but the notary, the meeting and the preference-right period still have to fit into the calendar.

Why There Is No Spanish SAFE

The Ley de Sociedades de Capital says plainly that an SL can never issue or guarantee bonds convertible into participaciones.¹ That rules out the convertible note in its American form, and a SAFE has no equivalent under Spanish company law.

The usual substitute is a convertible loan (préstamo convertible): a loan agreement in which the lender can convert the debt into participaciones, normally at the company's next qualifying round, with a valuation cap, a discount, or both.⁵ Writing in Almacén de Derecho in 2023, Pol Candela points out that the conversion event must be drafted carefully, so that the loan does not convert into any minor capital increase, and that because conversion brings in a new partner, the general meeting should approve the loan.⁵

Conversion itself is a capital increase by offsetting credits (compensación de créditos). In an SL the debt must be fully liquid and payable, and the directors must prepare a report on it for the meeting.¹ Because the preference right only applies to increases paid in cash, existing partners have no right to subscribe in a conversion.¹ One caution on tax: the investor deduction is built around subscribing new shares, and the tax authorities have not always agreed on whether a conversion counts. In June 2020 the Tribunal Económico-Administrativo Central, in a resolution that unifies criteria for the tax administration, held that contributing a credit against the company in a capital increase can qualify for the deduction if the other requirements are met.⁶ If the deduction matters to you, ask a tax adviser before choosing a convertible over a straight capital increase.

The other Spanish instrument is the participative loan (préstamo participativo), defined in Article 20 of Royal Decree-Law 7/1996 and best known as ENISA's financing product.⁷ Its interest has to include a variable part tied to the company's performance (net profit, turnover, total assets or another measure the parties agree). It can be repaid early only if the company increases its own funds by the same amount, it ranks after ordinary creditors, and it counts as equity for the purposes of capital reduction and liquidation.⁷ It is still debt, with no equity upside unless a conversion clause is added.

If the Angel Lives Abroad

Mallorca has many investors who are not Spanish tax residents. For investments in certified emerging companies, the Startup Law lets non-resident individuals obtain a tax identification number (NIF) from the Agencia Tributaria without first getting a foreigner's identity number (NIE), through an electronic procedure the agency has ten working days to resolve, and the notary can request the NIF when the investor joins in a capital increase.³

Separately, a non-resident who holds or reaches 10 percent of a Spanish company's capital or voting rights has to declare the investment to the Investment Register on form D-1A within one month.⁸ Below that threshold no declaration is required, unless the money comes from a jurisdiction Spain classes as non-cooperative, in which case it must be declared in advance whatever the size.⁸

The Counterpoint

The notarial model is slower and more expensive than signing a SAFE online, and every extra investor adds another signature, another power of attorney or another person in the room. The usual fix elsewhere is to pool small tickets into one investing vehicle. In Spain that has a tax cost. In a 2020 binding ruling (V0137-20) the Dirección General de Tributos accepted an investment made through a crowdfunding platform because the individual still became a direct shareholder of the company; a pooled vehicle that holds the shares in its own name does not give its members that position.⁹ Each angel has to choose between administrative convenience and the deduction.

The formality does buy something, since every capital increase is in a public deed and on the register, so a later investor can see the cap table's history, and a founder cannot quietly sell participaciones to an outsider without the transfer rules applying. For a market where many investors are writing their first check, that paper trail is a reasonable trade for a slower close.

Before the First Check

For a Balearic business owner thinking about a first investment, the practical sequence is short. Confirm that you are subscribing new participaciones in a capital increase, not buying old ones. Ask for the draft deed, the investment agreement and the shareholders' agreement together, and check the transfer clauses in the bylaws. Find out whether existing partners will waive their preference right or whether the round has to wait a month. If you are offered a convertible loan, ask how it converts and what that does to your deduction. If you live abroad, sort out the NIF early and check whether your stake triggers a D-1A. For members of the Balearic Business Angels network, these are the questions to raise with the deal lead before the notary date is set.

Sources

1. Boletín Oficial del Estado, Real Decreto Legislativo 1/2010, de 2 de julio, texto refundido de la Ley de Sociedades de Capital (consolidated text; articles 4, 92, 106, 107, 199, 301, 304, 305, 308, 314, 315 and 401). https://www.boe.es/buscar/act.php?id=BOE-A-2010-10544

2. Agencia Tributaria, 9.2. Deducción por inversión en empresas de nueva o reciente creación, Ayuda Renta 2025 (Modelo 100). https://sede.agenciatributaria.gob.es/Sede/Ayuda/25Presentacion/100/9_2.html

3. Boletín Oficial del Estado, Ley 28/2022, de 21 de diciembre, de fomento del ecosistema de las empresas emergentes (consolidated text; articles 9 and 11). https://www.boe.es/buscar/act.php?id=BOE-A-2022-21739

4. Garrigues, 'Startups': las rondas de financiación en 6 claves, José Luis Ortín, Israel García Rico and Pablo Vinageras, October 2023. https://www.garrigues.com/es_ES/garrigues-digital/startups-rondas-financiacion-6-claves

5. Almacén de Derecho, Good papers: préstamos convertibles, Pol Candela, 30 October 2023. https://almacendederecho.org/good-papers-prestamos-convertibles

6. Tribunal Económico-Administrativo Central, resolución de 1 de junio de 2020, RG 6580/2019, recurso extraordinario de alzada para la unificación de criterio (summary reproduced by fiscal-impuestos.com). https://www.fiscal-impuestos.com/aplicable-deduccion-inversion-empresas-nueva-reciente-creacion-aportacion-credito-frente-sociedad-recurso-extraordinario-alzada-unificacion-criterio.html

7. Boletín Oficial del Estado, Real Decreto-ley 7/1996, de 7 de junio, sobre medidas urgentes de carácter fiscal y de fomento y liberalización de la actividad económica (consolidated text; article 20). https://www.boe.es/eli/es/rdl/1996/06/07/7/con

8. Ministerio de Economía, Comercio y Empresa, Guía explicativa del régimen de declaración de inversiones exteriores (2024). https://comercio.gob.es/es-es/inversiones_exteriores/declaraciones_inversion/Documents/Guia_Explicativa_Regimen_Declaracion_Inversiones_Exteriores.pdf

9. Dirección General de Tributos, consulta vinculante V0137-20, 21 January 2020 (reproduced by fiscal-impuestos.com). https://www.fiscal-impuestos.com/sites/fiscal-impuestos.com/files/NFC074813.pdf