• en
  • es

THE ENTREPRENEUR WITH LIMITED LIABILITY

The Act 14/2013 of September 27, 2013 in support of entrepreneurs and their internationalization regulates for the first time the Entrepreneur with limited liability (ERL).

The individual professionals or entrepreneurs usually respond with their personal assets for professional debts and the new regulation may limit their liability for debts incurred in the development of their activity so that these do NOT affect their family home.

 

¿What assets are not affected by business debts and where should this be recorded?

The family home would not be affected by business or professional debts provided the value does not exceed 300,000 Euros or 450.000 Euros in the case of cities of more than 1,000,000 inhabitants. When registering the ERL in the Company’s Registry , they will have to provide the details of their home which they wish to exclude to be affected from business debts. Once registered the Company’s Registry will have to issue a certificate which in turn will be registered in the Land Registry to prevent any entry of an embargo for business and professional debts on the property.

Exclusions

Entrepreneur: No person can benefit from this limited liability if he has acted under fraud or with gross negligence in the performance of its obligations to third parties, providing there is a firm court resolution or a conviction in an insolvency proceedings.

Debt: The entrepreneur will maintain the universal liability on his assets for any debts incurred in prior to his registration in the Company’s Registry as limited liability individual entrepreneur.

The limitation of liability does not apply to debts with the public administration which can cause the embargo of the property and in this case this can also be subject to execution proceedings whenever the following conditions are met:

A – Other known assets of the debtor with sufficient value can be realised immediately in the proceedings.

B – There must elapse a minimum period of two years between the notification of the first embargo and the realization of the property.

Requirements of the ERL system.

The scheme is similar to a limited partnership but without having to put down share capital.

The entrepreneur must register in the Company’s Registry as limited liability entrepreneur for which a notarial document will have to be executed.

All the documentation must show the status of limited liability entrepreneur.

The entrepreneur has to prepare annual accounts of his business or professional activity, and if applicable submit same to an audit, unless he is registered under a specific tax regime denominated “estimación objetiva”.

The entrepreneur has to deposit the annual accounts with the Companies Registry within seven months after the end of the tax exercise as otherwise he will lose the benefit of limited liability with respect to debts incurred after the end of that term. In any case after presenting the accounts he will recover this limited liability.

Please note the information provided in this article is of general knowledge only and is not to be construed or intended as substitute for professional legal advice.