Soraya Sáenz de Santamaría, our delightful VicePresident, has announced that a new Law for small businesses will include a state fund to pay off your first bankruptcy.
The plan, if I understand it correctly, is to take away some of the risk of setting up your first business. In certain cases, if it all goes belly up, the state will step in and wipe your slate clean, allowing you to continue with your life with a shrug and a cry of “tally ho!”. It’s called la regulación de la segunda oportunidad (the regulation of the second opportunity) and aims to issue microcredits to allow small companies to reorganise themselves and continue forwards.
Leaving aside the fact that the fund appears rather small (just 40 million euros), is it really a good idea to be encouraging people to setup businesses by promising to take away the risk?
My theory is that to encourage people to start out in business for themselves, the regulatory framework should be light and barriers to entry low. You don’t keep the same cumbersome old 18th century legal framework, but promise to cover the fool who setup a business with 50€ lent from the bank’s bottom when he runs out of cash….
Here’s an idea, Soraya, get Spain a few places up the OECD “Ease of Doing Business” international ranking (Spain was 44th last time I checked, so we’ve gone up one place). Here’s a pair of scissors, cut the flipping red tape.
But we’re not doing that well in the starting a business rank, lingering down in position 133 – it takes 28 days to fill all 10 procedures to setup a new business, according to the ranking. It’s easier to open a new business in Cameroon, Kenya, Sudan or Burkina Faso, amongst others.
Bankruptcy is not the only legal status that an insolvent person or other entity may have, and the term bankruptcy is therefore not a synonym for insolvency. In some countries, including the United Kingdom, bankruptcy is limited to individuals, and other forms of insolvency proceedings (such as liquidation and administration) are applied to companies.:..