In the digital age, start-ups are driving innovation and economic growth on a global scale. These emerging companies, driven by creativity and technology, have become an attractive sector for investors seeking new business opportunities. However, until the end of last year, Andorra had no specific legislation for this type of economic activity. With the approval of the new law on the digital economy, innovation and entrepreneurship, a section has been created to regulate the creation, operating conditions and characteristics of this type of company in the Principality.
Table of contents:
- The perfect location for a start-up
Investing in a start-up
Andorra’s new start-up regime
“Digital nomads” and remote working
The Digital Economy Law
Why invest in a start-up in Andorra?
The perfect location for a start-up
Andorra’s characteristics make it an ideal country for investment. Thanks to the new laws created in recent years, the country has provided investors (both local and foreign) with the necessary tools and confidence to support their activities. In addition, the recent digital economy regulations create an enabling environment that not only regulates but also encourages disruptive initiatives. Until recently, the regulatory framework was not specifically designed for start-ups, and this could lead to uncertainty and ambiguity in terms of requirements and procedures. There was also a lack of information and transparency. This made it difficult to assess investment opportunities, and it also increased perceived risks. These obstacles could have limited investment in Andorra. However, the new law aims to provide the country with its own reliable entrepreneurial ecosystem, in which public and private actors will work together to promote new businesses adapted to the digital age. These will diversify the economy.
Investing in a start-up
Foreign investment plays an important role in the growth of start-ups:
• It provides the necessary financial resources, expertise and experience.
• It provides access to a wide network of contacts and market opportunities.
• In addition, international investors bring their experience of different business environments, thereby stimulating development and competitiveness.
• It provides an injection of capital to fund new ideas, research and the recruitment of talent.
Overall, foreign investment not only boosts economic growth, but also enriches the business environment by fostering global collaboration and the exchange of ideas.
Andorra’s new start-up regime
The Digital Economy Law includes a section that establishes the legal regime for start-up companies. It is part of the financing and investment measures for entrepreneurial initiatives related to the digital economy, entrepreneurship and innovation. Its purpose is to promote the arrival of, and the security of, investors in this type of company.
A regulation on the creation of a register of start-up companies has also been established to expand and complete the law.
Eligibility for start-up status
A start-up is a company or business model that uses technology as an underlying element. Its purpose must be to develop, improve or refine new products and services in an innovative way through the use of technology. In the design process a start-up must demonstrate that it relies on the application of digital know-how or science, digital assets or technology.
New start-up companies will be given a special name: Start-up Public Limited Company (SAS) or Start-up Limited Company (SLS).
The Regulation on the Establishment of the Register of Start-up Companies
Its main purpose is to monitor this type of company. The regulation is divided into different sections, including:
• The creation of the Register of Start-ups, as a section of the Register of Companies, in order to distinguish start-ups from other types of companies.
• Details of the procedure to be followed to declare a start-up company. Details of the resolution and of the effects.
• The functioning of the register of start-up companies, the manner of registration and the contents of the register.
• The monitoring of compliance with the requirements for maintaining the status of a start-up company and the cases in which this status is lost.
• The declaration of a start-up company as a result of a merger, or the declaration of the complete dissolution of a start-up company.
Loss of start-up status
A company ceases to be a start-up company in the following cases:
o If it fails to comply with the regulations.
o If it makes a profit before tax at the end of the financial year for two consecutive financial years and its net assets amount to not less than half of the share capital.
o If it distributes profits.
o If it merges or de-merges and does not form a new company.
o When it joins a group of companies or a company that does not have start-up status.
o When the enterprise is dissolved.
o If the founding members cease to manage or carry out the functions of the partnership.
“Digital nomads” and remote working
Another matter regulated by the Digital Economy Law is that of remote working and “digital nomads”, both of which are closely connected with this type of business. The Andorran immigration law is being reformed to create new work permits without residence in the country. These are the so-called digital nomads, who do not need a specific location to carry out their work. The aim is to be able to employ foreigners who contribute to the development of the digital economy as employees, while at the same time satisfying the conditions for self-employment.
The Digital Economy Law
These measures are included in Law 42/2022 on the Digital Economy, Entrepreneurship and Innovation, approved last December.
The aim of this legislation is to provide the necessary resources to promote and encourage new business opportunities in the digital and new technologies sector in Andorra. It also aims to promote the conditions that allow local and foreign investors to develop their activities by creating a solid, secure and reliable legal framework.
In addition to the new types of non-residential work and the start-ups, the latest legal framework regulates special economic zones and the creation of controlled testing environments such as sandboxes or living labs. It also considers the legal framework for shared living and working spaces, co-working and co-living.
Why invest in a start-up in Andorra?
Start-ups are long-term investment opportunities. They generally have high growth potential and therefore the potential for higher returns than other types of companies.
Investing in a start-up is an excellent opportunity for those who wish to diversify their portfolio into innovative sectors that use new technologies to develop new services and products. These companies have the ability to adapt quickly to market changes in order to take advantage of emerging opportunities.
In recent years, Andorra has made great efforts to offer a legal framework that favours and protects entrepreneurs who wish to create or participate in new projects. The result is a favourable and competitive legal and infrastructural environment, backed up by institutional support and access to new opportunities.
Overall, the new business start-up regulation represents an important step forward in the country’s economic diversification.
This initiative is expected to stimulate the creation and growth of innovative start-ups, thereby promoting economic development and global competitiveness. It is undoubtedly a major step forward in Andorra’s entrepreneurial environment.