Is your Family Office investing through an S.L.? When and why it makes sense to transition to an ECR structure

Introduction: Evolve Your Investment Strategy

If you're a Family Office currently channeling your investments through a limited company (S.L.), this structure has likely served you well up to now. S.L. companies are simple, flexible vehicles that are relatively easy to manage for traditional investments.

However, as your portfolio grows and your investment strategy shifts toward more sophisticated opportunities like startups or venture capital funds, the time to transition into a Private Equity Management Company (ECR) may be closer than you think.

At Lexcrea, we’ve guided numerous Family Offices through this strategic shift, optimizing their legal structure to maximize both investment opportunities and tax efficiency.

Why Should Your Family Office Consider Becoming an ECR?

Limitations of the S.L. Structure for Startup Investments

Limited companies present several drawbacks when aiming to invest in high-growth companies:

• Suboptimal tax treatment for capital gains from exits
• Difficulties in co-investing with professional venture capital funds
• Less professional image in the eyes of entrepreneurs and co-investors
• Limited ability to attract external capital if desired
• Governance not tailored to alternative investment management

These constraints can significantly hinder your access to the best investment opportunities within the startup ecosystem.

The Added Value of the ECR Structure

Transitioning to an ECR offers advantages that go far beyond taxation:

• A regulated framework supervised by the CNMV, inspiring institutional trust
• Preferential access to premium startup investment opportunities
• Ability to co-invest with other national and international funds
• Greater professionalism in investment and portfolio management processes
• Possibility of attracting capital from other investors or complementary Family Offices

An ECR is specifically designed to invest in unlisted companies with high growth potential, making it a perfect fit for modern wealth diversification strategies.

Tax Benefits: The Distinctive Incentive of ECRs

The tax regime for ECRs is one of their most compelling advantages for Family Offices actively investing in innovative companies.

99% Capital Gains Exemption

Under the Corporate Tax Law, capital gains from ECR divestments can be exempt up to 99%, provided certain conditions are met:

• The investment is held for 1 to 15 years
• The investor does not hold more than 40% of the target company
• Reinvestment is made in eligible assets and activities

Tax Comparison: S.L. vs ECR

This distinction is crucial since the real return potential in venture capital lies in capital appreciation through exits, not dividends—typically nonexistent in early-stage startups.

Flexibility and Governance: Professionalized Management

Investor Entry and Exit

An ECR provides substantial flexibility in capital management:

• More agile transferability of shares than in an S.L.
• Structures designed for co-investments with other vehicles
• Clear mechanisms for valuing holdings
• Standardized processes for capital increases
• Greater transparency in financial reporting

Whereas S.L.s often include pre-emptive rights that complicate share transfers, ECRs facilitate the onboarding of new investors or strategic partners.

Governance Improvements

Becoming an ECR means adopting higher governance standards:

• Investment Committee with expert members
• Formalized due diligence processes
• Clear separation between family wealth and investment management
• Standardized reporting in line with CNMV regulations
• Greater legal protection for managers and administrators

This professionalization helps mitigate risk and improve investment decision-making quality.

When Is the Right Time to Become an ECR?

There are several signs that your Family Office should seriously consider this transition:

Key Indicators

• Significant volume of investments in unlisted companies
• Growing focus on startups and high-growth businesses
• Recurring and increasingly professionalized investment activity
• Expectations of major exits in the coming years
• Interest in attracting co-investors or managing third-party capital
• Need for an optimized tax structure for capital gains
• Desire for greater visibility within the entrepreneurial ecosystem

The ideal moment arises when your S.L. investments become substantial and reflect a professionalized investment approach, with stakes in several companies where value lies in future growth rather than immediate dividends.

Recommended Minimum Capital

Although the legal minimum capital for establishing an ECR is €1.2M (SCR) or €1.65M (FCR), our advisory experience suggests that a larger managed portfolio is required to justify the operational costs:

• €5–10 million: The tipping point where tax efficiency begins to outweigh costs
• €15+ million: Optimal level to maximize all structural benefits

Types of ECRs for Family Offices: Choosing the Right Structure

Sociedad de Capital Riesgo (SCR)

• Separate legal entity (similar to an S.A.)
• Can be self-managed (no external management company required)
• Greater direct control over operations
• Minimum capital: €1.2 million

Fondo de Capital Riesgo (FCR)

• No legal personality (separate pool of assets)
• Requires an external manager (SGEIC)
• Greater separation between assets and management
• Minimum assets: €1.65 million

ECR-Pyme

• Specialized in SME investments
• Reduced capital requirements (€900,000)
• More flexible investment policy
• Additional incentives for investing in small-cap companies

The choice between these structures depends on your investment philosophy, family setup, and long-term wealth objectives.

The Transformation Process: From S.L. to ECR

Key Steps

1. Preliminary analysis of current portfolio and future strategy
2. Designing the most appropriate structure (SCR, FCR, ECR-Pyme)
3. Drafting regulatory documentation and bylaws
4. Filing for authorization with the CNMV
5. Implementing governance and investment policies
6. Establishing management and reporting processes
7. Reorganizing existing investments under the new structure

Although complex, this process can be completed within 6–9 months with the right legal support.

Operational Costs to Consider

Running an ECR entails certain ongoing costs that must be weighed against its benefits:

• CNMV regulatory fees
• Mandatory annual audit
• Independent valuation services
• Compliance and reporting obligations
• Specialized legal advisory services

A detailed cost-benefit analysis is essential before initiating the transition.

Beyond Tax: Strategic Benefits for Your Family Office

Becoming an ECR not only enhances tax efficiency — it also positions your Family Office to:

• Compete on equal footing with professional funds
• Access syndicated deals with institutional investors
• Project a more professional image to the startup ecosystem
• Facilitate intergenerational transfer of family wealth
• Diversify risk with a structure tailored to alternative investments
• Separate family wealth management from specific investment activities

This transformation represents a natural evolution for Family Offices seeking to professionalize their investment activity and fully seize the opportunities within the entrepreneurial ecosystem.

Conclusion: Transform Your Investment Strategy with an ECR

The decision to convert your Family Office from an S.L. to a Private Equity Entity should be based on a thorough analysis of your current portfolio, investment strategy, and long-term objectives.

If your focus is increasingly on innovative, high-growth companies, the tax and strategic benefits of becoming an ECR can significantly enhance the profitability and reach of your investments.

At Lexcrea, we have extensive experience assisting Family Offices in this transition, ensuring a smooth process and helping you unlock all the advantages an ECR structure can offer.

Ready to Explore Whether Your Family Office Should Make the Leap to ECR?

Our specialized team is available to analyze your specific case and provide a personalized assessment. Email us at lexcrea@lexcrea.com to schedule an initial consultation where we’ll review:

• The suitability of your current portfolio for an ECR structure
• Specific tax advantages applicable to your situation
• The most appropriate ECR type for your goals
• A detailed roadmap for the transformation process

This article is for informational purposes only and does not constitute legal advice. At Lexcrea, we have dedicated experts in Family Office and ECR structures who can help you implement the optimal setup for your investment strategy

• By Lexcrea
• 27/06/2025
• convert your Family Office from an S.L. to a Private Equity Entity, Lexcrea