Spain business support guidance

The Government of Spain has passed legislation and complementary regulation to be in force until 21 June (the “Restriction Period”).

Amongst others, this legislation includes the Royal Decree-law 8/2020 (“RDL 8/2020”), Royal Decree-law 11/2020 (“RDL 11/2020”), Royal Decree 487/2020 and the Resolution of the State Secretary of Economy and Support to Companies (the “Resolution”), both of 10 April, Order ICT/343/2020 of the Ministry of Industry, Commerce and Tourism published in the Official Gazette on 15 April 2020 (the “Order”), Royal Decree-law 15/2020 (“RDL 15/2020”) and Royal Decree-Law 16/2020 (“RDL 16/2020”). The latest information on all of the measures approved may be found here. Also the Spanish Stock Market Commission (CNMV) has centralised information with this regard (in both Spanish and English) here

Employment related provisions

Suspension of employment agreements and/or reduction of working hours

Special provisions are approved in order to accelerate and ease the process for companies to introduce flexibility by means of suspension of employment agreements and/or reduction of working hours.

These measures aim to avoid layoffs and dismissals (the sixth additional provision of RDL 8/2020 foresees that the extraordinary measures shall be subject to a commitment from the company to maintain employment for a period of six months from the date of resumption of activity).

• Temporary suspension of contracts (“ERTE”) and reduction in working hours having as direct cause the loss of activity / the legal obligation to shut down operations as a consequence of COVID-19 will have the consideration of force majeure (including the declaration of the emergency situation, which entails the suspension or cancellation of activities, temporary closure of public affluence businesses, public transport restrictions and, generally, people and/or goods mobility, lack of supplies seriously impeding the continuation of the ordinary activity, or in urgent and extraordinary situations due to the infection of the staff or the adoption of preventive isolation measures issued by the health authority, which are duly evidenced).
  In this event, the following special provisions will apply:

  • The ERTE application promoted by the company shall be accompanied by a report explaining how the loss of activity / closure is linked to the consequences of COVID-19, as well as with the relevant supporting documentation. Such application shall be notified to the workers. The content of the ERTE file will be shared with the employees or with the workers’ representatives, if any.

  • The existence of force majeure alleged by the company shall be confirmed by the employment authority within 5 working days from the submission of the application.

  • The decision will take effect from the date of the fact causing force majeure.

Exoneration of company contributions and contributions for joint collections in certain cases (ERTE for force majeure due to COVID-19)

In the event of ERTE for force majeure due to COVID-19, the Social Security General Treasury will exonerate the company from paying the company contributions, as well as contributions for joint collections, meanwhile the ERTE persists, provided that the company has less than 50 workers registered with the Social Security. For 50 workers or more, there will be a reduction of the company contributions up to 75% of the quota. Such exemption shall not have any effects to workers and it shall be considered as effectively contributed to all effects.

Such exonerations will apply as long as the company undertakes to maintain the level of employment during at least 6 months following business resumption.

Special provisions for suspension of contracts and reduction in working hours for economic, technical, organisational and productive (ETO) reasons (i.e.- for those cases where there is no clear force majeure case but companies are suffering the effects of COVID-19)

Suspensions of contract and reductions in working hours for economic, technical, organisational and productive reasons (“ETO” grounds) related to the COVID-19, will also need to apply some special provisions during the emergency situation period (the consultation period is reduced to 7 days). Employees will also be entitled to access unemployment benefits, in all cases. The above-referred social security exonerations will not apply for this type of ERTE (only for Force Majeure)

Unemployment allowances

In both cases (Force Majeure and ETO ERTE) the right to receive unemployment allowances when affected by an ERTE related to COVID-19 shall be recognized even if the affected workers do not meet with the minimum contribution period required.

In addition, the period of time during which unemployment allowances are perceived shall not be counted as unemployment right consumption ahead of any potential future scenarios of same type.

Recoverable paid leave

Measure included in RDL 10/2020 of 29 March, which regulates mandatory recoverable paid leave, being the same limited in time between 30 March and 9 April (both included), for all employees providing services for public or private sector companies or entities carrying out “non-essential” activities. The recovery of such working time can be made effective from the day after the end of the State of Alarm until 31 December 2020, and it must be negotiated during a consultation period lasting a maximum of 7 days.

This measure applies to all employees who provide services in public or private sector companies or entities and whose activity has not been suspended as a result of the State of Alarm declaration issued in Royal Decree 463/2020 of 14 March.

Main developments of Royal Decree 11/2020 dated 31 March, from an employment-law perspective:

Deferral or moratorium on Social Security contributions:

The Spanish Social Security Treasury will allow both deferrals or moratoria on Social Security contributions (up to six months), with no interest, to those companies or self-employed requesting so.

Special rules concerning the commitment to maintain employment during 6 months for companies from the performing, music, arts and audio-visual industries:

The commitment to maintain employment in order to be able to benefit from Social Security reductions or exemptions pursuant to Royal Decree 8/2020 will have to be interpreted and assessed considering the specific characteristics of the different sectors/industries and in accordance to the applicable labour regulations in force, provided that some industries are seasonal and deal with a heavy fixed-term workforce. Such is the case in those industries where shows, spectacles, or seasons are limited in time and imply a higher job rotation.

In this regard, for temporary employment, the commitment to maintain employment shall not be deemed to have been breached when the contract is terminated due to the normal expiry of the agreed term.

Exceptional unemployment subsidy for fixed-term contracts

An exceptional unemployment benefit is foreseen for employees whose temporary contract (of at least two months’ duration) has been terminated following the entry into force of the State of Alarm Royal Decree 463/2020 dated March 14th, 2020. The amount to be received by the employee will amount to 80% of the so-called IPREM, this is, around EURO 430.27 per month, renewable by Royal Decree.

Disposal of pension schemes amounts in case of unemployment or cessation of activity resulting from the health crisis situation caused by COVID-19.

During six months as from the entry into force of the State of Alarm Royal Decree 463/2020 dated 14th March (being this term potentially extended afterwards), individuals subject to pension schemes/plans may exercise their vested rights in the following scenarios:

• When the individual is legally unemployed as a result of an ERTE (temporary regulation of employment) caused by the COVID-19 health crisis. The amount to be received/rescued will not amount to more than the unreceived salaries.

• When the individual is a business owner of an establishment/store/business whose opening to the public has been suspended/shut down as a result of the provisions of RD 463/3030. The amount to be received/rescued will not amount to more than the estimated lost net income.

• When the individual is a self-employed worker who had previously been incorporated into a National Social Security scheme and has ceased his/her activity as a result of the COVID-19 crisis. The amount to be received/rescued will not amount to more than the estimated lost net income.

Reimbursement of vested rights will be made upon request of the participant, subject to the tax regime established for pension plan benefits in force from time to time. The reimbursement shall be made within a maximum of seven working days from the date the participant submits the relevant supporting request and documentation.

Measures to promote employment established by Royal Decree 15/2020 of 21 April

The extension of the validity of the provisions of Articles 5 and 6 of Royal Decree Law 8/2020 of 17 March is established. Therefore, the content of these articles will remain in force during three months following the end of the validity of the declaration of the State of Alarm:

• Preferential nature of remote work: in relation to teleworking, article 5 of Royal Decree 8/2020 states that organizational systems must be put in place in order to maintain activity, through alternative mechanisms, particularly through distance or teleworking means. Likewise, in order to facilitate the recommendations of the Ministry of Health in relation to teleworking, in those cases where companies had not previously foreseen the same, the RDL establishes that the obligation to evaluate H&S and occupational risks pursuant to Article 16 of Law 31/1995 on the Prevention of Occupational Risks shall be deemed to have been fulfilled.

• Right to adapt and/or reduce working day for employees: due to exceptional circumstances as provided for in the RDL 8/2020 right to adapt working time will be granted as long as the presence of the employee is necessary to directly take care of another person whom the employee has care obligations. It is presumed that such care duties trigger with respect to spouse or common-law partner, as well as with respect to relatives by blood up to the second degree of kinship. Thus, employees who can evidence that they have a duty of care have the right to adapt their working day and/or reduce the same under the terms of this article.

  In accordance with the provisions of the RDL 8/2020, it may refer to the distribution of working time or any other aspect of working conditions, the alteration or adjustment of which will enable the employee to provide the attention and care needed. It may consist of a change of shift, alteration of working hours, flexible working hours scheme, split or continuous working hours, change of place of work, change of functions, change in the way the work is performed and/or delivered, including the use of teleworking, or any other change of conditions which is available in the undertaking or which can be reasonably and proportionately implemented.

  The company must be notified 24 hours in advance of any special reduction in the working day, which may reach up to one hundred percent of the working day if necessary.

Relaxed requirements to access unemployment benefits

In this way, they will be legally unemployed:

• As a result of termination of employment during probationary period at the request of the company and from 9 March 2020.
• To employees who voluntarily resigned their last employment relationship since 1 March 2020, because they had a firm commitment to sign an employment contract by another company, if the latter has withdrawn from the contract as a result of COVID-19

Deferment of Social Security Debts

Companies and self-employed employees (provided they do not have deferrals already in force) may request a payment deferment of their debt to the Social Security, whose entry period takes place between the months of April and June 2020, with an interest rate of 0.5%. These applications must be made in the first ten calendar days of the entry period.

Financial support measures

Guarantee facility provided by the Spanish Administration

The Ministry of Economic Affairs and Digital Transformation will grant guarantees (avales) until 31 December 2020 for a total maximum amount of 100,000 million Euro in connection with the financing granted by credit institutions, financial credit institutions, electronic money entities and payment entities to companies and self-employed workers, in order for them to meet their needs arising from, amongst others, the management of invoices, payment of employees payroll, payment to suppliers, working capital needs, maturity of financial or tax obligations or other liquidity needs. . As set out in Royal Decree-Law 15/2020, of April 21, of complementary urgent measures to support the economy and employment (“RDL 15/2020"), guarantees may also be used for the Spanish Company for Re-guarantee (CERSA) as well as for promissory notes incorporated into the Fixed Income Market of the Association of Financial Asset Intermediaries (AIAF) and the Alternative Fixed Income Market (MARF).

On 24 March 2020, the Spanish Government approved the first tranche of the guarantee facility line, for an amount of up to EUR 20 billion for companies and self-employed individuals (out of the total guarantee line approved by RDL 8/2020). Further information may be found here.

The facility shall provide guarantees in connection with the new loans and removal of former loans for covering the financing needs derived, among other, of the obligations of payment of salaries, invoices, working capital and other liquidity needs, including those relating to due and unpaid financing or tax liabilities.

The guarantee facility line shall be managed by the Official Credit Institute (Instituto de Crédito Oficial, “ICO”), in cooperation with the credit entities.

Characteristics of the guarantees line:

• Of this first 20,000 tranche, a 50% shall be reserved for loans to self-employed individuals and SMEs.

• The guarantees can be applied by those companies and self-employed individuals affected by the economic consequences of COVID-19, provided that the applicants were not in a situation of payment default as of 31 December 2019 or in insolvency situation as of 17 March 2010. The guarantees shall have retroactive effect and may be applied for transactions executed on or after 18 March 2020.

• The guarantee shall cover an 80% of the amount of the new loans and renewals applied by self-employed individuals and SMEs. For the rest of the companies, the guarantee shall cover a 70% of the amount of the new loans and 60% of the amount of the renewal.

• Each of the guarantees shall have a term equal as the loan, with a maximum term of 5 years. The cost of the guarantee, ranging from 20 to 120 bsp shall be assumed by the credit entities.

• The companies and self-employed individuals may apply for the guarantee for its transactions up to 30 September 2020. For such purpose, they should address the application to the credit entities which have entered into the relevant cooperation agreements with the ICO.

• The credit entities are committed to maintain the cost for the new loans and renewals covered by this guarantees in line with the costs which were in force prior to the start of the COVID-19 crisis.

• The credit entities are also committed to maintain, until at least 30 September 2020, the maximum amounts of working capital facilities granted to all clients and, in particular, those clients who benefit of this guarantees line.

By means of RDL 11/2020, a public guarantee facility (línea de avales) has been approved by the State to back the financing of lessees in a situation of social and economic vulnerability as a result of the expansion of COVID-19 with a limit of EUR 1.2 billion (as set out in RDL 15/2020).

By means of the Resolution, published in the Official Gazette on 11 April 2020, the agreement adopted on 10 April 2020 by the Council of Ministers has been published, by which the terms of the second tranche of the guarantee facilities (avales) have been approved for a maximum amount of €20,000 million Euro, to be granted by the Ministry of Economy and also managed through ICO.

According to it, this second tranche has been issued exclusively for self-employed workers and SMEs affected by the economic effects of COVID 19, provided that neither are in the defaulting debtors list of the Bank of Spain as of 31 December 2020 nor are in an insolvency proceeding as of 17 March 2020. Larger companies will not benefit from it. Same conditions and eligible requirements terms approved for the first tranche shall apply to this second tranche.

On 9 May 2020, the approval by the Spanish Cabinet and the conditions of the third tranche of the guarantee line have been published in the Official Gazette. All the conditions and terms established for the two previous tranches also apply to this third tranche, besides the following:

Total amount of the third tranche of the guarantees line
Up to 20,000 million euros for renewals and new loans granted to self-employed workers and companies.

Amount per sub-tranches of the guarantees line

• Up to 10,000 million euros for renewals and new loans granted to self-employed workers and SMEs.
• Up to 10,000 million euros for renewals and new loans granted to companies that do not meet the status of SMEs.

Application period for guarantees
The guarantees of this third tranche may be requested until 30 September 2020 (this term may be extended).

Rights and obligations of financial entities
Entities may not charge any financial cost or expense on amounts not used by the customer.

Obligations of the companies and self-employed beneficiaries of the guarantee
The financing obtained must be used to meet the liquidity needs derived, among others, from the management of invoices, payment of payrolls and to suppliers, the need for currency and maturities of financial or tax obligations.

Also in the Official Gazette of 9 May 2020, the total amount of the first section of the line of guarantees for has been set out for:

• Issuing companies of promissory notes in MARF: up to 4,000 million euros.
• The public company CERSA (Compañía Española de Reafianzamiento, SME Sociedad Anónima): up to 500 million euros, for the re-guarantee (re-aval) or partial coverage of the risk assumed by the Sociedades de Garantía Recíproca for small and medium-sized companies.

On 20 May 2020, the approval by the Spanish Cabinet and the conditions of the fourth tranche of the guarantee line have been published in the Official Gazette. All the conditions and terms established for the three previous tranches also apply to this fourth tranche, and the total amount will be up to 20,000 million euros for renewals and new loans granted to self-employed workers and SMEs (“pymes”). The guarantees of this fourth tranche may be requested until 30 September 2020 (this term may be extended).

Increase of the net debt limit of the ICO

The net indebtedness limit established for the ICO in the State Budget Act is increased by 10,000 million Euro, in order to provide additional liquidity to companies, in particular to small and medium-sized companies and self-employed workers.

This will be carried out by means of ICO Financing Facilities through the intermediation of financial institutions both in the short and the medium and long term and in accordance with their direct financing policy for larger companies.

Extraordinary insurance coverage

An insurance coverage line of up to 2,000 million Euro (the “Coverage Line”) has been authorized to be created with a duration of 6 months from the entry into force of the RDL 8/2020 (i.e., until 18 September 2020), with the following characteristics:

• The working capital credits necessary for an exporting company will be eligible, without direct relationship with one or more international contracts being necessary, provided that they originate from new financing needs and not from situations prior to the current crisis.

• Beneficiaries: Spanish companies considered to be Small and Medium-sized Companies according to the definition in Annex I of Commission Regulation EU 651/2014, as well as other larger companies, provided they are unlisted entities, in which the following circumstances concur:

  • Internationalized companies or companies in the process of internationalization, which meet at least one of the following requirements:
  • companies in which the international business, reflected in its latest available financial information, represents at least a third (33%) of its turnover, or
  • companies that are regular exporters (those companies that have exported regularly during the last 4 years according to the criteria established by the Spanish Secretary of State for Commerce).
  • Companies that face a liquidity problem or lack of access to financing as a result of the impact of the COVID-19 crisis on its economic activity.

• Companies in insolvency or pre-insolvency proceedings are expressly excluded, as well as those companies in default with Public companies or debts with the Administration, registered before 31 December 2019.

• The percentage of credit risk coverage in the operations entered into under the Coverage Line will not exceed the limit that may be established at any time in accordance with the EU regulations on State aid.

• Guarantors and non-debtor mortgagees who meet these requirements may require the entity to deplete the main debtor's assets before claiming the guaranteed debt from them, even if they have expressly waived the benefit of excussion in the contract.

Decisions to provide the Coverage Line to individual transactions, as well as the risk analysis of each transaction, will be made with agile mechanisms and carried out, particularly for small and medium-sized companies, with extraordinary information and solvency criteria, within the framework of the market conditions generated by the health crisis, while it lasts.

The Coverage Line will be implemented in two sections of 1,000 million Euro, the second section coming into force after having verified a satisfactory execution of the first section.

All kinds of commercial transactions, including national ones, whether the supply of goods, the provision of services, or others carried out by Spanish companies, may be included within the Coverage Line, if the State Risks Commission understands that such transactions are part of the commercial strategy of said companies which act preferably in the field of internationalization.

The specific conditions and fees for the Coverage Line have been set out in the Order.

Temporary restrictions in the eviction of especially vulnerable people following a mortgage foreclosure of the habitual residence

RDL 6/2020 increases the temporary restriction foreseen in Law 1/2013 regarding the eviction of especially vulnerable people following a mortgage foreclosure of the habitual residence.

As a result, the awardee of the habitual residence on a foreclosure procedure will not be able to evict especially vulnerable people until May 2024.

Also, the scope of the especially vulnerable situations has been extended by (i) including single-parent family units with at least one child (previously the law referred to single-parent family units with children) and (ii) by lessening the requirements in order to be considered as especially vulnerable, by including a coefficient which factors the existence of children within the family unit.

Moratorium of mortgage debt for the acquisition of permanent residential property

RDL 8/2020, as amended by Royal Decree-Law 11/2020 includes measures for deferral on the payment applicable to 1) non-mortgage debt or to 2) mortgage debt regarding principal residence, properties used for economic activities or properties other than the principal residence that are rented and in respect of which the tenant has stopped paying rent to the owner during the state of emergency period or until the month following the date it ends.

The following requirements must be met in order to be considered a vulnerable debtor and, thus, be able to apply for the moratorium:

• The debtor has become unemployed or, in the case of an entrepreneur or professional, suffers a substantial loss of income or a substantial drop in sales (a substantial drop in sales is understood to be a drop of 40%).

• The aggregate income of the members of the family unit does not exceed, within the month immediately preceding the moratorium request, the limit of three times the Indicador Público de Rentas de Efectos Multiples (“IPREM”) (thus, 1,613.52 euros). This limit shall be increased depending on the number of children, elder or disabled persons forming part of the family unit.

• The mortgage installment plus basic expenses and supplies is equal to or higher than 35% of the aggregate net income of all the members of the family unit.

• As a result of the health emergency, the family unit must have suffered a significant alteration in its economic circumstances in terms of the effort required to acquire a residential property (a significant alteration is understood to exist when the effort represented by the mortgage charge on the family income has been multiplied by at least 1.3.

The following added requirements are considered in relation to loans not secured by a mortgage:

• If the debtor also has a mortgage debt, any mortgage moratorium that has been taken will not be included for the purpose of calculating the 35% limits and the 1.3 multiplier mentioned above. Thus, the mortgage liability is included among the costs even if it is deferred.

• If the debtor does not have mortgage debt, but rents their principal residence or has received any type of financing not secured with a mortgage from a financial institution, or both simultaneously, the amount of the mortgage payment will be replaced with the total sum of those amounts, including the lease amount, even if it is subject to a moratorium.

Debtors may request the moratorium to the lender until 15 days after the expiry of RDL 11/2020 (that will take place one month after the end of the state of emergency), and the credit entity shall implement it within 15 days from the receipt of such notice. The moratorium request will entail the suspension for three months and can be extended by agreement of the Council of Ministers. Once the moratorium has been granted, the lender must communicate its existence and duration to the Bank of Spain.

Guarantors and non-debtor mortgagees who meet these requirements may require the entity to deplete the main debtor's assets before claiming the guaranteed debt from them, even if they have expressly waived the benefit of exclusion in the contract.

The effects of the moratorium include the suspension of the debt during the mentioned three months term, during which:

• early termination and acceleration clauses of the mortgage loan agreement cannot be enforced by the lender;
• no mortgage debt instalments are payable to the lender, including principal, ordinary interest and default interest;
• no ordinary and default interest shall accrue; and
• the maturity date will be extended automatically during the whole suspension period, without alteration of other conditions of the facilities.

The suspension will not require an agreement between the parties or any contractual novation for it to take effect, but must be made by granting a Public Deed before a notary and registered with the Land Registry when it is related to a mortgage debt. Nevertheless, and given the emergency situation that keeps the notary offices available only for urgent matters, the moratorium must be applied within a maximum term of 15 days regardless of the granting of the public deed (and, therefore, its registration).

The suspension of the contractual obligations will take effect from the debtor's request to the lender (to which the required documents must be attached), that can be made by any means. Besides, registration obligations must be fulfilled if there are any types of collateral other than the mortgage or registered sales on instalment credit (ventas a plazo).

Endowment for CERSA (Spanish Refinancing Company)

The endowment for CERSA (Spanish Refinancing Company) is extended to EUR 60 million, in order to be able to guarantee a larger number of transactions.

Restrictions on investments

RDL 8/2020 imposes certain restrictions on foreign investors resident in any country outside the EU or EFTA (“Foreign Investors”). The new measures include the need of prior authorisation for foreign investments in certain strategic sectors, as well as subjective restrictions based on the conditions of the investor. The breach of the new regulation is considered a ‘very serious infringement’ which may result in fines ranging between €30,000 and the transaction value and public or private warnings.

According to RD 644/1999, the restrictions apply to the acquisition of holdings in shares, financial instruments that entitle to acquire shares, such as convertible bonds or subscription rights, and voting rights.

(A) Foreign investment in certain sectors

Government prohibits the acquisition by Foreign Investors of 10% holdings in companies active in sectors related to public order, public security or public health without a prior authorisation of the Spanish Government. Acquisitions of less than 10% of the share capital are also subject to authorization if resulting in an effective participation in the control or management of the target company.

The affected sectors are:

• critical infrastructures, both physical and virtual (energy, transport, water, healthcare, communications, media, data storage and processing, aerospace, defence, finance or sensitive installations);
• critical technology and dual-use products;
• essential supplies (energy, hydrocarbons, electricity, raw materials and food);
• sectors with sensitive information such as personal data or with capacity to control such information; and
• media.

(B) Restrictions applicable to certain investors

Foreign investment in any industry ‒when the investment is equal to or higher than 10% of the share capital, or results in a participation in the effective control and management of the relevant company‒ shall be subject to a regime of prior authorization if the relevant investor is in one of the following cases:

• it is controlled directly or indirectly by the government of a third country, including public bodies or armed forces;
• administrative or judicial proceedings have been initiated against it for exercising illegal or criminal activities.

(C) Restrictions applicable to investors that have invested in the affected sectors in another EU member States

Foreign investment in any industry ‒when the investment is equal to or higher than 10% of the share capital, or results in a participation in the effective control and management of the relevant company‒ shall also be subject to a regime of prior authorization if the relevant investor has invested or participated in sectors affecting the security, public order or public health in another EU member State, in particular in those sectors above;

In this case, RDL 8/2020 does not refer to any minimum threshold of the participation held by the Foreign Investor in another EU member State, although we believe that a reasonable interpretation of this provision would require that such investment in another EU member State amounts to at least 10% or entail effective participation in the management of the relevant company.

(D) Acquisitions or indirect holdings

RDL 8/2020 refers literally to direct investment in Spain by Foreign Investors. There is no reference to indirect investments except in the case referred to above.

However, based on past interpretation of RD 644/1999 and case law, we believe that there is a risk that the Spanish authorities may make a restrictive interpretation and apply the new regulation to indirect acquisitions as well. This may potentially apply both to (i) the acquisition of shareholdings in a Spanish company which in turn controls a Spanish subsidiary operating in the restricted sectors, or (ii) the acquisition of shareholdings in foreign companies having control of a Spanish company operating in the relevant sectors.

Investments by Foreign Investors through ad hoc EU or Spanish vehicles are likely to be subject to the new restrictions.

Clarifications entered by Royal Decree-Law 11/2020

The recent RDL 8/2020 has been amended by Royal Decree-Law 11/2020 as follows:

• It has been clarified that the suspension of the liberalisation of direct foreign investments regime applies to investments made by residents outside the European Union and the European Free Trade Association (“EFTA”) or by residents of countries of the European Union or of the EFTA whose beneficial owners are residents of countries outside the European Union and the EFTA. It is considered that the beneficial ownership exists if a percentage exceeding 25% of the capital or voting rights of the investor is, directly or indirectly, held or controlled, or if direct or indirect control is exercised by the non-EU/EFTA resident.

• Foreign investments are subject to the simplified authorisation process when:

  • it is proven that there is an agreement between the parties or a binding offer in which the price, fixed or determinable, was set out before 18 March 2020, or
  • the amount is equal to or greater than 1 million euros and less than 5 million euros.

Temporarily, and until the minimum amount is regulated, investment operations for an amount below 1 million euros will be exempt from obtaining previous authorisation.

Reimbursement measures in relation to collective investment undertakings

RDL 11/2020 Preamble informs about the following new added macroprudential mechanism, subject to provisions of article 16 of Royal Decree 102/2019. Act 35/2003, on Collective Investment Undertakings, has been amended by RDL 11/2020 to include in paragraph 7 of its article 71.Septies the possibility for the CNMV to authorise management companies of collective investment schemes (sociedades gestoras de instituciones de inversión colectiva) to establish notice periods for reimbursements from one or more collective investment schemes managed by them, being not subject to time, minimum amounts ore prior recording requirements. Those notice periods may also be established directly by the CNMV.

Corporate and commercial measures

Companies management

The management of Spanish legal persons, including limited companies (S.A.) and limited liability companies (S.L.), has been simplified within the emergency situation (estado de alarma):

• Meetings of governing bodies of legal persons may take place, even if not allowed by the relevant by-laws, by means of:

  • videoconference which ensures the authenticity and the bilateral or multilateral connection in real time and with image and sound of all remote attendants; or
  • voting by written letters without a meeting when so decided by the Chairman or requested by two members of the governing body.

• The approval of the annual accounts of legal persons benefits from an extension in the following terms:

  • The period of 3 months from the closing of the financial year within which the governing body of a legal person must draw up the annual accounts (whether ordinary or abbreviated, individual or consolidated), the management report (if mandatory) and any other mandatory documents is suspended until the date on which the emergency situation finalises. Such period of 3 months will start anew from said date.

  • If the governing body of the legal person has already drawn up its annual accounts as of the date of the declaration of the emergency situation, the deadline for the auditing of such annual accounts (if mandatory) is extended for two months after the date on which the emergency situation finalises.

  • The general ordinary shareholders’ meeting for the approval of the annual accounts must be held within 3 months following the period for drawing up the annual accounts. For listed companies, the general ordinary shareholders’ meeting for the approval of the annual accounts may be held within the first 10 months of the fiscal year.

• The winding-up of companies also benefit from the following provisions:

  • If the by-laws of a company provide the winding-up of the company on a date within the emergency situation, such winding-up only legally occurs until two months after the date on which the emergency situation finalises.

  • If a company enters into a winding-up cause under the law or its by-laws before or during the emergency situation, the legal deadline for convening the general shareholders’ meeting in order to approve or avoid the winding-up is suspended until the emergency situation finalises.

  • If a winding-up cause under the law or the by-laws of a legal person has occurred during the emergency situation, the directors will not be liable for any company debts incurred within such period.

Clarifications entered by RDL 11/2020

Some clarifications have been issued by means of the RDL 11/2020 regarding commercial and corporate contractual interpretation issues:

• It is permitted taking decisions in writing without a meeting if it is decided by the chairman or is requested by, at least, two members of the relevant body.

• In relation to the preparation of financial statements it is clarified that, although the period for doing so has been suspended until three months after the end of the state of emergency, financial statements can be validly prepared in that period, and the rules extending the period for auditing apply to financial statements so prepared.

• The period for auditing financial statements has been extended to two months from the end of the state of alarm and it applies to those financial statements drawn up before the state of alarm began;

• In relation to the proposed distribution of income/allocation of loss of companies which have prepared their financial statements before the beginning of the state of emergency, it is clarified that the proposal contained in the notes to the financial statements may be modified and another proposal may be submitted to the shareholders’ meeting, attaching to the new proposal a statement of the auditor specifying that he would not have altered his opinion if he had known the new proposal beforehand. The proposed distribution of income/allocation of loss of companies whose shareholders’ meeting was already called can be withdrawn and this item can be deferred to a subsequent shareholders’ meeting with similar requirements to those indicated.

Matters relating to listed companies

When, in light of art. 40.6 bis of RDL 11/2020, listed companies decide to modify the proposed distribution of income/allocation of loss, the new proposal, the rationales for doing so provided by the managing body and the auditor’s statement shall be made public, as soon as they are approved, 1) as information supplementing the annual accounts on the entity’s website and 2) as other relevant information on CNMV’s website or, if mandatory in light of the concrete case, 3) as inside information.

Flexibility on the management of Spanish legal persons

The management of Spanish legal persons, including limited companies (S.A.) and limited liability companies (S.L.), has been simplified within the Restriction Period. Shareholders meetings and meetings of governing bodies of legal persons may take place, even if not allowed by the relevant by-laws, by means of:

• videoconference which ensures the authenticity and the bilateral or multilateral connection in real time and with image and sound of all remote attendants; or
• voting by written letters without a meeting when so decided by the Chairman or requested by two members of the governing body.

Extension in the approval of annual accounts

The approval of the annual accounts of legal persons benefits from an extension in the following terms:

• The period of 3 months from the closing of the financial year within which the governing body of a legal person shall draw up the annual accounts (whether ordinary or abbreviated, individual or consolidated), the management report (if mandatory) and any other mandatory documents is suspended until the date on which the emergency situation finalises. Such a period of 3 months will start anew from said date.

• If the governing body of the legal person has already drawn up its annual accounts as of the date of the declaration of the emergency situation, the deadline for the auditing of such annual accounts (if mandatory) is extended for 2 months after the date on which the emergency situation finalises.

• The general ordinary shareholders’ meeting for the approval of the annual accounts shall be held within 3 months following the period for drawing up the annual accounts. For listed companies, the general ordinary shareholders’ meeting for the approval of the annual accounts may be held within the first 10 months of the fiscal year.

Notwithstanding the extension provided, the formulation of the annual accounts by the governing body or administration of a legal entity during the emergency situation shall be deemed valid, and they may also be verified for accounting purposes within the legally established period or by making use of the extension provided.

Provisions regarding the winding-up of companies

• If the by-laws of a company provide the winding-up of the company on a date within the emergency situation, such winding-up shall only legally occur until two months after the date on which the emergency situation finalises.

• If a company enters into a winding-up cause under the law or its by-laws before or during the emergency situation, the legal deadline for convening the general shareholders’ meeting in order to approve or avoid the winding-up is suspended until the emergency situation finalises.

Provisions regarding telecommunications

During the emergency situation, no service can be suspended by any other reason than networks repair or security.

Product return suspension

During the Restriction Period, any period to return any product purchased either at distance, online or at shop is suspended.

If a winding-up cause under the law or the by-laws of a legal person has occurred during the emergency situation, the directors shall not be liable for any company debts incurred within such period.

Tax related measures

Tax reliefs for certain taxpayers

Royal Decree-law 15/2020 in force from 23 April 2020 contains certain measures to reduce the tax burden for certain taxpayers:

• VAT of 0% until 31 July 2020 in supplies of goods, imports and intra-community acquisitions of sanitary material collected by public law entities, healthcare clinics and hospitals (further, import duties have been removed for some of these goods). These transactions will be registered as exempted in the corresponding invoice without limitation of the deductibility of the VAT borne. The VAT has been also reduced to 4% for books, newspapers and digital magazines.
• Certain entities will be able to pay the Corporate Income Tax by instalments calculated on the tax base of the current fiscal year (as opposed to the regular method which is based on the previous year). Entities with a turnover under €600,000 will be able to apply this measure in the instalment to be paid in May (normally this instalment is payable in April, but it has been extended up to 20 May for certain taxpayers) and those with a net turnover under €6 million will be able to apply it in the instalment to be paid in October. However, the last ones will be able to deduct from the instalment the payment made in April.
• Taxpayers subject to Value Added Tax or Personal Income Tax based on the objective estimation will be able to waive such method for the first quarter of 2020. These taxpayers may not compute the days of the state of alarm as business days.
• Taxpayers affected by COVID-19 may apply for certain deferrals, reductions and exemptions in harbour dues and taxes.

Extension of deadlines for the filing and payment of certain taxes

Royal Decree-law 14/2020 was published on 15 April 2020 to extend the deadline for filing and paying the quarterly VAT, Corporate Tax instalment and Personal Income Tax one month.

Tax deadlines for filing and paying taxes up to 20 April 2020 have been extended up to 20 May 2020. However, this deadline extension only applies to taxpayers with a turnover under €600,000 in 2019.

This extension does not apply to VAT and consolidation tax groups.

Deferral option for small and medium size taxpayers in respect of certain tax payments

The Government grants the possibility for small and medium size entities and individual entrepreneurs (those with a net turnover up to €6,010,121.04 in 2019) to opt for the deferral of taxes up to €30,000 per taxpayer (mainly VAT, payroll taxes, payments-on-account of Corporate Tax) due between 13 March 2020 (date of entry into force of the Royal Decree-Law 7/2020) and 30 May 2020 for up to 6 months.

The first three months of deferral will be free of statutory interest for late payments, and any additional period of deferral will bear the standard statutory interest rate for late tax payments (annual rate currently fixed at 3.75%).

Some regional authorities are approving additional specific measures for taxpayers who reside in the relevant region.

Since the date the Government approved this Royal Decree Law, different trade associations have claimed a broader scope for this provision with tax deferrals for individuals and companies with a greater turnover, as well as larger cap per taxpayer.

Deferral option for small and medium size taxpayers in custom duties

RDL 11/2020 grants the possibility for small and medium size entities and individual entrepreneurs (those with a net turnover up to €6,010,121.04 in 2019) to apply for a deferral of custom duties between €100 and €30,000 from 2 March 2020 until 30 May 2020, both inclusive.

The deferral application and the granting of the same can be filed in the customs declaration and the concession will be notified in the manner provided for the notification of the customs debt, in accordance with article 102 of the Union Customs Code.

The first three months of deferral will be free of statutory interest for late payments, and any additional period of deferral (up to a total of six months) will bear the standard statutory interest rate for late tax payments.

Tax deadlines suspended

Certain tax (including regional and local taxes) deadlines have been suspended until 30 May 2020, including such deadlines that had not been reached as of 18 March 2020 and those notified from 18 March 2020 onwards, unless the relevant tax deadline elapses on a later date.

The following deadlines will benefit from the suspension:

• deadlines for the payment of tax liabilities assessed by the tax administration in both voluntary and executive periods (as opposed to self-assessed taxes - see below for further details);
• deadlines resulting from tax deferral decisions or decisions approving the delayed payment of tax liabilities on instalments, which had been already granted by the Spanish tax authorities; and
• deadlines for answering to miscellaneous requests from the Spanish tax authorities or for the submission of allegations in certain tax procedures.

In addition, in the context of administrative tax seizures, the enforcement of securities granted over real estate assets will not occur until 30 May 2020.

It should be noted that the suspension of these deadlines has been also extended to other public debts.

It should also be noted that the above extension of deadlines does not cover for instance self-assessed taxes.

Tax deadlines interrupted

Days count for computation of deadlines to file administrative appeals by reversal (“recurso de reposición”) before the Spanish tax authorities or before the administrative tax courts (“reclamaciones económico-administrativas”) have been interrupted from 14 March 2020 up to 30 May 2020. As opposed to the suspension of other tax deadlines mentioned in the above paragraph, this measure relating to the aforementioned tax appeals has the effect of reinitiating the computation of the term provided for the relevant administrative or tax court claim, which will start from 30 May on wards (assuming that the relevant term had not expired by 13 March 2020). This shall be applicable to equivalent appeals before regional or municipal tax bodies.

Deadline extension for certain tax procedures

The period elapsed from 14 March 2020 until 30 May 2020 will not compute for:

• the purposes of the maximum duration to enforce administrative tax court decisions; and
• the time line for any actions and rights provided both to taxpayers and the tax administration by the tax regulations. This includes for instance for the purposes of computation of the statute of limitations under Spanish tax laws.

The abovementioned extension shall apply to procedures, actions and formalities at municipal, regional and central state level.

Court proceedings suspended

Court proceedings have been suspended up to June 2020.This includes any deadline or non-essential procedure at court level (non-essential proceedings should cover all tax proceedings at court level).

The day count for terms provided in court proceedings will be reinitiated, starting from the 4 June 2020.

Also deadlines for the announcement, preparation, formalisation and filing of appeals against judgments and other resolutions that end the relevant procedures are extended, for a period equal to the one provided for such actions in their corresponding regulations. This shall also apply to those decisions or resolutions notified within the twenty working days following the end of the suspension.

Stamp Duty exemption on certain mortgage modifications

The Government grants a Stamp Duty exemption to the deeds of mortgage loans modifications qualifying for the moratorium on mortgage debt for the acquisition of permanent residential property as described above.

Modifications to the enforcement of certain tax debts

Self-assessed taxes whose filing term ends between 20 April 2020 and 30 May 2020 will not start the enforcement period as long as:

• The taxpayer has applied for the extraordinary financing foreseen in article 28 of the RDL 8/2020 amounting to the tax debt;
• Provides the Administration within the term of five days after the end of the voluntary payment period a certificate issued by a financial institution evidencing the request including the amount of unpaid tax debt;
• The financing request is granted in at least an amount equal to the tax debt; and
• The tax debts are effectively and completely paid within the one month from end of the voluntary term of payment.

In case any of these requirements are not met the executive period starts as of the end of the voluntary period.

Tax debts derived from self-assessed taxes submitted between 20 and 22 April 2020 in executive period will be considered in voluntary period if the taxpayer provides the Administration with the certificate issued by the relevant financial institution which provides evidence of the application for the aforementioned financing within five days from the entry into force of RDL 15/2020 and as long as the rest of the requirements are met.

Public contracts

Suspension of public procurements

The Government grants the suspension of public works, supply and service contracts which execution becomes impossible as a result of COVID-19. For that purpose, the contractor must request the suspension and the contracting authority resolve it within five days.

In these cases, the Royal Decree-Law 8/2020 introduces a compensation mechanism different from the one provided in Law 9/2017. The main difference is that the contractor is not entitled to receive the 3% of the price of the works, supplies or services that should have been carried out during the suspension period.

Public works, supply and service contracts that can still be carried out may be extended if the contractor is late to meet its deadlines as a result of the COVID-19 and he offers the contracting authority to meet its contractual commitments.

In addition, the Government grants the contractors of public works and services concessions contracts affected by COVID-19, the right to restore its economic balance by extending its initial duration up to 15% or by amending the clauses of economic content included in the contract.

Lease agreements related measures

Measures on residential leases

The Royal Decree-law 11/2020, of 31 March (published on 1 April), adopts urgent additional measures in the social and economic fields to confront COVID-19.

Suspension of eviction procedures for vulnerable tenants with no housing alternative

Extraordinary suspension of all acts of eviction (i.e. when the date for the eviction has been set), applicable in eviction procedures deriving from residential leases governed by the Spanish Act 29/1994, of 24 November, on Urban Leases (“ULA”) once suspension of the procedural deadlines has been lifted after the end of the state of alarm, when the tenant evidences to be in a situation of financial or social vulnerability occurring as a consequence of COVID-19 pandemic which prevents the tenant from finding a housing alternative for it and for the people living with it.

Under the same scenario, but when the date for the act of eviction has not been set, the procedure will be suspended until 2 October 2020 at the latest. The suspension involves the notification from the relevant court clerk to the social services.

Criteria/requirements for determining the existence of a situation of vulnerability are included in the new regulations. Please see Section 4.3 below for further details in this regard.

Extraordinary renewal of residential leases

At the tenant’s request, the residential leases for permanent residence governed by the ULA, whose minimum term or their extensions expire within the period from 2 April 2020 to the two (2) months following the end of the state of alarm, will be extended for a maximum period of six (6) months. The terms and conditions applicable to the existing lease will likewise apply to the renewal. If required by the tenant, this extension will be compulsory for the landlord, except if otherwise agreed by the parties.

Deferments and releases of rent payments

RDL 11/2020 establishes different measures aimed to endeavour the moratorium on the rent debt for tenants of residential leases for permanent residence subject to the ULA in a situation of economic vulnerability caused by COVID-19.

Situation of economic vulnerability

The following requirements must be met for the tenant to be entitled to apply for the moratoriums or aids as regards the rent of residential leases:

• The tenant has become unemployed, has been affected by the application of a temporary suspension of contracts (i.e. ERTE) or its hours have been reduced for care reasons, in the case of an entrepreneur, or other similar circumstances, and as consequence, the aggregate income of the members of the family unit does not exceed, within the month immediately preceding the moratorium request:

  • The limit of three times the Multiplier for the Public Income Index (“IPREM”). This limit shall be increased depending on the number of children, elderly or disabled persons forming part of the family unit.

  • The limit of four times the IPREM if any of the persons forming part of the family unit has a disability higher than 33%, is dependent or has a medical condition preventing it from carrying out a work activity.

  • The limit of five times the IPREM if the tenant is a person with cerebral paralysis, mental illness, or an intellectual disability equal to or higher than 33%, or a person with a physical or sensory disability equal to or higher than 65% or suffers a serious illness which prevents the tenant or its carer from carrying out a work activity.

• The rent, plus expenses and basic supplies is equal to or higher than 35% of the aggregate net income of all the members of the family unit.

• Neither the tenant nor any member of the family unit is owner or usufructuary of a residential property in Spain, with a few exceptions.

  The above circumstances will have to be attested to the landlord by the tenant as established in the RDL 11/2020.

• Automatic application of the rental debt moratorium in case of large holders, companies or public housing bodies*

  The tenant being in a situation of economic vulnerability for rent debt moratorium purposes, may request to the landlord, for a period of one (1) month as of 2 April 2020, the temporary and extraordinary deferment in the payment of the rent, provided that such deferment or writing off has not been previously agreed by the parties. If no agreement has been reached by both parties:

• If the landlord is a company or a public housing entity or a large holder (i.e. a natural or legal person which owns (i) more than 10 urban properties, excluding parking spaces and storage rooms, or (ii) a built surface area larger than 1,500 m2), the landlord must opt for one of the two following choices, which must be expressly communicated to the tenant within a maximum of 7 working days:

  • Release. A 50% rent reduction applicable during the state of alarm, which may be extended if such term is not sufficient due to the vulnerability situation caused by COVID-19, up to a maximum term of four (4) months.

  • Deferment. A rent debt moratorium to be automatically applicable during the state of alarm, which may be extended, month by month, if such term is not sufficient due to the vulnerability situation caused by COVID-19, up to a maximum term of four (4) months. The deferred payment will be paid by the tenant by splitting the payment for a period of at least three (3) years, as from the situation of economic vulnerability is overcome or from the end of the four-month period, and in any case within the period the lease is in force. No penalties will be applicable, and no interests will accrue.

  If the tenant has access to the temporary financial assistance program provided for in the RDL 11/2020 (i.e. guarantee lines), the moratorium and the payment by instalments will be lifted once the financing is available to the tenant.

• If the landlord is not a company or a public housing entity or a large holder, the landlord will communicate to the tenant within a maximum term of 7 working days, the measures for deferring the rent or splitting the payment that it accepts or, failing that, other alternative measures. If the landlord does not accept any agreement on the deferment, the tenant will be entitled to access the temporary financial assistance program.

• Tenant assistance programs*

  The RDL 11/2020 approves the following assistance programs:

• A temporary financial assistance program consisting in a guarantee facility line (línea de avales) for a period up to 14 years, which shall be managed by the Official Credit Institute (Instituto de Crédito Oficial, “ICO”) and guaranteed by the Spanish State, whereby financial entities may offer temporary financial assistance to the persons in a vulnerability situation. The repayment period is up to six (6) years, exceptionally extendable for 4 additional years, and without any expenses or interest accrued for the applicant.

  • A new assistance program to minimize the economic and social impact of COVID-19 on the residential leases for permanent residence aimed to assist the tenants with difficulties in repaying the temporary financial assistance obtained for the payment of the lease rent.

Measures on leases for use other than housing and industry leases

The Royal Decree-Law 15/2020, of 21 April (published on 22 April 2020), on additional urgent measures to support the economy and employment (“RDL 15/2020”) sets out, among other measures, the rent moratorium for small and medium-sized enterprises (SMEs) (pequeñas y medianas empresas-PyMEs) and self-employed persons on leases for use other than housing (Article 3 of the ULA) and industry leases.

• If the lessor is a company or public housing entity or a large portfolio holder, for these purposes, any individual or legal person owning more than ten (10) urban properties, excluding parking areas and storage rooms, or a built surface of more than 1,500 m2:

  • The moratorium shall be mandatory for the lessor, provided that no agreement between the parties had been previously reached to defer or reduce the payment of rent.

  • The moratorium shall apply automatically and be maintained for the duration of the alarm status and its extensions and, as the case may be, during the following monthly payments if said period is insufficient as regards the impact caused by COVID-19, up to a maximum of four (4) months.

  • The payment of the rent will be deferred by dividing the same into instalments to be paid within a period of two (2) years as from the time the impact suffered by COVID-19 is overcome or from the end of the four (4) month period, though always within the term of the lease agreement. Said deferral shall not result in any penalty or accrual of interest.

• If the lessor is neither a company nor public housing entity nor a large portfolio holder:

  • The lessee “may request” the lessor a rent moratorium, provided that no agreement between the parties had been previously reached to defer or reduce the payment of rent. Please note that RDL 15/2020 does not set out either the conditions of said moratorium or if it is mandatory for the lessor.

  • The parties may make use of the lease deposit for the payment, total or partial, of any of the rent monthly payments, in which case the lessee shall replace the amount of the deposit provided within one (1) year as from the parties have agreed so, or within the remaining term of the lease agreement, if said period is shorter.

• Within a period of one (1) month as of 23 April 2020, SMEs and self-employed persons, as lessees in a lease agreement of a property relating to their economic activity, may apply for the rent moratorium if the following requirements are complied with and justified:

Self-employed

To be affiliated and registered with date 14 March 2020 in the Social Security Special Regime for Self-employed Workers or in the Social Security Special Regime for Workers of the Sea or, in one of the Mutual Labour Insurances substituting the Special Regime for Self-employed Workers (Régimen Especial de Trabajadores Autónomos RETA).

SMEs

Not exceeding the following limits¹:

• The total of the asset’s items does not exceed the amount of €4,000,000 during two (2) consecutive financial years.
• The net amount of the annual business turnover does not exceed €8,000,000 during two (2) consecutive financial years.
• The average number of workers during the financial year does not exceed 50.

Its activity has been suspended as a result of the declaration of the state of alarm, which must be justified by certificate issued by the Tax Authorities (Agencia Estatal de Administración Tributaria-AEAT) or the competent body from the relevant Autonomous Community.

In the event that its economic activity has not been suspended, the turnover for the calendar month preceding that of the application for the moratorium has been reduced by at least 75% compared to the average monthly turnover for the quarter of the previous year to which that month belongs. Said reduction shall be initially justified by a responsible declaration, although where requested by the lessor, the lessee shall disclose its accounting books for justifying such reduction.

• Lessees who have unduly benefited from the moratorium on the payment of rent pursuant to RDL 15/2020 shall be liable for any damages caused and for the expenses generated by the application of said measures, without prejudice to any other liability which may derive from their conduct.

Insolvency procedures

On 28 April 2020, Royal Decree-Law 16/2020 was approved, which contains several measures regarding insolvency procedures.

Renegotiating creditors’ agreements, out-of-court payment agreements and homologated refinancing agreements is promoted.

Debtors’ may file a proposal to amend them until March 2021, even if, in the case of refinancing agreements, a year has not elapsed since the homologation of the previous one.

Creditors’ applications to declare the breach of such (prior) agreements will be deferred, giving the opportunity to the debtor to renegotiate them during the deferral.

Deferral of the opening of the liquidation phase.

Debtor’s obligation to promote the liquidation of the company (when it becomes aware it will not be able to comply with the payments agreed) is deferred until March 2021, provided that the debtor files a proposal to amend the creditors’ agreement.

No order to open the liquidation phase will be issued until March 2021.

New super-privileged credits following a new or amended creditors’ agreement.

In the event of failure to comply with a creditors’ agreement approved or amended since March 2020 until March 2022, financing granted to the debtor or arising from personal or in rem securities granted by anyone (including those granted by a specially related person to the debtor) will be qualified as super-privileged credits, provided they were set out in the original or amended creditors’ agreement.

Deferral of the debtor’s obligation to file for insolvency until 31 December 2020

During this time, the debtor's application for voluntary bankruptcy will be admitted with preference, even if it is filed after other mandatory insolvency petitions promoted by creditors.

If the debtor communicates negotiations to reach a refinancing agreement, payment agreement or an anticipated creditors’ agreement before 30 September 2020, the debtor’s general regime of the Spanish Insolvency Act will be applied (therefore, if the situation of insolvency continues after three months from the communication, the debtor will have the duty to file for insolvency in the following business month).

No subordination of the financing granted by specially related persons with the debtor in certain cases (in case of insolvency proceedings declared since March 2020 to March 2022).

Financing granted since March 2020 by specially related persons will not be classified as subordinated but as ordinary credits.

During this time, the same classification will be given to credits in which a specially related person is subrogated as a consequence of having satisfied an ordinary or privileged credit.

Important corporate measure: Suspension of the obligation of compulsory legal dissolution due to losses.

• Losses of 2020 financial year will not be taken into account for the obligation of promoting the compulsory legal dissolution of the company due to losses.
• However, if the financial result for 2021 shows losses that reduce the equity to less than half of the share capital, the current legal regulation will apply, that is, directors must call a shareholders meeting (or any shareholder may request it) within two months since the end of the financial year in order to ask for the dissolution of the company, unless the share capital is increased or reduced sufficiently.

Other measures

Ongoing litigation and arbitration:

• Judicial proceedings and deadlines were suspended during the Restriction Period until 4 June 2020, and administrative deadlines until 1 June 2020, with some exceptions for certain cases (urgent cases)..
• Also, statute of limitations periods (“prescripción y caducidad”) regarding actions was suspended until 4 June 2020.
• Procedural deadlines (that had been suspended) have been reset once the suspension of deadlines has been lifted.
• Some national arbitration courts (CIMA) have decided not to close but have suspended hearings and deadlines. Others are doing this on a case by case basis
• Days 11 to 31 of August 2020 (traditionally non business days due to judicial holidays) will be considered business days for legal proceedings (excluding bank holidays, Saturdays and Sundays).
• Up to 31 December 2020, certain judicial procedures will be processed faster and on a preferential basis.

Extension of the term for filing administrative appeals

The term for filing administrative appeals or for filing any other challenge, claim, conciliation, mediation and arbitration procedures that may replace them, in any procedure that may have unfavourable effects or a burden on the interested party, shall be calculated from the working day following the date when the state of alarm ends, regardless of the time that has passed since the notification of the administrative action that is the object of the appeal or challenge prior to the declaration of the state of alarm.

Right to terminate certain contracts without penalty for consumers and users

Royal Decree 11/2020 of 31 March states that, if as a result of the measures taken during the state of alert, the contracts concluded by consumers, whether for the sale of goods or the provision of services, including those of a subsequent nature, are impossible to be performed, the consumer shall be entitled to terminate the contract for a period of 14 days. The Royal Decree 15/2020 of 21 April clarifies that this period of 14 days starts when the contract becomes impossible to be performed.

The claim for termination can only be considered when it is not possible to obtain from the proposal or proposals for revision offered by each of the parties, on the basis of good faith, a solution that restores the reciprocity of interests of the contract. It shall be understood that no proposal for revision can be obtained when a period of 60 days has elapsed since the request of the consumer to terminate the contract without the agreement of the parties on the proposal for revision.

Companies and entrepreneurs shall be obliged to return the sums paid by the consumer, except for expenses incurred duly itemised and provided to the consumer, in the same form in which payment was made, within a maximum of 14 days.

In the case of contracts for the provision of services with subsequent nature, the company/entrepreneur may offer the possibility of subsequent recovery of the service and only if the consumer is unable or unwilling to accept such recovery shall the amounts already paid be refunded for the part of the service not provided for or, with the consumer's acceptance, shall the amount resulting from future payments be reduced. The service provider will not be able to claim new monthly payments until the service can be provided.

General measures

State of alert: The state of alarm (“estado de alarma”) has been declared in Spain during the Restriction Period. This enables (in theory) the government to agree during this period measures to (i) restrict circulation (of people or vehicles), (ii) conduct temporary requisitions of all types of goods and impose mandatory personal services, (iii) intervene and temporarily occupy industries, factories, workshops, operations or premises of any kind, with the exception of private homes, (iv) limit or ration the use of services or the consumption of basic necessities and (v) issue the necessary orders to ensure the supply of markets and the operation of services and production centres of first necessity products.

Specific measures agreed as of today comprise a de-escalation of the lock-down in four phases and at different paces depending on the region:

• Quarantine: Spain has already started the de-escalation period, but the measures in this regard are not the same in all the different autonomous regions or provinces. Thus, there are different phases through which all the autonomous regions or provinces will pass, and certain conditions are required to pass from one phase to another (the evolution of the pandemic in the region, measures and structures in the region to avoid the expansion of the pandemic, etc.). The most restrictive phase is the “phase 0”, and the most permissive one, the “phase 3”.

For example, in those provinces that are already in phase 2, people can circulate at any time, although people under 70 are not allowed to walk or exercise from 10am to 12pm and 7pm to 8pm but in those provinces that are in phase 3, there are no time restrictions..
People must wear masks in closed spaces and, on open spaces, when a minimum distance of 2 metres between people cannot be assured.

• Transport:

  Roads may be closed down for reasons of public health, safety or the flow of traffic. Access for certain vehicles may also be restricted on the same grounds.

  Transports (people and goods): Public transports for people will be reduced. However, measures will be agreed to guarantee supply of transport of goods throughout Spain (especially food). Measures will be taken to guarantee incoming imported goods, with priority to first necessity products.

People using public transport must wear masks.

• Shop closures: The suspension of the retail premises and establishments’ closure is being lifted under some conditions.

In those provinces or autonomous regions that are currently in phase 2:

• Retail shops and premises, and professional service activities can reopen to the public, as long as the capacity of the premises is reduced to 50%, and a priority service schedule for people over 65 years is set up. This includes premises located in shopping centres.

• • Hostelry establishments can reopen to the public,. Consumers can consume inside the establishment. However, the capacity of the establishments will be reduced to 50% (in the case of discos and nightclubs, it will be reduced to a third of their capacity). Terraces can reopen to the public, but limited to the 75 % of the tables permitted in the immediately preceding year on the basis of the corresponding municipal licence. People can also sit and consume at the counter.

• Cinemas, theatres, auditoriums and similar establishments can reopen to the public, provided that they have pre-assigned seats and do not exceed 50 % of the authorised capacity.

  However, these restrictions do not affect those retail premises and establishments that cover basic necessities (retail shops for food, beverages, basic necessities, pharmaceuticals, health care, opticians, veterinary centres or clinics, etc.).

• Temporary requisitions of all types of goods necessary for security services or critical and essential operators may be undertaken.

• Performance of compulsory personal services essential for the achievement of the aims of the regulation published may be imposed.

• Fines are being applied for breach of the abovementioned obligations.

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¹ Article 257.1 of Royal Legislative Decree 1/2010, of 2 July, approving the consolidated text of the Spanish Capital Companies Law.