CORONAVIRUS – New provisions 18-31 March, 18-31 2020 (2/2)

The measures adopted in Spain in the fight against the health and socio-economic effects of the COVID-19 “coronavirus” during the second half of March 2020 are many, of various kinds and depth, and affect practically all sectors of activity that we Amber Legal & Business Advisors summarize the key aspects in this Newsletter:

  1. Royal Decree-Law 9/2020, of March 27
  2. Royal Decree-Law 10/2020, of March 29
  3. Order SND / 307/2020, March 30 – Model Responsible Declaration.
  4. Royal Decree Royal Decree-Law 11/2020, of March 31.

In the preceding Newsletter we focused provisions of sections 1 through. This release focuses on the last one, Royal Decree-Law 11/2020 (generally effective as from April 2nd, 2020).

As continuation of our newsletters, by way of introduction, the health emergency continues, and health emergency intensifies, forcing public administrations to act and make decisions, in an extraordinary, unknown and “dynamic” crisis, in terms used by the spokespersons, lagging behind events. On March 25 Spanish Congress has resolved to extend the state of emergency until 00:00hrs of April 12, although further extension is foreseen till the end of April.

If this is so in Spanish Government and governmental agencies, one cannot expect less from citizens – both individuals and companies – mostly , self-employed workers and professionals and SMEs – who in a few days are overwhelmed by packages of laws and measures at all the levels, of tremendous importance, many lacking clarity that generates continuous explanatory and error- correction provisions, that require professional information and advice to be able to apply them correctly in order a) not to incur infractions and b) comply with the priority objective of defending people’s health, but at the same time, to the extent possible, maintain activities.

Leaving aside the numerous provisions enacted to control activities and Government internal budgetary and public -procurement provisions, the new provisions refer mainly to health and social care areas, support from policy, military, public transport, and mobility, essential services. We will focus on those most directly related to the functioning of the legal system in the economy and businesses:

4. Royal Decree-Law 11/2020, of March 31, which adopts urgent complementary measures in the social and economic field to deal with COVID-19 (BOE 04/01/2020)

It contains a new package of economic and social measures, completing and reinforcing the measures adopted over the past three weeks by the Government to mitigate the effects of the COVID-19 pandemic, extending them until the month following the end of the Emergency State, covering the following issues:

4.1.- Protection of workers, families, consumers, self-employed and most vulnerable groups, to relief their financial situation and fixed expenses thus preserving a minimum income. The major measures in this section consist of:

  • Suspension of evictions for 6 months from the start of the Emergency state, in order to protect people who cannot pay their rents because they are in a vulnerable situation by COVID-19 and have no alternative housing.
  • Automatic renewal of tenancy agreements expiring within the 2 months following the entry into force of this Royal Decree Law. This extension will be for 6 months, as their terms and conditions of the contract remain in force.
  • Automatic moratorium on the payment of house rents (arts. 3 to 9) for vulnerable tenants whose landlord is a large property asset holder, whether public or private, understood as such who owns more than 10 properties or asset surface exceeding 1,500 sq. m.

This moratorium will continue as the Emergency state and vulnerability persist with a maximum of 4 months. Once this situation is overcome, the tenant will return the unpaid installment(s) over a period not exceeding 3 years without penalty or interest.

  • Moratorium for the case in which the lessor is not a large property holder,: Vulnerable tenants may request a rent deferment. The lessor will have 7 days to accept it, propose an alternative or reject it. Failing an agreement, the tenant will qualify for a financing aid program (MICROCREDITOS ICO -Official Credit Institution- Microcredits), State-guaranteed, at zero cost and may request a loan for this purpose interest free that will be paid directly to the landlord for up to 6 monthly rents and 10 year repayment maturity.
  • Mortgage moratorium: The suspension period extends from one to 3 months; The proof of vulnerability is adapted to the effects of this Emergency just having to submit a sworn statement about the personal situation. Government clarifies that the postponed mortgage payments are extended for the same time period. Self-employed may also benefit from this moratorium.
  • Moratorium on unsecured loans and credit: The possibility of applying a moratorium for vulnerable people, including consumer loans, is also included.
  • Guarantee of basic utilities to more households, expanding the group of potential beneficiaries of the electricity aid, such as the self-employed who ceased operations or whose income reduced by more than 75%. Measures are established to guarantee the continuity of energy and water supplies in the homes, prohibiting their suspension for reasons other than security of supply.
  • Pension Scheme reimbursements. Extension of the cases qualifying for reimbursement of contributions made, so that people who are on temporary layoffs (“ERTEs”) and the self-employed who ceased their activity because of the COVID-19 crisis may resort to it.
  • Housekeeping, cleaning and other employees: A new subsidy is specifically enacted for these employees affected by the cessation or reduction of activity and for temporary workers whose contract ends and do not qualify for unemployment or other benefits.
  • Specific program for victims of gender violence, homeless people and other particularly vulnerable groups: Aid of up to € 600 per month, which can be raised to € 900, always with a limit of 100% of the house rent. Another € 200 is added to cover maintenance, community and basic supplies expenses, with a limit of 100% of them.

4.2.- Support to the country production structures and employment, in order to facilitate the future recovery of economy, by promoting flexibility measures in various activities and processes of the Administration, among which the following should be highlighted:

  • Social Security is empowered to grant moratoriums on the payment of social contributions to companies and the self-employed.
  • Companies and the self-employed who do not have debt payment deferrals with Social Security in force are allowed to request deferment of the payment of debts that must enter between April and June 2020 without applying any interest.
  • The self-employed who receive the benefit for cessation of activity may postpone Social Security taxes that are due from April to June 2020, at no interest.

Properties used in business or professional activities of the self-employed, under mortgage loans can also apply for the mortgage moratorium.

4.3.- Flexibilization of the suspension of the liberalization of capital movements and foreign investments.

By means of Transitional Provision no. 2 and Final Provision no. 3 the suspension of liberalization is extended to residents of EU and LAC countries, if their ultimate beneficial owner(s) are residents from outside the EU or EFTA, such beneficial ownership being deemed to be when they have the last direct or indirect control of 25% or more of the capital or voting rights, or exercise direct control of the investor.

It provides an interim simplified regime to obtain administrative authorization for projects subject to the new article 7 bis: (a) If it is proven that, before the entry into force of Royal Decree-Law 8/2020, of March 17, there was a binding agreement or offer fixing a determined or determinable price; and (b) Projects of an amount greater than € 1,000,000.00 and less than € 5,000,000.00 [although, temporarily, investments of less than 1 million euros are exempt from prior authorization]. Likewise, the provision of competence of the Council of Ministers to lift the suspension of liberalization is deleted and accordingly it will require a law-rank provision.

NOTE: We hope these measures will be revised once the emergency situation will be officially removed and general liberalization regime will be restored.

4.4.- Legal persons under private law. Functioning of its corporate bodies (Final Provision no. 1 section Thirteen):

Procedures to adopt company resolutions:

Multiple teleconferencing means are also allowed, the technical requisites for video conferencing are reduces, and requirements for the authentication and documentation process are added: (a) these procedures are permitted only if all the members of the governing bodies have the necessary devices and communication tools, (b) the Company secretary recognizes their identity and expresses it in the minutes, (c)  minutes of the distance meeting are issued and immediately, to the email addresses of each of the participants.

Annual accounts:

It clarifies that the preparation of accounts by Directors during the state of emergency is also valid, and the corresponding audit may be performed either within the ordinary legal term (1 month), or on the 2-months extension that was granted.

Result application:

The new provision differentiated two different scenarios:

a) Companies whose Annual General Meeting was called before the new provision came into force:

The management body may withdraw the proposal for the application of the result from the agenda by submitting a new proposal for a new General Meeting to be held within the legal term for annual meeting publishing this decision before the General meeting already called is held.

The new proposal must incorporate (a) justifying report based on the situation created by COVID-19 and (b) the auditor’s written statement indicating that it would not have modified its audit opinion had he known the new proposal at the time of signing.

For the deposit of accounts in the Companies Register, the competent governing body may certify only the approval of the accounts, and later file a complementary certification of approval of the application of the result.

b) Companies that call the General Meeting after effective date of the new provision:

The proposal for the application of the result contained in the notes to the financial statements (“memoria”) can be replaced by another proposal, accompanying the Directors’ justifying report of based on the situation created by COVID -19 and the auditor’s written statement in the terms indicated above.

  • Listed companies:

As regards result application in listed companies, the above measures can apply to, but these companies must publish their decision as soon as adopted as additional information complementary to the annual accounts in their website, and giving notice to the Spanish  the rest of the companies so that those that apply any of the new measures, proposal, its justification by the management body and the auditor’s brief must be made public, as soon as they are approved, as Complementary information to the annual accounts on the entity’s website and on that of the CNMV (Spanish Securities and Exchange Commission) as other relevant information or, where appropriate, as privileged information.

4.5.-. Insolvency proceedings (Transitional Provision no. 4)

If, on the date of entry into force of this RD-LAW, a court order declaring bankruptcy had been issued, providing for the measures of articles 22 and 23 of Royal Decree Law 8/2020, of March 17, (regarding workers temporary layoffs on ERTEs) such judicial resolution will have full effect for the recognition of social benefits; and applications for ERTEs pending approval or confirmation by the court order must be submitted to the labor authorities for processing according to the aforementioned provisions.

Amber Legal & Business Advisors 

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