CORONAVIRUS - Royal Decree-Law 8/2020, of March 17. Urgent Measures

After the Emergency declaration of RD 463/2020 of March 14, Spanish Government has issued a package of measures for 1 month, renewable, to maintain business activity, employment, cash-flow/financing and legal-private and public flexibility. Additional measures are expected.

From Amber Legal & Business Advisors in the following notes we highlight the provisions of greatest impact of this RD-Law to facilitate its understanding and better application given their immediacy and impact, according to the sectors, groups most affected.

NOTE: Spanish Official State Gazette has opened an Electronic Code link where all legal measures both State and regional (autonomous communities) “Crisis sanitaria Covid-19”: easy -to-follow update tool : https://www.boe.es/biblioteca_juridica/codigos/codigo.php?id=355

  1. Support to individuals and vulnerable groups. Connectivity

1.1 Essential Supplies:

During the emergency period public services guarantee supply of electricity, gas and water to vulnerable consumers (RD 897/2017).

The discount card (bono social) is extended for certain beneficiaries, until 09/15/2020 .

 1.2 Connectivity. Electronic communications.

During the state of alarm, broadband connectivity, electronic communications services and universal telecommunications service are guaranteed, but extraordinary commercial campaigns to contract services that require number portability are prohibited.

1.3. Residential Mortgage Debtors.

  • Extension of term of payment of mortgage debts from the acquisition [no refurbishment ] of habitual residence of debtors
  • Unemployed persons,
  • Entrepreneurs or professionals, with loss of income> 40%
  • Persons whose family unit does not reach certain income, and
  • Those hose share represents more than 35% of your income.
  • Benefit of excussio or execution to vulnerable mortgage guarantors.
  • Exemption from Stamp Duty Tax accrued on deeds renegotiating mortgage loans

Qualifying persons may request this measure from creditor, e.g. Bank up to 15 days after the emergency period of the RD-Law and Central Bank of Spain must be notified.

NOTE: Tennants, lesees of residential houses or apartments, offices retail stores or industrial buildings or mortgage debtors of the foregoing except for habitual residence are NOT included in this protective measure.

2. Employment

2.1 Teleworking and reconciliation of work with family life.

  • Companies must establish remote work systems, to the extent technically and reasonably possible, before temporary dismissals or reduction of activity, and grants approval for the purposes of Law 31/1995, on Prevention of Occupational Risks to assessment.
  • Workers personal care duties for spouse / partner, or relatives up to the 2nd grade can choose, -informing 24hrs in advance- to adjust and/or reduce working hours, giving a proposal -ej. shift change, center, or schedule, functions, flexible hours, etc.) under exceptional circumstances COVID-19 incl. decreed closure of educational, elderly, or disabled centers.

Company and worker must try to agree on this, but in the absence of agreement the parties may submit to Labor Jurisdiction. –so, In many cases this measure can be hardly effective.

2.2 Temporary Redundancies  -General (for financial, technological, organizational or production reasons). 

  • Procedure to get approval is shortened (5 days to designate negotiation committee, 7 days for negotiations),
  • Employees can benefit even lacking minimum social security contributions from previous occupation.
  • Time of this leave shall not reduce the legal maximum term of unemployment subsidy .
  • The requirements of the extraordinary benefit for cessation of activity are relaxed.
  • Files based directly on COVID-19 initiated and notified before the effects of RD-Law: (a) The measures on contributions and unemployment benefits will apply. (b) Processing particularities NO.-

NOTE: Measures subject to maintaining employees for at least 6 months as from termination of emergency period.

2.3  Temporary Redundancy Programs – Force Majeure.

Clarifies RD 463/2020 of Alarm: The following causes directly derived from the COVID-19 crisis qualify for this procedure:

  1. loss of activity due to suspension or cancellation of activities;
  2. temporary closure of premises open to the public;
  3. restrictions on public transportation; mobility of persons, goods;
  4. lack of supplies that seriously prevent to maintain operations;
  5. contagion or preventive isolation ordered by health authority.
  • Processing:

1º) Application  and report justifying direct relationship COVID-19 / Loss/cessation

2nd) Information to workers or workers representatives.

3rd) Approval: 5 days, effective on date of cause of the loss or cessation.

  • Exemptions from employer contributions (art. 273.2 LGSS, and joint collection contributions): (a) 100% companies with <50 workers as of 02/29/2020 (b) 75% companies with> 50 workers.

 NOTE: Measures subject to maintaining employees for at least 6 months as from termination of emergency period.

3. Return of Products

3.1 Terms to return products are deferred until emergency status finishes. 

The wording does not distinguish if it refers to consumer purchases or to all in general, which can be relevant, although it appears that the Explanatory Memorandum of RD-Law refers to consumer purchases both in person and on-line

NOTE: This could be abrogating an important part of the general market and consumer regulations that provide for the right of withdrawal that would give rise to the return – for distance sales (on-line). So:

  • In online purchase the consumer cannot see or value the product at the time of purchase;
  • In the face-to-face purchase, in physical stores, if the purchased product is in perfect condition, the store is not obliged by law to refund the price (except for commercial courtesy, advertising or sales conditions in which case then it would have to make the refund).

4. Cash-Flow and financial Support

 4.1 Cash-Flow and financial support

Lines of Guarantees to financing by credit institutions, EFC, electronic money entities, to help payments of companies self-employed cash-flow needs (invoices), financial and tax payments: Provision of a line of up to €100,000,000,000.

  • OCI (Official Credit Institute) ICO (Instituto de Crédito Oficial): The limit of indebtedness of the OCI is extended by €10,000,000,000 to finance companies and the self-employed.
  • Insurance coverage: line of up to € 2,000,000,000 through CESCE institution as working capital loans for exporting SMEs with difficulties of not bankruptcy or pre-bankruptcy).
  • Farmers: 1-year extension of the maturity period if they applied for financing in the 2017 drought.

5. Tax measures.

5.1 Statute-barred and expiration terms; Terms for tax audit procedures

The period From Mar 18-Apr 30 does not count for the purposes of (a) tax statute-barred term (article 66 LGT) (b) terms expiry, or (c) maximum term for procedures for tax collection, fines, etc.

5.2 Deadlines for certain administrative procedures

The following deadlines are deferred to Apr 30 2020: Terms commenced and not expired upon the enactment of RD-Law for: (a) payment of administrative settlements in the voluntary period and notified on foreclosure (Art 62, sections 2 and 5 of the General Tax Law (LGT), but does NOT extend the deadlines for filing of Art 62.1 LGT; (b) Maturities and installments already granted; (c) terms for requests, seizure and requests tax information, allegations tax refunds, etc. (d) terms of guarantees enforcement on property.

Expiration of the terms for payment of approved installments and deferrals of taxes for acts or indicated, notified from the RD-Law enactment are deferred until May 20, 2020 .

 Companies and legal entities. Governing bodies. Insolvency. “ACELERA”-SME Incentive program. Listed companies.

 6.1 Subjective scope:

Public and private limited companies, civil companies, associations and foundations. 

6.2 Functioning of corporate bodies: 

  • Governing body resolutions can be adopted:

a) In session: videoconference:(i) authenticity (ii) bilateral or plurilateral connection in real time image +sound.

b) In writing in lieu of a meeting, if the Chairman so decides, or if requested by at least 2 of the members.

  • Shareholder right to withdrawal:

Postponed until the end emergency status.

  • Reimbursements to cooperative members:

Reimbursements to members that cause withdrawal during the alarm period is extended to 6 months from the end.

6.3 ACCELERA – SME incentive Program. 

The ACELERA-PYME Program is kicked-off through REDEs to offer initiatives along with the private sector to promote digitization.

6.4 Annual Accounts: Terms.

  • Term for Directors to draw up annual accounts: the 3-month period is suspended, and shall resume upon termination of emergency status for another 3 months.
  • Statutory audit: if accounts were issued prior to the declaration of of alarm audit term is extended for 2 months after it ends.
  • Shareholders Approval: The Annual General Meeting shall be held within 3 months from the end of the new term for directors to draw up accounts (if it had been called before the state of alarm for a date while the alarm persists Directors may change the place and time [and date also], or revoke the call, 48 hours in advance and call again within the subsequent month.

6.5 Dissolution and liquidation.

  • Companies due to dissolve before April 14, 2020 (ex. Art. 367 LSC, for losses that reducing net equity down to below 50% of capital): the “legal period of 2 months” for the call Shareholders Meeting to resolve the dissolution or measures that remove the cause is suspended until the end of the state of alarm.
  • Companies falling into impairment during the state of alarm: Directors are exempted from liability for company debts incurred during the alarm period.

 6.6 Bankruptcy: Deadlines

Debtors in a state of insolvency, or who have notified commencing of negotiation arrangements with creditors (art.5 bis Bankruptcy Law): Do not need to file the declaration of voluntary bankruptcy during the state of alarm; Requests for bankruptcy of others will be admitted  only admit 2 months after the end of the alarm state, prioritizing voluntary bankruptcy filings.

6.7 Listed companies. 

  • Reporting: The (i) annual financial and audit report (publication and submission to the CNMV) is deferred to 6 months from the end of the fiscal year; (ii) the interim management statement and the 4-month semi-annual financial report.
  • Annual General Meeting: The term is extended to 10 months from year-end; The call may provide for attendance by remote attendance and voting and the meeting can be held anywhere of the national territory.

The possibility of moving a constituted meeting or re-convening it in case of restrictions on mobility or meeting is foreseen.

Directors are allowed to attend by videoconference.

7. Foreign investments. Protection of strategic sectors

Law 19/2003 of July 4: A new Art.7 bis is introduced: suspends during the alarm period, the liberalization regime of direct foreign investments in Spain (except those of the EU and LAC) as to the following sectors and investors, being subject to prior authorization during the suspension

Sectors:

  • Critical, physical or virtual infrastructures (energy, transport, water, health, communications, data treatment or storage, aerospace, defense, electoral or financial, and key land and buildings.
  • Critical technologies and dual-use products, AI, robotics, cybersecurity, aerospace, energy storage, quantum and nuclear, nano- and bio-technologies.
  • Essential basic supplies.
  • Sectors with access or control of sensitive information, esp. personal information.
  • Media.

Investors:

  • Controlled by another State.
  • That they have made investments or activities in safety, public order or public health in another Member State.
  • To whom an administrative or judicial enqquiry has been opened for illegal activities in another Member State, State of origin or 3rd State.

Amber Legal & Business Advisors 

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