Extraordinary Measures to address the Economic and Social Impact of the COVID-19

Yesterday, Wednesday 18 March, Royal Decree-Law 8/2020 of 17 March about extraordinary measures to deal with the economic and social impact of COVID-19 came into force.

These measures, as stated in its Explanatory Memorandum, are intended to avoid a prolonged economic impact beyond the health crisis, giving priority to the protection of families, self-employed and most directly affected businesses:

1. 1. Measures to support employees, families and vulnerable groups, provided that they are particularly affected by the current circumstances. Among others:

• – Extending the coverage of vulnerable groups of supplies and essential public services: water, gas and electricity.
• – Priority will be given to organisational systems that allow running the activity by alternative mechanisms (teleworking or distance), and appropriate measures will be provided to make this possible.
• – Employees in charge of their dependents as a result of the COVID-19, and who may evidence this situation, will be encouraged to reconcile their work and family life, with the consequent proportional reduction in their salaries.
• – The right of housing is guaranteed to mortgage debtors in a particularly vulnerable situation who see their income reduced as a result of the COVID-19 health crisis, entitling them to a moratorium on mortgage payments.
• – An extraordinary benefit for cessation of activity is created for the self-employed, which covers the termination of activity caused by an involuntary situation such as the current one.
• – The deadlines for the return of products purchased by any means, either in person or online, are interrupted while the State of Alarm is in force.

2. 2. Measures to make the temporary activity adjustment mechanisms more flexible to avoid dismissals of employees

• – It is specified that losses of activity as a result of COVID-19 will be considered as force majeure for the purposes of suspending contracts or reducing the working day.
• – Coverage for employees affected by a temporary workforce restructuring plan (or “ERTE”), is reinforced, enabling them to have access to contributory unemployment benefit, even if they do not have the necessary contribution period to access it.
• – Companies are exempted from the payment of 75% of the company contribution to Social Security, reaching 100% of the contribution in the case of companies with less than 50 employees, provided that they maintain the employment of their employees.

3. 3. Liquidity guarantee measures to sustain economic activity and to face the transitional difficulties resulting from the situation generated by the COVID-19.

• – It is planned to approve a line of guarantees on behalf of the State for companies and the self-employed, covering both the renewal of loans and new financing. The net borrowing capacity will also be expanded to provide liquidity for SMEs and the self-employed.
• – Customs procedures for imports in the industrial sector are streamlined.
• – The deadlines for payment tax debts are made more flexible, both in the voluntary and executive periods, as well as the deferment and instalment agreements. In relation to this measure, due to its impact and relevance, a specific note will be issued soon.
• The termination of public contracts by all entities that make up the public sector is prevented. Thus, a specific regime for the suspension of such contracts is foreseen.

4. 4. Additional measures to allow an adequate response to the exceptional situation.

• – A series of extraordinary measures applicable to the functioning of the governing bodies of companies governed by private law are established:
  • – Video conference sessions
  • – Vote in writing without a meeting, provided that the Chairman decides and at least two members of the body request it
  • – The time limit for drawing up the annual accounts is suspended until the end of the state of alert
  • – If the annual accounts have already been drawn up at the date of the statement of alert, the deadline for their audit – if this is compulsory – will be extended by two months after the end of the alert.
  • – The ordinary general meeting for the approval of the annual accounts of the previous financial year shall meet within three months of the end of the period for the preparation of the annual accounts.
  • – The notary required to attend a general meeting of members may use real-time remote communication means.
  • – While the state of alarm lasts, the partners may not exercise their right of separation.
  • – If during the duration of the state of alarm the company is dissolved, the dissolution will not take place until two months after the end of the state of alarm.
  • – If, during the period of the state of alert, legal or statutory grounds for dissolution arise, the managers will not be liable for the company’s debts incurred during that period.

• – Extraordinary measures applicable to the functioning of the governing bodies of listed companies are established:
  • – The publication and submission of the annual financial report to the CNMV, as well as the audit report to which they are obliged, may be complied with up to six months after the end of the financial year.
  • – The ordinary general meeting of shareholders may be held within the first ten months of the financial year.
  • – Attendance at the call by telematic means may be provided for, as well as remote voting.
  • – The resolutions of the board of directors and the resolutions of the Audit Committee adopted by videoconference or by multiple telephone conference shall be valid, even if this is not provided for in the corporate bylaws.

• – The period of expiry of the entries in the Registry of Commerce and/or Land Registry is suspended during the validity of the royal decree declaring the state of alarm or its extension.

• – The period set in the Bankruptcy Law is interrupted so that the debtor who is in a state of insolvency does not have the duty to request the declaration of bankruptcy.