COVID-19 COMMERCIAL LAW
On the 18th March 2020 the Royal Decree-law 8/2020, of 17th of March, of extraordinary and urgent measures to confront the economic and social impact of COVID-19 came into effect.
The influence COVID-19 has had and is still having on our daily lives is enormous as it is on the economy. It is exactly because of this that Royal Decree-law was published, in an attempt to reduce the damage this virus can cause to the economy. In this respect, it’s obvious that companies are also affected by this situation, and the government has decided to introduce a series of exceptional measures in order to give companies the facilities to overcome this crisis. These measures are set out in article 40 of said Royal Decree-law, which is analysed below.
- The possibility of on line attendance to shareholders meetings, even though it is not specifically provided for in the Corporate Statutes (Article 182 of Spanish corporation law for S.A., and RDGRN of 19th December 2012 for S.L.), it is now extended to all societies regardless of whether or not it is provided for in the Corporate Statutes.
- The possibility of voting in writing and without a meeting is extended both for S.A. and S.L., previously only provided in Article 248 of Spanish Corporation Law.
- The preparation of annual accounts of the year 2019 is suspended until the end of the State of Alarm and, from that date, a further three-month deadline is allowed for the preparation of said accounts by the administrators.
- If the Annual Accounts had been prepared prior to the declaration of the State of Alarm, a deadline of two months after the end of the State of Alarm is allowed for its approval by the shareholders meeting.
- The annual accounts of the year 2019 shall be approved in a shareholders meeting in the three following months after the State of Alarm is over.
- If the meeting had been called before the declaration of the State of Alarm and it is provided for this period, the board of directors is entitled to modify the place and hour of the meeting or for revoking the meeting with 48 hours advance. In case it is revoked, the board of directors is obligated to establish a new date.
- If this meeting had been called before the declaration of the State of Alarm and was to be held during said State of Alarm, then the Board of Directors is entitled to change the place and hour of said meeting or to revoke said meeting by giving 48 hours advance notice. If the meeting is revoked the Board of Directors shall establish a new date for that meeting.
- If a public notary is required for the shareholders meeting, their presence may be by electronic means.
- The right of separation held by shareholders is suspended even if there is a legal or statutory cause, until the ending of the State of Alarm.
- The reimbursement of the contribution of cooperative members who leave during the State of Alarm is extended up to six months after the end of the State of Alarm.
- If a company reaches the term of duration during the State of Alarm, it will not dissolve until two months after the State of Alarm is over.
- If before the State of Alarm there was a cause of dissolution, the deadline to convene shareholders meeting by the administrators is suspended until the State of Alarm is over.
- If the cause for dissolution occurs during the State of Alarm, the administrators will not be liable for the social debts incurred during this period.
The bankruptcy aspect is another one specially affected by the State of Alarm and the Royal Decree-law, which establishes, in Article 43, a series of measures aimed to reduce the economic and social impact of the crisis over natural and legal persons in bankruptcy.
Specifically, it is established that the debtor who is in bankruptcy during the State of Alarm will not have the obligation to apply for the insolvency declaration until three months after the State of Alarm is over. In the same context, the judges will not admit a request for voluntary insolvency process submitted during the first two months and a request for voluntary insolvency process will have preference over a request for necessary insolvency process, even if the request for voluntary insolvency process is submitted by the debtor after the necessary insolvency process is requested by the creditor.
Nor will anyone who is negotiating with creditors under the regime of Article 5 bis of bankruptcy law be obligated to apply for a declaration of insolvency.
Royal Decree-law 11/2020 also modifies certain points regarding commercial measures that are set out below:
- The possibility to carry on with the meetings of the board of directors of mercantile and civil companies, cooperative associations and foundations not only by means of video conference but also through telephonic conference if secretaries of the board of directors confirm the identity of those attending, and have the necessary means to carry it out and that the minutes of the meeting are sent with all content through e-mail.
- It is equally permitted to hold the shareholders’ meetings, shareholders’ assemblies through telephonic conference in addition to video conference.
- If decided by the president or chairperson of the board of directors or if required by two of the board members it is possible to pass the resolutions in writing and without the need to hold a formal meeting.
- Even though the term for the preparation of the annual accounts has been suspended, to three months after the end of the State of Alarm, it is valid to prepare and submit it during the State of Alarm, applying the rules of extension of the term for the auditors review.
- In relation to the extension of the deadline for auditors to review the annual accounts to two months after the end of the State of Alarm, the same applies to cases of annual accounts prepared before the start of the State of Alarm
- Finally, regarding the proposal for the application of results of companies that have drawn-up their accounts before the start of the State of Alarm, the proposal can be modified and another proposal for the application of results can be submitted to the general meeting, accompanied with a letter from the auditor stating that his opinion would not have changed if he had known of the new proposal earlier. It is also permitted to withdraw a proposal for application of the result of companies whose meeting has already been called and to defer that point to a later meeting with similar requirements to those indicated.
In relation with bankruptcy measures adopted in this regard, the Royal Decree-law 11/2020 clarifies some points that the Royal Decree-law 8/2020 did not clarify at all.
- In relationship to the ERTEs of the Royal Decree-law 8/2020 presented before an insolvency judge before the Royal Decree-law 11/2020 came into force, the procedure will be the following:
- If they have already been approved by the bankruptcy court, they will be maintained and will have full effect for the recognition of the benefits provided for in Royal Decree-law 8/2020.
- If they have not yet been approved, they will be referred to the labour authority for further processing, while the actions previously carried out remain valid.
- Companies in insolvency proceedings will be eligible for the ERTEs provided for in Royal Decree-law 8/2020 for reasons of force majeure or economic, technical or organizational reasons, despite being in a situation of insolvency. Access to the ERTEs for both reasons is conditioned by the viability of the company. The procedure must be adjusted to the provisions of the Workers’ Statute and of Royal Decree-law 8/2020 itself (without Article 64 of the Bankruptcy Law being applicable) with the following special conditions:
- In both cases, the applicant will be the company itself with the authorisation of the bankruptcy administration proceedings under the intervention regime) or directly the latter (in tenders under the suspension regime). Likewise, the judge (of the contest) must be informed immediately, by telematic means, of the application, resolution and measures applicable in the ERTE.
- In relation to ERTEs due to force majeure, the decision of the labour authority that has not established the existence of force majeure may be challenged before the labour jurisdiction.
In relation to ERTEs for economic, technical or organizational reasons, the bankruptcy administration will be part of the consultation period; if no agreement is reached with the workers during this consultation period, the bankruptcy administration will authorize (in intervention mode) or take (in suspension mode) the business decision to suspend contracts or reduce working hours. The bankruptcy judge is competent to decide on challenges to the business decision to suspend contracts or reduce working hours.