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The Spanish Government has approved a €200 billion emergency program to fund efforts to contain COVID-19 epidemic.
The Spanish Official Gazette (Boletín Oficial del Estado) published today, 17 March 2020, a Royal Decree Law 8/2020 (Real Decreto-ley 8/2020, de 17 de marzo, de medidas urgentes extraordinarias para hacer frente al impacto económico y social del COVID-19) ("RDL 8/2020") which includes a set of extraordinary measures addressed yesterday by the Spanish Government to respond to the economic and social impact of COVID-19 in Spain.
This new piece of regulation follows Royal Decree 463/2020 (Real Decreto 463/2020, de 14 de marzo, por el que se declara el estado de alarma para la gestión de la situación de crisis sanitaria ocasionada por el COVID-19) declaring the lockdown of the country as of 14 March 2020. The purpose of this regulation is to limit the spread of the coronavirus while keeping the Spanish economy from tanking.
The lockdown measures have resulted in an acute decrease in consumer demand and consumer spending. This decline has already started to ripple through the Spanish economy. Spanish companies have seen their sales declining, and they fear that this may potentially result in liquidity problems.
The intention of Spanish policymakers with these stimulus measures is to minimise the deterioration of the Spanish economy as well as to ensure that such situation is transitory and does not become systemic, albeit under strict conditions aimed at preventing an upsurge in the number of coronavirus cases.
Measures can be divided in three main categories: those aimed at (i) protecting employees and cash-strapped households; (ii) supporting continuity of the producing activities and industries and employment; and (ii) eradicating COVID-19.
Among those that may be of interest to investors or corporates with interests in Spain are the following:
RD 8/2020 affords additional protection to those mortgage debtors in a so-called "vulnerability situation" that may have their income cut as a consequence of the COVID-19 outbreak. Along the same line as to the measures already introduced in favour of certain mortgage loan debtors in the recent years,1 RDL 8/2020 introduces a relief program consisting in a repayment moratorium or payment breakup for those first home mortgage loans debtors deemed vulnerable (e.g. unemployed, low income families, etc.). Also, it provides a loan scheme where late payment interest rates will not accrue.
Employees' Restructuring and Lay-off Payments
Measures to allow controlled restructuring of the workforce are introduced by the new regulation. Employment contracts suspension and short-term work allowances during the coronavirus-related disruption are now permitted. The regulation entitles employers, where the circumstances recommend, to apply force majeure clauses.
The procedure to allow such employees restructuring will be sped up and social security-related payments by the employer will be, in certain cases, suspended.
Support payments for individuals affected by COVID-19, and social security payment reliefs for employers are also approved.
Public Contracts and Concessions
Contracts entered into by companies and Spanish public entities (at various levels, including state and regional level) that cannot be complied with or which obligations cannot be performed as a result of the COVID-19 disruption will not allow the public entity to terminate the contract. Performance of the contract may be suspended and may even allow the company to seek a compensation from such public counterparty.
A specific regime is provided for in RDL 8/2020 with regards to the works and services of Spanish concessions. According to the provisions contained thereto, the concessionaire may be entitled to an economic rebalance of the concession by means of an extension of the original concession term of up to a 15% of the original term or an amendment of the economic terms and conditions of the concession to cover the decrease in revenues and increase in costs. It is worth mentioning that the term to make such claims is only five days.
Corporate Governance and Listed Companies
With the annual shareholders meeting season coming up, many companies were unable to meet filing deadlines and were grappling with how to hold the compulsory annual shareholders meeting.
In light of the circumstances, RDl 8/2020 allows for companies to hold telematics meetings of the governing bodies (e.g. videoconference) even if the company bylaws do not provide for it. Also, most of the corporate deadlines are suspended, including the one related to the filing of the annual financials where not only has the deadline been suspended, but the term extended. Similar measures have been approved for other filings such as the auditing report.
The two-month period to request the opening of insolvency proceedings provided for in the Spanish Insolvency Law (Ley 22/2003, de 9 de julio, Concursal) is suspended.
In response to the impact of COVID-19 in the markets and the Spanish Stock Market (IBEX 35) hitting its historic low, RDL 8/2020 had included a number of restrictions to the acquisition of certain assets and stakes in Spain. These apply to foreign investors and to businesses or companies operating in strategic areas or interests.
In this regard, RDL 8/2020 amends the current foreign investments regulation (Ley 19/2003, de 4 de julio, sobre régimen jurídico de los movimientos de capitales y de las transacciones económicas con el exterior) and declares a suspension of the investments made by investors outside the EU or the European Association of Free Commerce as well as those investments in strategic sectors when the investor, as a result of such transaction, holds 10% of the share capital or gains control over the governing body.
Similarly, investments made by foreign publicly owned and sovereign entities are suspended.
Other measures have also been approved by RDL 8/2020, as well as in other pieces of regulation to boost the Spanish economy. These include cash injections by the Government in different formats, suspension of the terms to make administrative filings (including court filings) and restrictions in the short selling activities.
1 Royal Decree 1975/2008 (Real Decreto 1975/2008, de 28 de noviembre, sobre las medidas urgentes a adoptar en materia económica, fiscal, de empleo y de acceso a la vivienda; el Real Decreto-ley 6/2012, de 9 de marzo, de medidas urgentes de protección de deudores hipotecarios sin recursos) and Law 1/2013 (Ley 1/2013, de 14 de mayo, de medidas para reforzar la protección a los deudores hipotecarios, reestructuración de deuda y alquiler social) recently amended by Royal Decree 6/2020 (Real Decreto-ley 6/2020, de 10 de marzo, por el que se adoptan determinadas medidas urgentes en el ámbito económico y para la protección de la salud pública)
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