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25.03.2020

Commercial law and exceptional measures for companies, cooperatives, associations and foundations

In the last week, the Spanish Government has approved several measures to confront the effects of the health crisis caused by the COVID-19 pandemic, which are included in the Royal Decrees Laws 7/2020 and 8/2020, in the Royal Decree 463/2020 (as modified by the Royal Decree 465/2020), as well as in the previous Royal Decree Law 6/2020. At Toda & Nel-lo, we want to help our clients indentify and understand those measures that have the greatest impact on their activities and operations. With this goal in mind, our professionals from the Corportate and Commercial Law department have prepared this text that summarizes the measures contained in the aforementioned regulations.

In the last week, the Spanish Government has approved several measures to confront the effects of the health crisis caused by the COVID-19 pandemic, which are included in the Royal Decrees Laws 7/2020 and 8/2020, in the Royal Decree 463/2020 (as modified by the Royal Decree 465/2020), as well as in the previous Royal Decree Law 6/2020.

The measures included in these regulations, which are applicable throughout Spain, affect many aspects of economic and social life.

At Toda & Nel-lo, we want to help our clients indentify and understand those measures that have the greatest impact on their activities and operations. With this goal in mind, our professionals from the corportate and commercial law department have prepared this text that summarizes the measures contained in the aforementioned regulations.

All of our professionals are prepared, accessible, and at your disposal to clarify any doubts you may have regarding the interpretation and practical application of the measures analyzed as well as, in general, to support you in managing the legal uncertainties posed by the health crisis.

 

Commercial law and exceptional measures for companies, cooperatives, associations and foundations

In the area of commercial and corporate law, Royal Decree-Law 8/2020 of 17 March, sets out a number of measures in relation to:

  • Legal entities under private law,
  • The governing bodies of listed companies,
  • The suspension of the expiration of the registry entries and
  • The suspension of the deadline for bankruptcies.

In summary, the following relevant measures are expected:

 

1.  Extraordinary measures applicable to legal persons governed by private law (Article 40).

Even though the statutes do not provide for it, during the state of alarm, the governing and administrative bodies of civil and commercial companies, and governing bodies of cooperatives and foundations may be held via videoconference that ensures authentic and real-time bilateral or multilateral connection with video and sound of the remote attendees. The meeting shall be deemed to have taken place at the domicile of the legal entity.

Even though the statutes do not provide for it, during the state of alarm, the resolutions of such governing and administrative bodies may be adopted by a vote in writing and without a meeting whenever the president decides to do so, and they can be adopted in that manner when requested by at least two of the members of the governing body. The meeting shall be deemed to have taken place at the registered office.

The period of three months from the close of the financial year for which the governing body or administrators of a legal entity are obligated to formulate the annual accounts, the management report, and the other mandatory documents is suspended until to end the state of alarm, resuming again for another three months from the end of the state of alarm.

In the event that, on the date of declaration of the state of alarm, the governing body or administrators had already drawn up the accounts for the previous year, the deadline for verification of these accounts, if an audit is mandatory, shall be extended for two months from the end of the state of alarm.

The general meeting to approve the accounts of the previous year must occur within three months from the end of the period to formulate the annual accounts.

If the notice of the general meeting was published before the state of alarm but the the meeting was to occur following the declaration of the state of alarm, the governing body may change the place and time of the meeting or revoke the agreement to convene the meeting by notice published at least forty-eight hours in advance on the company's website and, if the company doesn’t have a website, in the "Official State Bulletin" (Boletin official del Estado). In case of the agreement to convene the meeting is revoked, , the governing body must convene a new meeting within one month from the end of the state of alarm.

The notary that is required to attend a general meeting of the partners and formalize minutes of the meeting may use real-time remote communication means that adequately ensure the fulfillment of their notarial function.

Even if there is legal or statutory cause, in capital companies (las sociedades de capital), partners may not exercise the right of separation until the end of the state of alarm, including any extensions as the case may be.

If, before the declaration of the state of alarm and during the state of alarm, there is legal or statutory cause for dissolution of the company, the legal deadline for the governing body of the partners to adopt an agreement for the dissolution of the company or an agreement to resolve the cause of dissolution is suspended until the end of the alarm condition.

If the legal or statutory cause for dissolution occurs during the state of alarm, the administrators will not be responsible for debts of the company incurred during that period.

 

2. Extraordinary measures applicable to the operation of the governing bodies of listed companies (art. 41).

During the year 2020, the following measures will apply to companies listed in the EU:

  • The obligation to publish and submit its annual financial report to the CNMV and the audit report on its annual accounts may be completed within up to six months from the end of the financial year. This period will be extended to four months for the publication of the interim management statement and the biannual financial report.
  • The ordinary general meeting of shareholders may be held within ten first months of the fiscal year.
  • The board of directors may provide in the notice of the general meeting instructions for attendance via videoconference or teleconference and remote voting under the terms provided for in the Capital Companies Act (la Ley de Sociedades de Capital), as well as for the meeting to be held in any location within the national territory, even if not provided for in the bylaws.
  • In the event that the measures imposed by the public authorities prevent the general meeting from being held in the place and physical location established in the notice and the powers provided in the previous number cannot be used: (i) if the meeting has been validly constituted in that place and location, it may be agreed to continue the meeting on the same day in another place and location within the same province, establishing a reasonable period of time for the transportation of those attending. (ii) if the meeting cannot be held, a later date for the meeting may be announced, upon at least five days advance notice of such later date, with the same agenda and the same notice requirements as the meeting that was unable to be held.
  • In exceptional cases, the resolutions of the board of directors and the resolutions of the Audit Committee shall be valid when adopted by videoconference or by telephone conference call, even though it is not contemplated in the bylaws, provided that all the directors have the necessary means to do so and the Secretary recognizes their identity, which must be expressed in the minutes and in the certification of the resolutions issued. In this case, the meeting will be considered unique and held in the place of the registered office.

 

3. Suspension of the period of expiration of the entries in the register during the validity of Royal Decree 463, 14th of March, which declared the state of alarm (art. 42).

The dates of expiration of presentation entries, precautionary notes, mentions, marginal notes and any other registration entries that may be cancelled due to the passage of time are suspended.

The calculation of the dates shall be resumed on the day following the end of the state of alarm or its extension, as the case may be.

 

4.  Term to declare a bankruptcy proceeding at Court  (art. 43).

As long as the state of alarm is in effect, the debtor who is in a state of insolvency is not obligated to declare bankruptcy.

Until two months have passed from the end of the state of alarm, the judges will not process the necessary applications for insolvency proceedings that have been filed during the state or alarm or that are filed during the following two months. If an application for a voluntary bankruptcy has been submitted, it will be accepted with preference, even if it was dated later.

A debtor will not have a duty to declare bankruptcy while the state of alarm is in effect, if the debtor has informed the court with jurisdiction for the declaration of bankruptcy that the debtor has initiated negotiations with creditors to achieve a refinancing agreement, an out-of-court settlement, or to adhere to an advance proposal of agreement, even if the deadline for such is referred to in Section 5 of Article 5 of Law 22/2003 of 9 July 2003 Bankruptcy (artículo 5 bis de la Ley 22/2003, de 9 de julio, Concursal).