COVID-19 EXTRAORDINARY MEASURES IN CORPORATE MATTERS

The state of alarm declared in Spain on 14 March 2020 in order to deal with the health crisis caused by COVID-19 has led to severe restrictions on the freedom of movement of citizens that could prevent the functioning of the governing bodies of companies and other legal persons.

Royal Decree-Law 8/2020 (as amended by Royal Decree-Law 21/2020) has adopted the following extraordinary measures in this area (Article 40):

  • Until 31 December 2020, the meetings of the administrative body and the general meetings of the companies can be held by videoconference or teleconference, even if this is not provided for in the statutes. All members must have the necessary means and the secretary must acknowledge their identity and state this in the minutes, which must be sent by e-mail immediately to all attendees.
  • Until 31 December 2020, the administrative body (but not the general meeting) of the companies can adopt resolutions by written procedure, even if the statutes do not allow this method, provided that the president so decides or at least two of the members of the body request it (therefore, it is no longer necessary for all the members to agree to the written procedure). While the system is flexible and allows for different modalities, as a general rule the procedure will be initiated by a written request for a vote sent by the president to all members, and members will have 10 days from receipt (unless the statutes provide otherwise) to cast their vote. The latter communication must guarantee its authenticity. The minutes must record the vote cast by each of the members.

These rules also apply to associations, cooperatives and foundations, as well as to any commission other than the administrative body. The meetings will be understood to be held at the domicile of the legal entity.

If the general meeting has already been called before 14 March 2020, the administrative body may cancel it or change the place and date of the meeting. To do so, it must publish a notice at least 48 hours in advance on the company’s website (provided that it has been registered in the Mercantile Registry) or, failing that, in the BOE (although the rule should refer to the BORME). In the event of a cancellation, the meeting must be reconvened within one month of the end of the state of alarm.

The notary requested to draw up the minutes of the meeting may attend the meeting by videoconference.

Additionally, Royal Decree-Law 8/2020 (as amended by Royal Decree-Law 19/2020) has introduced exceptional rules applicable to the formulation, audit and approval of the financial statements:

  • The deadline for formulating the financial statements, which in general is 3 months from the end of the financial year, shall be 3 months from 1 June 2020, i.e. it shall end on 1 September 2020. However, the formulation of the financial statements made during the state of alarm is valid.
     
  • If the financial statements are formulated before or during the state of alarm, the period for their verification by the auditor shall be understood to be extended by 2 months from the end of the state of alarm.
     
  • The ordinary general meeting which must approve the financial statements shall meet within 3 months from the end of the period for formulating them, i.e. until 1 December 2020. The deadline for filing the financial statements with the Mercantile Registry remains the same: 1 month from their approval.
     
  • The proposed allocation of earnings set out in the notes to the financial statements may be replaced or this item may be withdrawn from the agenda of the general meeting.

The financial consequences that the state of alarm may cause to the companies have motivated the following additional measures, provided for in Royal Decree Law 8/2020 and Royal Decree Law 16/2020:

  • In the event that, before or during the state of alarm, a legal or bylaw cause for dissolution arises (in particular, the reduction of equity to less than half of the capital), the period of 2 months within which the directors have to call the general meeting that will have to resolve the dissolution or enervate the cause is suspended until the end of the state of alarm. If the cause for dissolution has occurred during the period of the state of alarm, the directors are not liable for the company’s debts incurred during that period (although, in accordance with the general rule, such liability only arises in the event of failure to call the general meeting).
     
  • Losses during the financial year 2020 will not be taken into account for the purposes of the cause of dissolution provided for in Article 363.1.e) of the Spanish Companies Act. In accordance with this provision, a company is deemed to have been dissolved if its accumulated losses reduce its net assets to less than the half of its share capital. Only in the event that, at the closure of the 2021 financial year, losses are found that have reduced the net assets to less than half of the share capital, the directors (even at the request of any shareholder) must convene the shareholder meeting to agree on the dissolution or adopt the resolutions that will make the cause disappear (such as an increase or reduction of the share capital). This provision, which is very poorly drafted, leaves significant uncertainties: for example, how it should be applied to companies whose financial year does not coincide with the calendar year, and whether the losses of 2020 should be taken into account at the end of the 2021 financial year.

Finally, Royal Decree Law 8/2020 has introduced two exceptional corporate measures of lesser relevance:

  • During the state of alarm, the shareholders of capital companies cannot exercise their right to separation.
     
  • If during the state of alarm, the term of the company as set out in the statutes ends, the company will not be dissolved until 2 months have elapsed from the termination of said state.

updated in accordance with Royal Decree-Law 11/2020 of 31 March, Royal Decree-Law 16/2020 of 28 April, Royal Decree-Law 19/2020 of 26 May and Royal Decree-Law 21/2020 of 9 June

12.06.2020

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Fernando Lozano Carlos Fernández Axel Roth
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