Extraordinary measures aimed at softening the impact on companies of Covid 19

by | Mar 19, 2020 | Uncategorized

Royal Decree-Law 8/2020 of 17th March on urgent extraordinary measures to deal with the economic and social impact of COVID-19, among the measures of Chapter V  there is a series of extraordinary measures that may be practical for the management of companies during this period of alarm.

So, article 40, entitled “Extraordinary measures applicable to legal persons governed by private law” establishes in relation to various entities, including associations, foundations and commercial companies, the following:

  • Even if the statutes do not contemplate it, during the period of alarm, sessions of the governing and administrative bodies may be held by videoconference, which would ensure authenticity and bilateral or plurilateral connection in real time with images and sounds of the remote attendees.
  • Even if the statutes had not foreseen it, during the period of the state of alarm, resolutions of the governing and administrative bodies may be adopted by written votes and without a meeting, provided that the president so decides and is requsted by at least two members of the body.
  • The three-month period for the preparation of annual accounts is suspended until the end of the state of alarm, and is resumed for a further three months from that date.
  • If the accounts for the previous financial year have already been drawn up at the date of the declaration of the state of alarm, the deadline for the accounting verification of these accounts, if the audit is compulsory, shall be extended by two months from the end of the state of alarm period.
  • The ordinary general meeting to approve the accounts of the previous financial year shall necessarily be held within three months of the end of the state of alarm, for drawing up the annual accounts.
  • If the notice of the general meeting was published before the declaration of the state of alarm but the day of the meeting is after that declaration, the administrative body may change the place and time of the meeting or revoke the agreement to call the meeting. In the event of revocation of the agreement to call the meeting, the administrative body must call the meeting again within the month following the date on which the state of alarm ended.
  • The notary which was required to attend a general meeting of shareholders and to take the minutes of the meeting may use remote communication means in real time that adequately guarantee the fulfilment of the notary function.
  • Even if there is a legal or statutory cause, in capital companies the partners may not exercise the right of separation until the end of the state of alarm and any extensions thereof that may be agreed.
  • In the event that, before the declaration of the state of alarm and during the time this state is in force, a legal or statutory cause for the dissolution of the company arises, the legal period to call the general meeting of shareholders by the administrative body to adopt the agreement for the dissolution of the company or the agreements that have the purpose of alleviating the cause, is suspended until the end of the state of alarm.
  • If the legal or statutory cause for dissolution has occurred during the period of the state of alarm, the administrators will not be liable for the corporate debts incurred during that period.

Article 41 of the same Royal Decree-Law also establishes extraordinary measures applicable to the operation of the governing bodies of listed companies.

Article 42 of the aforementioned text establishes, in relation to the expiry period of the entries in the Register, that during the duration of the state of alarm and, if applicable, any extensions thereof that may be agreed, the expiry period of the presentation of entries, preventive notes, mentions, marginal notes and any other register entries that may be cancelled due to the passage of time is suspended. The calculation of the periods shall be resumed on the day following the end of the state of alarm or its extension, as the case may be.

Finally, with regard to the duty to apply for insolvency, Article 43 states that:

  • While the state of alarm is in force, the debtor who is in a state of insolvency shall not have the duty to apply for a declaration of bankruptcy. Until two months have elapsed since the end of the state of alarm, the judges will not admit for processing the necessary applications for bankruptcy that have been presented during that state or that are presented during those two months. If an application for voluntary bankruptcy has been submitted, it will be admitted for processing, with preference, even if it is submitted at a later date.
  • Nor will it be the duty of the debtor to apply for a declaration of bankruptcy while the state of alarm is in force, where that debtor has notified the court with jurisdiction for the declaration of bankruptcy of the commencement of negotiations with creditors to reach a refinancing agreement or an out-of-court settlement agreement, or to obtain adherence to an early proposal for a settlement, even if the period referred to in the fifth paragraph of Article 5 bis of Law 22/2003 of 9th July on Bankruptcy has expired.