Royal Decree-Law 8/2020, dated March 17th, of urgent and extraordinary measures to address the economic and social impact of COVID-19
The following is a summary of the main decisions taken by the Council of Ministers and contained in the Royal Decree-Law 8/2020, dated March 17, of urgent and extraordinary measures to address the economic and social impact of COVID-19.
The source of this article is Ramón & Cajal Abogados
For legal advice, please refer to them directly.
In the labour relations field, several extraordinary measures are implemented throughout the Royal Decree-Law 8/2020, which came into force yesterday, 18 March 2020, with a (renewable) validity of one month, subject to the commitment of the company on maintaining employment during the six months following the resumption of its commercial activity.
- Preference for remote work
Telecommuting (and equivalent possibilities) arise as a measure to maintain the activity, which is preferable than the suspension of contracts or reduction in working hours:
- If it is technically and reasonably possible and if the adjustment effort is proportionate.
- The obligation to carry out the relevant risk assessment shall be considered fulfilled through a self-assessment carried out voluntarily by the worker.
- Right to adapt working hours and reduce the working day
In case there are duties of care towards the spouse, partner or blood relatives up to the second degree, workers shall be entitled to the (i) adjustment of the working day and/or (ii) reduction of the working hours, provided that:
- The presence of the worker is necessary for the caregiving duties.
- The closure of educational centres or similar centres which provided care to the person in need of it has been adopted by government decisions,
- The caretaker who had been carrying out this task cannot continue with the duties of care for justified reasons related to the COVID-19.
This right must be justified, reasonable and proportionate to the situation of the company, particularly when several workers have access to it in the same company.
The worker will initially specify the right to adapt the working day due to duty cares (or any other aspect of the working conditions), but the company and the worker must strive to reach an agreement.
The special reduction in the working hours (i) must be notified to the company 24 hours in advance and (ii) could reach 100% of the working day.
If the worker already enjoys any conciliation right, he or she may temporarily waive their former rights, or request the Company to modify them in order to better accommodate to these exceptional circumstances.
- Softening of the temporary adjustment of the activity to avoid dismissals 
Temporary Employment Regulation File due to Force Majeure
The company may initiate a Temporary Lay-Off Regulation File (hereinafter, “ERTE”) due to force majeure, for the losses on its activity resulting from the governmental measures adopted as a result of COVID-19, including the declaration of the state of alarm, provided that it is duly accredited and involves (i) the suspension or cancellation of activities, (ii) the temporary closure of premises with public access; (iii) restrictions on public transport and on the mobility of persons and/or goods; (iv) lack of supplies that seriously prevents the continuation of the ordinary development of the activity and (v) urgent and extraordinary situations due to the infection of the staff or the adoption of preventive isolation measures decreed by the health authorities.
The procedure will be the legally foreseen one, with the following particularities:
- Submission of the business application to the Labour Authority including a report on the connection between the loss of activity as a result of COVID-19, plus with the supporting documentation, which will also be sent to the workers or their representatives.
- The Labour Authority must confirm the existence of force majeure by a decision within 5 days, prior (optional) report from the Work and Social Security Inspection.
Temporary Lay-Off Regulation File due to objective causes.
In the event of an ERTE derived from productive, technical and organizational causes related to COVID-19, the following procedural specialties will apply:
- In the absence of legal representation of the workers, the committee representing them part will be made up of the most representative trade unions in the sector to which the company belongs, or by 3 democratically elected workers from the company itself.
- The representative commission must be constituted within a non-renewable period of five days.
- The consultation period shall not exceed seven days.
- The (optional) report of the Work and Social Security Inspection must be issued within a non-renewable period of seven days.
- Social Security contributions during the force majeure ERTE
By the company’s request, the Social Security Treasury will exempt the company from payment of the company’s contribution and joint collection terms.
The exemption will reach 100% of the company’s contribution if the company had less than 50 employees on 29 February 2020, and 75% if the number of employees at that date was superior.
- Unemployment protection
The State Public Employment Service may take the following measures regarding workers affected by an ERTE arising from force majeure and/or objective causes:
- Recognition of their contributory unemployment benefit even if they do not reach the legally required minimum contribution period.
- The unemployment benefit of a contributory level received in this exceptional case will not be computed for the purpose of consuming the maximum periods of receipt established by law.
Thus, a new right to unemployment benefit will be recognised with the aforementioned specialities, which will extend until the end of the period of suspension of the employment contract or temporary reduction of the working hours.
 These procedural specialities for ERTEs arising from both force majeure and objective causes, shall not apply to ERTEs initiated or notified prior to the entry into force of this Royal Decree-Law based on the causes set out therein.
Mortgage debt moratorium for the acquisition of the main residence
Articles 7 to 16 of Royal Decree-Law 8/2020 establish vigorous measures to produce a moratorium on mortgage debt for the acquisition of the main residence of those who are experiencing extraordinary difficulties in making their payments as a result of the COVID-19 crisis.
From 18 March 2020 until fifteen days after the end of the Royal Decree-Law’s validity, those who have been left in a particularly vulnerable situation as a result of the COVID-19 health crisis may request a moratorium (during the state of alarm) on the mortgage debt assumed for the purchase of their main residence (whether in the form of a loan or credit), attaching the appropriate supporting documentation.
This is a measure which had already been implemented in similar terms by the institutions adhered to the Code of Good Banking Practice (Royal Decree-Law 6/2010) -all Spanish banks-. However, in this case it is mandatory for all lenders.
Applications may be filed from March 19 2020 and will imply that the mortgage debt will be suspended during the period of validity of the moratorium. Consequently, the creditor entity will not be allowed to request the payment of the mortgage quota, nor any of the concepts that integrate the quota (capital amortisation or interest payment), not even a percentage of the quota.
However, it should be noted:
· The patrimonial deterioration must take place as a result of the health crisis of COVID-19.
· Some vulnerability situations are added to those already provided for in Royal Decree-Law 6/2010 (situation of unemployment, substantial loss of income or decline in sales) and the limits of required indebtedness are reduced.
· The guarantors and the non-debtor mortgagor which find themselves in an economic vulnerability situation may require the entity to address the assets of the principal debtor before claiming the guaranteed debt from them, even if they have expressly waived the benefit of excussio.
· The creditor entity will have 15 days at most to implement the requests it receives.
· Once the moratorium has been granted, the creditor entity shall inform the Bank of Spain of its existence and duration, for accounting purposes and so that it is not included in the calculation of provisions for default risks.
Liquidity measures to sustain the economic activity
Articles 29, 30 and 31 of Royal Decree-Law 8/2020 establish various liquidity guarantee measures to sustain the economic activity against the transitional difficulties resulting from the situation generated by COVID-19.
· Approval of a line of guarantees for companies and self-employed workers. The Ministry of Economic Affairs and Digital Transformation will provide guarantees to financing granted by credit institutions, financial credit establishments, electronic money institutions and payment institutions, to companies and the self-employed to meet their needs arising, among others, from the management of invoices, money, financial or tax obligations and other liquidity needs.
The maximum amount will be 100 billion euros and the applicable conditions and requirements must be approved by agreement of the Council of Ministers, complying with the regulations on State Aids.
· The net debt limit for the ICO (Official Credit Institute) is increased by 10 billion. This amount will be made available to SME’s and the self-employed, through the ICO lines through the mediation of financial institutions, whose requirements will be made more flexible.
· A line of insurance coverage of 2 billion euros has been approved for working capital loans for exporting companies (small and medium-sized enterprises, and larger companies that meet certain requirements -at least 33% of international turnover or regular exporters in the last 4 years-), without the need for them to be directly linked to international contracts. The coverage will be granted by CESCE.
Suspension of deadlines in the taxation area
Article 32 of Royal Decree-Law 8/2020 regulates the suspension of deadlines in the tax sphere.
Before summarising the aforementioned regulation, it is necessary to point out two issues: (i) that Royal Decree-Law 7/2020 established the possibility that persons and entities with a volume of transactions not exceeding 6,010,121.04 euros in 2019 defer (for a period of six months and with no interest for the first three months) their tax debts derived from self-assessments where the voluntary period of filing ends between 13 March and 30 May; and (ii) that Royal Decree 463/2020, which declared the state of alarm, established the suspension of administrative deadlines.
This latter point raised the question of whether the obligation to file self-assessments during the period of suspension of administrative deadlines was suspended. In favour of this theory, the self-assessment is one of the forms in which tax management procedures begin (article 118 of Law 58/2003, of 17 December, General Tax Law), which should lead to the conclusion that the period for presentation of the self-settlement is suspended.
Notwithstanding the above, the Royal Decree 465/2020 of 17 March, amending Royal Decree 463/2020, solves the issue with a negative answer, by expressly stating that the suspension does not affect tax deadlines, which are subject to special regulations, particularly, the deadline for filing returns and self-assessments.
In the taxation sphere, Royal Decree- Law 8/2020 establishes and extension until 30 April 2020 (i) of the deadlines for payment of the settlements made by the Administration; (ii) of injunctions; (iii) of the expiry of the deadlines and fractions of the deferred and fractioned agreements granted by the Administration; (iv) of the deadlines related to the development of the auctions and awarding of goods and (v) the deadlines to meet the requirements, seizure orders and of requests of information with tax implications (vi) to make allegations in relation to the beginning of such proceedings or hearings, issued in proceedings for the application of taxes, penalties or declarations of nullity, (vii) refunds of undue income, correction of material errors and revocation; all of which that have not concluded on March 18, 2020. Likewise, the time limits to respond to requests and applications for information made by the General Management of the Land Registry that are due to be answered on 18 March 2020 are extended to 30 April 2020.
Taking into consideration the above, the deadlines for the presentation of tax statements and self-assessments are not suspended. Therefore, the only speciality during the state of alarm is the possibility of the abovementioned deferral for taxpayers with a volume of operations not exceeding 6,010,121.04 euros in the year 2019.
In the case of urgent debts, the execution of guarantees on real estate will not take place from March 18, 2020 until April 30, 2020.
The deadlines for payment of the settlements made by the Administration, of the injunctions, of the due dates of the terms and fractions of the agreements of postponement and fractioning granted, the terms related to the development of the auctions and awarding of goods and the terms to meet the requirements, seizure orders, requests for information or acts of opening of pleadings or hearings, which are communicated from 18 March 2020, will be extended until 20 May 2020, unless the general deadline is longer, in which case the latter shall apply. Similarly, the period to process pleadings or hearings which are communicated from 18 March 2020 onwards will be extended until 20 May 2020 by the General Management of the Land Registry is extended until said date, unless the period granted by the general rule is longer, in which case the latter will apply.
For the purposes of calculating the statute of limitation deadlines in appeals and in economic-administrative proceedings, the resolutions that end them shall be deemed to have been notified, when there is evidence of an attempt to notify the decision between 18 March 2020 and 30 April 2020, on said date.
The period to lodge economic-administrative appeals or claims against tax acts, as well as to appeal through administrative channels decisions issued in economic-administrative proceedings, will not commence until 30 April 2020, or until notification has been made in accordance with the terms of the General Tax Law, after said date.
In all cases, if the private party complies with the requirements, requests for information with tax implications or presents its arguments, the procedure will be deemed correct and the period from March 18, 2020 to April 30, 2020 will not count for the purposes of the maximum duration of the procedures. However, during said period the Administration may promote, order and carry out the essential procedures (without the said period counting for the purposes of the limitation and expiration periods provided for in the General Tax Law).
Water and energy supply guaranteed to vulnerable consumers
Article 4 of Royal Decree-Law 8/2020 states that in the month following its entry into force, i.e. until 18 April 2020, suppliers of electrical energy, natural gas and water may not suspend supply to consumers who are vulnerable consumers or consumers at risk of social exclusion, in accordance with the provisions of Articles 3 and 4 of Royal Decree 897/2017 of 6 October.
In addition, the Royal Decree-Law provides:
· The automatic extension, until September 15, 2020, of the social bond (“bono social”) validity for those beneficiaries for whom the period provided for in Article 9.2 of Royal Decree 897/2017 expires before that date.
· The suspension, for the following six months, of the validity of Article 3.5 of Order IET/389/2015 of 5 March, which updates the system for the automatic determination of maximum sales prices, before tax, for bottled liquefied petroleum gases and modifies the system for the automatic determination of sales prices, before tax, for liquefied petroleum gases by pipeline. During this period, the maximum prices established in the Resolution of 14 January 2020 of the Directorate General for Energy Policy and Mines will be in force.
Measures in the field of telecommunications
Due to the strategic nature of telecommunications, which are needed for the performance of an increasing number of economic and social activities, articles 18 to 20 of Royal Decree Law 8/2020 establish the following measures of temporary validity limited to the duration of the state of alarm:
· The electronic communications services and broadband connectivity shall be guaranteed: In order to guarantee that citizens, in the current situation, can keep accessing these services, it is essential to ensure that connectivity is maintained and that electronic communications services are provided, under the same conditions as the ones previous to the state of alarm. Therefore, services provided by telecommunication operators should be available to their customers, and they cannot suspend or interrupt them, even if it is contractually agreed.
· Universal telecommunications services shall be guaranteed: the electronic communications service provider designated to provide universal telecommunication services shall guarantee the provision of its service and shall maintain, at least, the number of beneficiaries, as well as the quality of services, and specifically access to the Internet. It shall also guarantee the conditions of affordability of the telecommunication services.
· Suspension of portability: exceptional commercial campaigns to contract electronic communications services requiring number portability shall not be carried out during the state of alarm. In addition, all phone and mobile numbering portability operations shall be suspended, except in force majeure cases.
Public procurement measures
Article 34 of Royal Decree Law 8/2020 establishes the following measures in the area of public procurement to mitigate the consequences of COVID-19:
· Consecutive service and supply contracts regulated in Article 3 of Law 9/2017 of 8th November on Public Sector Contracts: contracts of this nature with public entities will be suspended if their execution is impossible due to COVID-19 or because of the measures taken by public administrations to combat it. The suspension will be maintained from the time the execution of the service is impossible until the service can be resumed.
For this “suspension regime” to be applicable, the contractor must request it and the contracting body must give its opinion within five calendar days; administrative silence will be negative. In this case, the contracting entity must pay the contractor compensation for damages, excluding loss of profit. Finally, this specific suspension does not in any case constitute grounds for termination of contract.
· Other service and supply contracts: in other service and supply contracts, if the contractor fails to meet the deadlines as a result of COVID-19 or the measures taken by the public authorities to combat it, the contracting authority will grant him an extension, under certain conditions.
The contractor will be entitled to compensation for the additional salary costs incurred as a result of the time lost, up to a maximum of 10 per cent of the initial contract price. In order to seek this compensation, the contractor must request it.
· Work contracts: they are regulated under a similar regime to the consecutive service and supply contracts.
The contractor is allowed to request an extension only if he offers to meet his commitments if the initial deadline is extended. The contractor is entitled to compensation for damages as explained above.
· Works and service concessions: the de facto situation created by COVID-19 and by the measures taken by the public administrations to combat it, will be considered force majeure and will entitle the right to restore the economic balance between contracting parties.
The measures to ensure the economic balance between the parties will consist of extending the term of the concession to a maximum of 15 per cent or amending the economic clauses in the contract. In any event, the rebalance will compensate the concessionaries for the salary costs they have actually paid to all the personnel assigned to the ordinary execution of the contract during the period of the de facto situation created by COVID-19. Such compensation will be paid only after a request.
· Application of these measures to other contracts: these measures apply, in addition to the public contracts themselves, to the following contracts:
– Contracts entered by public sector entities subject to Law 31/2007, October 30th.
– Contracts contained in Book I of Royal Decree-Law 3/2020, of February 4th.
– Contracts for private insurance, funds, related to tax and tax litigation.
· Contracts excluded from the application of these measures: the measures do not apply to the following contracts:
– Contracts for health, pharmaceutical or other services or supplies, linked to the health crisis caused by COVID-19.
– Contracts for security services, cleaning or maintenance of computer systems.
– Contracts for services or supplies necessary to ensure the mobility and security infrastructures and transport.
– Contracts awarded by public entities that are listed on official markets and do not obtain income from the Spanish National Budget.
· Complementary measures: the Minister of Transport, Mobility and Urban Agenda, as the competent authority designated in Article 4 of Royal Decree 463/2020, may adopt measures other than the ones explained above to guarantee the necessary services for the protection of citizens, goods and places. These measures may involve, among other things, a modification of the cases in which contracts may be suspended.
Measures regarding scientific and technical research
In order to promote scientific and technical research related to dealing with the health emergency caused by the coronavirus COVID-19, article 38 of the Royal Decree-Law 8/2020 declares the general regulations on subsidies inapplicable.
Therefore, aid and subsidies may be granted directly by the Institute of Health Carlos III and the Spanish National Research Council (CSIC), without the need to comply with the requirements set forth in that legislation such as the competitiveness criteria, solvency, guarantees, etc.
Measures regarding foreign direct investment
In order to protect Spanish companies, both listed and unlisted, from the M&A operations launched by foreign investors taking advantage of the decline in their equity value, Final Provision 4 of the Royal Decree Law 8/2020 amends Law 19/2003, of July 4th, of capital movements regulation and economic transactions abroad, in order to introduce ex ante authorization mechanisms for foreign direct investments made by investors from countries outside the EU and the European Free Trade Association:
- In certain strategic sectors affecting public order, public security and public health (those related to critical infrastructure and technologies, the supply of key inputs such as energy, raw materials or food, those with access to or control over sensitive information and the media) or
- Made by certain investors (of a public nature, who have made investments in strategic sectors or who are affected by administrative or judicial proceedings due to criminal or illegal activities).
When, in either case, the investor holds a stake equal to or greater than 10 per cent of the share capital of the Spanish company, or when, as a result of the corporate transaction, act or legal business, he effectively participates in the management or control of that company.
Additionally, the Government is empowered to suspend the liberalization of foreign direct investment in sectors other than those expressed when they may affect public security, public order and public health.
The suspension of the liberalization of foreign direct investment means that in order to make a valid investment operation it is compulsory to obtain the corresponding authorization. Investment transactions carried out without obtaining the former are not valid and have no legal effect until they are legalized. It is expected that the suspension of the liberalization of previous foreign direct investment will remain in force until it is lifted by the Council of Ministers.
In line with the above, sanctioning and competition regimes are modified, including new very serious sanctions.
Aid in emergency situation
The Fifth Additional Provision of Royal Decree Law 8/2020 limits the application of Royal Decree 307/2005, of March 18th, which regulates subsidies in response to certain needs arising from emergency situations or of a catastrophic nature, and establishes the procedure to grant them.
This Royal Decree regulates a system of exceptional aid in emergency situations for a community who faces a serious, imminent, exceptional, collective risk, inevitable or unforeseeable, and which becomes catastrophic in nature when, once the risk has been updated and the event has occurred, the living conditions of that community are substantially altered and serious damage is caused, affecting a plurality of people and goods.
In these situations, the only way to compensate would be the one applied to public administration liability.
Private procurement measures
Regarding private procurement, the most relevant measures adopted in articles 21 and 42 of Royal Decree-Law 8/2020 are the following:
· Interruption of the deadline to return products during the state of alarm: in order to guarantee compliance by consumers of the measures that limit the freedom of movement of people ordered by Royal Decree 463/2020, declaring the State of Alarm, and, in order to be consistent with the interruption of procedural and administrative terms foreseen in its second and third additional provisions, the exceptional measure of interruption of the deadlines to return products purchased either in person or on-line is decreed (article 21). As the explanatory statement to the Royal-Decree Law 8/2020 indicates, since the right of withdrawal of consumers with respect to purchased products is usually subject to a time limit, the return periods must be interrupted to ensure that they can exercise it without violating Royal Decree 463/2020. The calculation of deadlines will resume the moment Royal Decree 463/2020 or its extensions lose validity.
· Suspension of the period of expiration of Registry entries during the validity of the state of alarm: during the validity of the state of alarm and its extensions, the expiration period of any Registry entries: preventive entries, mentions, marginal notes and any other registry entries which could be cancelled by the passage of time is suspended. The calculation of the deadlines will resume the day after the end of the state of alarm or its extensions.
The Royal Decree declaring the state of alarm has ordered the suspension of the statute of limitations and expiration deadlines for the duration of the state of alarm and its possible extensions. We understand that said provision does not affect the deadlines in contracts, since it refers to legal, not contractual deadlines and an exceptional and temporary rule should not be applied analogically or extensively to the deadlines of contracts according to article 4.2 of the Spanish Civil Code and its jurisprudence. Furthermore, the Government could have so established in the Royal Decree that declares the state of alarm (or in the Royal Decree-law discussed in this note) and has not done so (this power being expressly provided for in article 955 of the Code of Commerce).
· Analogous application in the field of private procurement of the set of events defined as force majeure in article 22 regarding the suspension of employment contracts: finally, although article 22.1 of Royal Decree-Law 8/2020 applies only to the suspension of labour contracts, it should be noted that it contains a definition of circumstances or events that qualify as force majeure that will surely be invoked by many operators as circumstances that prevent compliance with the obligations assumed in private contracts with their suppliers or clients, and to urge the suspension or termination of said contracts. In our opinion, this attempt may be futile insofar as the Civil Code (article 4.2) prevents the extrapolation of exceptional or temporary norms to instances or situations other than those expressly regulated in them. In this sense, our Supreme Court has indicated that special laws cannot be extensively or analogically applied (Judgment of the Spanish Supreme Court of July 22, 1994).
Measures regarding corporations and analogous legal entities
Articles 40, 41 and 42 of Royal Decree-Law 8/2020 include a series of extraordinary measures applicable to the operation of the governing bodies of legal entities under private law, with specialties for listed companies in order to try to alleviate the social and economic situation in which we find ourselves as a consequence of COVID-19 and which has generated a temporary and general disruption of economic activity, accentuated in a context of high volatility in financial markets.
· Legal private entities
General Shareholder’s meeting. Call and holding
If the call for the General Shareholder’s meeting was published before the declaration of the state of alarm (but with the date being set after the declaration), the management body may modify the place and time of the meeting or revoke the convening agreement. In the latter case, a new call must be made within the month following the date in which the state of alarm ends.
Internal bodies. Meetings and adoption of agreements.
During the state of alarm period, all the collegiate governing bodies and delegates of legal entities may meet by videoconference (considering the meeting to be held at the legal entity’s domicile), provided that authenticity and full connection are ensured, and their agreements may be adopted in writing and without internal meeting, even when none of these options is expressly provided in the statutes.
Preparation of annual accounts, management reports and similar mandatory documents in accordance with company law. Approval and audit
The deadline of 3 months from the end of the fiscal year to prepare annual accounts is suspended while the state of alarm lasts, resuming for a period of 3 months from the date in which the state of alarm ceases.
The accounting verification period (if the audit is mandatory) of the annual accounts prepared as of the date of declaration of the state of alarm is extended for a period of 2 months after the end of the alarm status.
Even if there is legal or statutory cause, the partners of incorporated companies may not exercise their right of separation until the state of alarm ends. Likewise, the reimbursement of contributions to Co-Op members that cease working during the duration of the state of alarm is extended until 6 months have elapsed from the end of the state of alarm.
Company dissolution situation
If during the duration of the state of alarm the deadline for which the company was initially incorporated elapses, the legal dissolution will not take place until 2 months have elapsed from the end of the state of alarm.
If before the declaration of the state of alarm (and during the duration of said state) there is a legal or statutory cause of dissolution, the legal deadline to call the General Shareholders Meeting by the governing body of the company in order to adopt the agreement of dissolution or, where appropriate, the agreements they deem convenient to correct the cause, is suspended until the state of alarm ends.
Liability of administrators for company debts
The administrators will not answer for company debts contracted during the validity of the state of alarm if during said state the company fell in a legal or statutory cause of dissolution.
Among other measures, Royal Decree-Law 8/2020 establishes that during year 2020 the companies’ obligation regarding the publication and submission of their annual financial report to the National Securities Market Commission and the audit report of their annual accounts may be completed up to 6 months after the end of the fiscal year. Said deadline will be extended to four months for the publication of the intermediate management declaration and the half-yearly financial report.
Likewise, the aforementioned Royal Decree-Law foresees the possibility that the ordinary general meeting of shareholders may be held within the first 10 months of the fiscal year, and that the board of directors foresees in the call for the general meeting (or in a published announcement if the call was already published): attendance by telematic means, remote voting, as well as the holding of the meeting anywhere in the national territory, even when not provided for in the company statutes.
Exceptionally, if the measures imposed by public authorities prevent the general meeting from being held in the place and physical venue established in the call and the possibilities described in the previous paragraph could not be used, the continuation of the meeting is allowed, once constituted, the same day in another place and headquarters within the same province. If it could not be held, a further call can be announced with the same agenda and the same advertising requirements, at least five days in advance.
Royal Decree-Law 8/2020 suspends the expiration period of Registry filing entries, preventive entries, mentions, marginal notes and any other registry entries which could be cancelled by the passage of time is suspended. The calculation of the deadlines will resume the day after the end of the state of alarm or its extensions.
Measures in Insolvency Law
As a consequence of the many queries generated these days by the suspension of procedural deadlines, introduced in the Additional Provisions of Royal Decree 463/2020, of March 14, declaring the state of alarm, and its impact on article 5 bis of Spanish Insolvency Law 22/2003, Royal Decree-Law 8/2020 introduces in its article 43 the following legal developments:
· While the state of alarm is in force, the period provided for in article 5 of the Bankruptcy Law to request bankruptcy, is also interrupted.
· Consequently, the debtor, even if it is insolvent, will not have the duty to request bankruptcy during the state of alarm period.
· Absolute priority is given to the voluntary insolvency over the necessary one: Until two months have elapsed after the end of the state of alarm, no request for a necessary insolvency (by a third non-debtor party) will be processed. During that two-month period, priority will be given to the voluntary bankruptcy request that the debtor may submit, even if it is subsequent to the necessary bankruptcy request. This provision implies a de facto modification of art. 22 of the Insolvency Law in order to favour the interests of the debtor over those of the creditor since the necessary or forced bankruptcy of the debtor will not be declared during the extraordinary temporary period of two months after the end of the state of alarm.
· If a debtor, prior to the state of alarm, had communicated to the Commercial Court the start of negotiations with creditors of those as foreseen in article 5 bis of Law 22/2003, it will not be compelled to request bankruptcy until said state of alarm ends.
As a first assessment, we consider this measure to be very sound since it clarifies the queries raised by the suspension of the procedural deadlines and gives the debtor, in this situation of unforeseeable economic crisis, an additional extra time of two months to avoid to the extent it is possible, bankruptcy. Thus, the debtor will have a certain time frame to assess the best solution to insolvency and seek alternative mechanisms to it.
Source of this article is Ramón & Cajal Abogados
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