COVID-19: CNMV and the Spanish Registrars’ Association issue joint statement on financial statements and proposed allocation of profit/loss

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Spain Corporate Alert

In the context of the extraordinary situation stemming from the COVID-19 health crisis, the Spanish Registrars’ Association and the Spanish National Securities Market Commission (CNMV) issued a joint statement on March 26, 2020, in which they consider that, as regards financial statements and the proposed allocation of profit/loss, companies may, among other alternatives, choose to proceed as follows:

1.- If the managing body considers it necessary, it may restate the financial statements and modify the allocation of profit/loss included in the notes to financial statements, so that the financial statements contain the latest allocation of profit/loss for submission to the shareholders’ meeting. If the shareholders’ meeting has been called, the restatement would require calling off the meeting on force majeure grounds.

2.- Without restating the financial statements, if it were not necessary, companies with shareholders’ meetings that have not been called may replace the allocation of profit/loss with an alternative one that has been adjusted to the health crisis situation stemming from COVID-19 and has been approved by the managing body. The alternative allocation of profit/loss must, among other requirements indicated in the joint statement, be accompanied by a statement from the auditor indicating that the change would not have changed its audit opinion had it known of the new allocation of profit/loss at the time of signature.

3.- In the case of companies that have called the shareholders’ meeting, the managing body may propose to defer the decision on the proposed allocation of profit/loss contained in the call notice of the meeting to a subsequent shareholders’ meeting to be held within the statutory period for holding the annual shareholders’ meeting (which period has been extended by Royal Decree-Law 8/2020). The new shareholders’ meeting may include a different proposed allocation of profit/loss adapted to the new context, which, according to the joint statement, will be subject to the same requirements as in the preceding alternative, as detailed in the statement.