Publications

Notable in the area of corporate law/commercial contracts are the effects for foreign investments of the measures approved by the Spanish government, together with the new guidelines published by ESMA and the industry decision by AEB.  Worth considering in relation to tax are the new deadlines for the payment or the effects of “ERTE” temporary layoff procedures on personal income tax. In relation to labor matters, companies are starting to work on and plan their return to normal by designing plans for gradual reincorporation.  On the subject of litigation, we analyze the calculation and resumption of procedural and substantive times periods determined by months or years, or the ability to file submissions, even though the suspension of time periods is kept in place. Regarding administrative law, we bring your attention to the new legislation on the requisition of property and mandatory obligations. And in the area of restructuring and insolvency, the shake-up plan proposed by the CGPJ (General Council of the Spanish Judiciary) has a direct impact on insolvency matters.

CORPORATE LAW / COMMERCIAL CONTRACTS

1. Foreign investments. Elements needing to be placed in focus in relation to foreign investments are who and which sectors are affected by the new legislation, what the authorization procedure looks like, and the consequences that would ensue from performing a transaction without fulfilling that procedure. We analyze the subject in depth, in this commentary.

2. New publication from ESMA.

• In April, ESMA updated its Questions and Answers on the application of the ESMA Guidelines on Alternative Performance Measures (APM) in the context of the COVID-19 pandemic, and has added question 18 on how an issuer should present the impact of the COVID-19 pandemic for the purpose of the APM Guidelines, to which the  answer recommends that issuers use caution with the objective of only depicting the impacts of COVID-19. ESMA reminds issuers that they must ensure that these measures provide a fair review of the development and performance of the business and of the position of the issuer and do not provide an incorrect depiction of the performance of the business of the issuer which would give a misleading signal on the price of the relevant financial instruments.

TAX

1. Corporate income tax and VAT. An extension of deadlines for small and medium-sized companies and the self-employed has recently been approved in relation to returns to be filed between April 15 and May 20 2020. Groups of companies for corporate income tax and VAT purposes have been excluded from this extension. We discuss the scope of this restriction in a commentary that may be viewed here.

2. REDEME. Registration for the REDEME monthly refund scheme allows VAT refunds to be requested in every monthly assessment period. For that reason, faced with the current economic situation, companies would be well-advised to study how they could benefit by registering for this scheme. In this commentary we run through the key obligations under the scheme and the time periods for registration to take effect in upcoming self-assessments.

3. Personal income tax implications of ERTE temporary layoff procedures. Temporary layoff procedures (ERTEs) may have important personal income tax implications for workers, including on their obligations to file returns, and for claiming maternity tax credits; they also create costs at companies, and to be able to deduct these expenses they will need to adequately support the decisions that have been adopted. We run through all these issues in our commentary.

LABOR AND EMPLOYMENT

Although the exact date the state of emergency will end is not known, companies are starting to work on and plan for returning to normal by designing plans for a gradual reincorporation with an essential labor and occupational risk prevention component. Similarly, it is foreseeable that the temporary measures associated with the state of emergency, and very particularly the temporary layoff procedures due to force majeure from the way in which they are crafted, do not provide the means in themselves for an orderly transition in line with the needs associated with a gradual reactivation of the economy and the particular characteristics of every sector of activity and of every company.

1. Phased return to the new normal. Particularly important for a phased reactivation of business are planning and designing a gradual timetable for reincorporation, the ability to combine for a certain period of time working from home with presence at the workplace, flexible start and finish times, together with work/life balance measures  Workers’ and employers’ representatives will have a crucial role in securing the success of the return to normal for all collective bargaining matters.

2. Occupational health and safety as a key element of the reactivation of business. Occupational risk prevention and health and safety will be critical for making the reactivation of business possible. The elements that companies will have to tackle include signaling safety measures, minimum distances in communal areas, redistributing work spaces, defining vulnerable sectors, rules to be obeyed when entering the workplace, determining shifts, rules to be obeyed when entering and spending time in canteens and other communal areas, changing the frequency of or keeping modes of transport paid for by the company or making testing available, and health questionnaires.

Aside from the particular rules applicable in each case, the Spanish Social Security and Occupational Health and Safety Institute regularly publishes guidance on this subject. CEOE (Confederation of Employers and Industries of Spain) has also published practical guidance on preventative measures against COVID-19.

3. Updated instructions on the new procedure for sending public health service reports related to COVID-19. On April 15, 2020, the Directorate General of the Spanish Social Security Institute issued instructions clarifying the procedure for issuing reports for medical leave. These instructions explain the parameters for determining which workers are treated as vulnerable, and they state that neither pregnant women, or individuals over 60 with no underlying conditions, are classed automatically as particularly sensitive workers.

4. A few doubts over the practical application of ERTE temporary layoff procedures. As the temporary layoff procedures are being implemented doubts are continuing to appear over a few legal issues associated with them. For example, whether the State Public Employment Service will take care of direct payment of unemployment benefit (instead of authorizing payment by the employer), or whether employees can be removed from the temporary layoff where the company’s circumstances so recommend for reactivating the business.  

Similarly, there is some discussion as to whether temporary layoff procedures due to force majeure may be extended into the months following the end of the state of emergency, because of the requirement for phased resumption of activity. The short length of the temporary layoff procedures due to force majeure is precisely why temporary layoff procedures for economic, technical, organizational and/or production-related reasons are being negotiated which will be more in line with expectations of a phased recovery of business.

LITIGATION AND ARBITRATION

1. Calculation and resumption of procedural and substantive time periods determined by months or years. As has been widely reported, Royal Decree 463/2020, of March 14, declaring the state of emergency, suspended procedural time periods (in additional provision two, paragraph 1), in addition to substantive statute of limitations and time bars for any actions and rights (in additional provision four).

On the subject of resumption of these time periods, it is determined, in relation to procedural time periods, that they will “resume when this royal decree or any of its extensions cease to be in force”. Nothing is expressly specified, however, in relation to resumption of substantive time periods, although it may be interpreted that, because it is suspension that has been decreed rather than interruption, in the same way as with procedural time periods, when the state of emergency ends they will resume from the point where they stopped running.

The calculation and resumption of procedural and substantive time periods measured in days should not, in principle, pose any major problems. The procedural and substantive time periods measured in months or years are more of an issue. How are they to be calculated in this case? We offer some solutions in this piece.

2. Potential criminal offenses related to social security fraud and subsidy fraud. Royal decree laws 8/2020 and 11/2020 introduce aid and measures to soften the effects of the economic crisis that may arise from the COVID-19 health crisis. Those decree laws determine which requirements, if any, must be met by their potential beneficiaries for them to be granted, and the commission of a criminal offense may be found for anyone who receives any of these types of aid by falsely claiming that the requirements have been met. Further information, here.

3. Filing of submissions. Under the decision by the Permanent Commission of the General Council of the Spanish Judiciary on April 13, 2020 and the ruling by the Ministry of Justice on the same date (see here), since April 15 it has been allowed to file procedural submissions, even though the suspension of time periods is kept in place, and therefore, unless those decisions are modified or changed or any new decisions are adopted, over the coming days those submissions may continue to be filed, as has been occurring, generally, since April 15.

ADMINISTRATIVE

Requisition of property, mandatory obligations and other measures. Attention needs to be paid to a few of the latest provisions implementing Royal Decree 463/2020, of March 14, 2020, declaring a state of emergency to manage the COVID-19 public health crisis Firstly, Order SND/344/2020, of April 13, 2020, which, among other measures, imposes on privately-owned health institutions, services and establishments providing clinical diagnosis the obligation to make themselves available to join or reinforce the existing diagnosis circuits, and makes available to the autonomous community governments any health institutions, services and establishments providing clinical diagnosis which, on April 14, 2020, were not already providing services to the Spanish national health system. And, secondly, Order SND/345/2020, of April 19, 2020, providing additional measures to secure that the population has access to the products recommended to be used as measures of hygiene to prevent contagion by COVID-19, which define the procedure for determining the maximum retail sale price for specific medical devices and products needed to protect the health of the population. See here for further information.

RESTRUCTURING AND INSOLVENCY

CGPJ’s plan and its effects on insolvency matters. The General Council of the Spanish Judiciary (CGPJ) has proposed a shake-up plan (see here here) with a set of initiatives designed to improve the effectiveness of insolvency proceedings as a mechanism for preserving value and jobs.

Those initiatives notably include those designed to avoid liquidation for viable debtors which, as a result of the crisis caused by COVID-19, are temporarily in breach of an arrangement with creditors that they had been fulfilling before the crisis. The proposed mechanism for those debtors is a type of exemption from breach of the arrangement with creditors restricted to 6 months, together with a temporary resurrection of “re-arrangement” concept to allow amendment of the terms of an arrangement with creditors that is in effect.

It also contains an interesting proposal to add flexibility to the list of cases allowing insolvency proceedings to be joined, including very broad scenarios only requiring the debtors whose insolvency proceedings are going to be joined to have economic relationships with each other. The goal behind that measure is to increase the number of approved arrangements and lower costs.

Additionally, measures are suggested to prompt quicker completion of the insolvency proceeding. Most of these focus on reducing the number, complexity and length of ancillary proceedings, to stop them becoming a procedural impediment to successful completion of the insolvency proceeding as a whole.

It is also sought to cushion the potential collapse of the commercial courts when the state of emergency is lifted through proposals directed at redistributing or reducing the courts’ workloads. This is the underlying aim of the general proposal not to close down in August for the courts in every jurisdiction, or other measures related more specifically to insolvency matters such as encouraging out of court auctions.

Lastly, it contains a notable list of initiatives focusing on increasing the degree of specialist knowledge and amounts of resources that the justice system will employ to tackle the potential wave of insolvencies after the current health crisis. Particularly worth mentioning are the proposals to increase the number of commercial judge positions, to open new commercial courts, to develop the commercial court of first instance or to attribute to commercial judges the jurisdiction to hear all insolvency proceedings on individuals (including any on non-trading debtors).