Impact of COVID-19 on Corporate Matters

Published 03 April 2020 by Bufete B. Buigas

The approval of the Royal Decree-Law 8/2020 of March 17th (RDL 8/2020) has led to the adoption of a series of extraordinary measures to face the economic and social impact of COVID-19. Although these regulations have an impact on the different areas of a company, in the corporate scope, the following extraordinary measures have been implemented:

Private law companies:

1.- Meetings of governing bodies. Even though the by-laws do not provide for it, during the state of alarm, all kind of companies are allowed (i) to hold meetings of their governing bodies by video-conference with image and sound, with certain requirements, and (ii) to adopt resolutions of their governing bodies in writing without a meeting, provided that the Chairman decides to do so or two of its members request it.

2.- Annual accounts. During the state of alarm, the period of three months from the close of the financial year for the formulation of the annual accounts of legal entities that are obliged to do so is suspended and will be restarted for another three months from the end of the state of alarm.

If the annual accounts were already authorized by the management body, at the date of the declaration of the state of alarm, the period for verification by auditors, when compulsory, is extended for two months after the end of the state of alarm.

3.- Ordinary General Shareholders Meeting. The ordinary general meetings for the approval of the yearly accounts must be held within three months after ending of the three months period for the governing body to formulate the accounts.

In the case of general meetings called before the publication of the state of alarm and whose celebration date is after the publication of the state of alarm, the place and time may be modified or the call may be revoked by means of a notice on the company’s website or, if the company does not have it, in the BOE (Spanish Official Gazette) 48 hours in advance. If the call is revoked, the Board of Directors must issue a new call within one month after the end of the state of alarm.

4. Extraordinary General Shareholders’ Meetings. RDL 8/2020 does not clarify the conditions for attendance at non-listed companies.

5.- Right of separation of shareholders. Even if there is a legal or statutory cause, the exercise of the right of separation of shareholders is suspended until the end of the state of alarm and its extensions.

6.- Dissolution of a company. In the event that, before the declaration of the state of alarm and during its validity, there is a legal or statutory cause for the dissolution of a company, it will remain suspended until the end of the state of alarm, the legal period to call the general shareholders meeting that has to resolve the dissolution of the company or the measures to correct the dissolution cause. If the legal or statutory cause for dissolution occurs during the state of alarm, directors will not be liable for the social debts incurred during such period.

7.-Formalization before a public notary of corporate agreements. Those companies with agreements pending of formalization, in general, the notary’s intervention will be reduced to those actions of an urgent nature. The assessment of urgency shall be carried out in a restrictive manner.

8. Registration. The Association of Registrars of Spain has published a guide about the state of alarm due to COVID-19. It must be noted:

- Suspension of terms: all terms during the validity of the state of alarm and, if applicable, its extensions have been suspended.

- Term for the legalization of books before the Mercantile Registry. In view of the general suspension of the ordinary terms and particularly the deadline for drawing up accounts, the Registrars’ Association interprets that the deadline for the legalisation of the books before the Mercantile Register shall be of four months from the end of the state of alarm or its extensions.

Listed companies

1. Publications and declarations to the CNMV (Spanish Securities Market Commission.) The obligation to publish and submit the annual financial report and the audit report of the annual accounts to the CNMV is extended to six months from the close of the financial year. Such a period is extended to four months for the publication of the interim management statement and the half-yearly financial report.

2.- Meetings of the Board of Directors. Meetings of the Board of Directors held by videoconference or telephone conference are admitted as valid, even though they are not established in their by-laws.

3. General shareholders meeting.

- The Ordinary General Meeting may be held within ten months of the end of the financial year.

- The Board of Directors may provide in the call for the General Meeting the telematic attendance and remote voting, as well as its celebration in any place within the Spanish territory, even though it is not established in their by-laws. If the call for the meeting has already been published, any of these cases may be provided for in a complementary notice to be published at least five calendar days before the date scheduled for the meeting.

- In the event that the measures imposed by the public authorities prevent the celebration of the general meeting in the place and physical location established in the call and the faculty established in the abovementioned section cannot be used, the holding of the meeting at a later date may be announced with the same agenda and the same publicity requirements as the non-held meeting, at least five days before the date set for the meeting. In this case, the management body may agree in the complementary announcement to hold the meeting exclusively by telematic means, that is, without the physical attendance of the shareholders or their representatives, provided that the possibility of participating in the meeting is offered by each and every one of these means: telematic attendance; representation conferred on the chairman of the meeting by means of distance communication; and early voting by means of distance communication. Directors may attend the meeting, which shall be deemed as held at the registered office regardless of the location of the Chairman of the Meeting, by audio or video conference.