LATEST DEVELOPMENTS:
I. FOREIGN INVESTMENTS IN SPAIN
On 17th November 2020 the Spanish Government passed a Royal Decree Law pursuant to which the foreign investment regime in Spain is modified and which implies the modification of Law 19/2003 regulating such transactions. It is the third modification the regime has undergone in 2020.
In this brief explanation, we would like to emphasise the following:
Before passing the Royal Decree Law 34/2020, article 7 bis of Law 19/2003 stated that:
“Direct foreign investments in Spain are considered to be all investments as a consequence of which the investor comes to hold a participation equal to or greater than 1% of the share capital of the Spanish company or when, as a consequence of a corporate operation, act or legal business the investor effectively participates in the management or control of said company, provided that one of these circumstances concur.”
As from 18th November 2020, this article states:
“Direct foreign investments in Spain are considered to be all investments as a consequence of which the investor comes to hold a participation equal to or greater than 1% of the share capital of the Spanish company or when, as a consequence of a corporate operation, act or legal business the control of said company is acquired in accordance with the criteria established in article 7.2 of the Competition Law 15/2007, of 3rd July, provided that one of these circumstances concur.”
The text in bold refers to the modification.
Likewise, article 7.2 of Law 15/2007 establishes that:
“For the aforesaid purposes, the control shall be a consequence of the contracts, rights or any other medium that, taking into account the circumstances in fact and in law, confer the possibility of exercising a decisive influence on a company and, in particular by means of:
a) Rights of ownership or use of all or part of the assets of a company,
b) Contracts, rights or any other means which permit the decisive influence over the composition, the deliberations or the decisions of the organs of the company.
In any case, it shall be understood that this control exists in cases which are provided for in article 4 of the Securities Market Act 24/1998, of 28th July”.
Said article 4 refers us in turn to article 42 of the Commercial Code, which defines the concept of a “group of companies” and what is meant by a controlling company in respect of a controlled company. Thus, article 42 of the Commercial Code reads:
“A group exists when a Company holds, or may hold, directly or indirectly, the control over another or several other companies. In particular, it shall be presumed that control exits when a Company, which shall be classified as controlling, is in a relation with another Company, which shall be classified as dependent, in any of the following situations:
a) it holds the majority of voting rights.
b) it has the power to appoint or dismiss the majority of the members of the management body.
c) it may dispose, by virtue of agreements entered into with third parties, of the majority of the voting rights.
d) It has used its votes to appoint the majority of the members of the governing body (….). Such circumstances shall be assumed when the majority of the members of the management body of the controlled company are members of the management body or top management of the controlling company (…).”
Prior to the modification implemented by Royal Decree Law 34/2020 the operators had shown their confusion and worry over the difficulty of specifying the concept “participate effectively in the management or control of the company” established by the law. Now, in Royal Decree Law 34/2020, the lawmaker only mentions the “control of the company”; and to avoid doubts regarding what this is, we are referred to two regulations which define “control”.
Finally, there is another important change. The single transitory disposition of Royal Decree Law 34/2020 establishes that the suspension of the liberalisation of the investment system regarding certain direct foreign investment shall apply until 30th June 2021 to transactions regarding listed Spanish companies; and likewise regarding non-listed companies when the investment exceeds Euro 500 million, and in both cases, the operations of investment are carried out by residents of the European Union and the Free Trade Association. This measure partially unblocks the inter-European investment market, but it does not affect investments originating from outside the European Union. We should recall that the investor is understood to be a resident in said geographical area when the company which controls the investor holds more than 25% of share capital of the latter or is resident in one of the countries which make up the EU or the FTA.
II. HOLDING OF PARTNERS’/ SHAREHOLDERS’ MEETINGS
Article 3 of Royal Decree Law 34/2020 provides that during 2021 a transitory regime shall apply to the holding of the meetings of partners or shareholders either electronically or remotely:
a) Joint-stock companies: although not provided for in the bylaws, the board of directors may anticipate in the convening of the shareholders meeting the attendance thereof by electronic means as well as remote voting, following the provisions of articles 182 and 189 of the Spanish Capital Companies Act for non-listed companies and article 521 for listed companies.
b) Limited liability companies: although not provided for in the bylaws, the general meeting may be held by video conference or by multiple telephone conference, on the condition that (i) all of the attendees with the right of attendance or their representatives have at their disposal the necessary means for doing so; (ii) the secretary of the body recognises the identity of the attendees, and thus it is expressed in the minutes; and (iii) the minutes are immediately sent to their respective email address, shortly following the end of the meeting.
III. FILING FOR INSOLVENCY
A temporary suspension on the obligation to file for insolvency is established with the modification of law 3/2020 of 18thSeptember on procedural and organisational measures in order to deal with COVID-19 in the field of the Administration of Justice. Thus, the Royal Decree modifies article 6 in the following terms:
“Article 6. Special regime for filing for insolvency.
1. Until 14th March 2021, inclusively, any debtor who is in a state of insolvency shall not have the duty to file for insolvency, regardless of whether the debtor has notified the competent court of the initiation of negotiations with creditors to reach a refinancing agreement, an out-of-court payment settlement agreement or adhesion to an anticipated proposal of settlement.
2. Until 14th March 2021, inclusively, the judges will deem inadmissible any applications for involuntary insolvency which were filed since 14th March 2020. If, up until 14th March 2021, inclusively, the debtor has submitted an application for voluntary insolvency, the application will be accepted for preferential processing, even if the date of application is subsequent to filing for involuntary insolvency proceedings.”
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26th November 2020
