In our information note titled “EXTRAORDINARY MEASURES FOR LEGAL PERSONS DUE TO THE STATE OF ALERT (I)” we presented the extraordinary measures foreseen in articles 40 and 43 of Royal Decree-law 8/2020 of 17th March, applicable to private law legal entities as from this date. In just two weeks, some of the measures have been partially modified by the Royal Decree-law 11/2020, of 31st March, which entered into force on 2nd April. Specifically, herein we shall analyse the extraordinary measures (1), (3), (4) and (6) of said article 40:
- Sessions by videoconference, even when not established in the company by-laws:
The new text includes the possibility for sessions to be held by the governing body and the management organ of associations, commercial or civil law companies, the governing council of cooperative societies and the board of trustees of foundations, by multiple telephone conference as well as by video conference, on the condition applying to both of said means that
(i) all of the members of the management organ have the necessary means at their disposal; and
(ii) the secretary of the body recognises the identity of the participants of the meeting, and this is duly stated in the minutes, which shall be sent immediately to the email address of each of the participants.
Likewise, a further addition is the possibility for meetings or assemblies of associates or partners to be held by video or multiple telephone conference, also subject to
(i) all those entitled to attend or the representatives thereof having the necessary means at their disposal; and
(ii) the secretary of the body recognising the identity of the participants of the meeting, and that this is duly stated in the minutes, which shall be sent immediately to the email address of each of the participants.
In principle, the first condition may be complied with easily, although with the second, the secretary has a threefold obligation to see that this is done in practice:
(a) to recognise the identity of the participants of the meeting,
(b) to indicate this expressly in the minutes, and
(c) to send the minutes immediately to the email addresses of each attendee.
- Votes in writing and without session, even when not established in the company by-laws:
During the period of alert, the governing body and management organ of associations, commercial or civil law companies, the governing council of cooperative societies and the board of trustees of foundations, may pass agreements through written votes and without session, provided that it is decided by the president, or when requested, by at least two members of the organ. The session shall be deemed as held in the registered office of the legal entity.
In said cases, persons with powers of certification shall record the agreements passed in the minutes, stating the name of the partners, or where applicable, of the directors, and the system followed for forming the will of the corporate body in question, with an indication of the vote cast by each one of them, in accordance with article 100 of the Commercial Registry Regulation, even though they are not commercial companies.
- Suspension of the deadline for formulating annual accounts and the extension thereof for a period of three more months:
In this point, a final phrase is added for the purposes of clarification regarding the validity of the formulation of the accounts carried out by the governing body and the management organ of a legal entity during the state of alert, as it could not be otherwise.
- Extension of the term for the audit of annual accounts, which have already been formulated, for a further two months:
This extension is added to the annual accounts formulated during the effect of the state of alert, and likewise its application to the voluntary audit (and furthermore the obligatory audit).
- Extension of the term for the approval, when necessary, of the annual accounts:
The ordinary general meeting for approving the annual accounts of the previous financial year shall meet indispensably within the three months following the date upon which the term for formulating the annual accounts ends (instead of 30th June).
- Modification or revocation of the summons of the general meeting which has already been published.
If the summons of the general meeting had been published before the declaration of the state of alert, but the date of holding the meeting was subsequent to this declaration, the management organ may modify the place and time intended for holding the meeting or withdraw the agreement for the summons via an announcement published at least forty eight hours beforehand on the company website and, if the company does not have a website, in the “Official State Gazette – Boletín oficial del Estado”. In the case of the withdrawal of the agreement for the meeting summons, the management organ must proceed with a new summons within the month following the date upon which the state of alert is lifted.
Following this section, article “6bis” is added which gives the go ahead to companies, which having formulated their annual accounts, summon the general ordinary meeting as from 2nd April (date of entering into force of this provision) so that they may substitute the allocation of profit contained in the financial report for another proposal based on the situation created by COVID-19. The reasons for the substitution must be justified by the management organ, and it must also be accompanied by a written document issued by the accounts auditor which indicates that it would not have changed its audit opinion if the new proposal had been known at the time of signing.
Likewise, for companies wherein the general ordinary meeting had already been summoned, the management organ may remove the proposal for the allocation of profits from the meeting agenda in order to submit a new proposal to the approval of the general meeting, which must also be held within the legally established term for holding the ordinary general meeting. The decision of the management organ must be published before holding the summoned general meeting. The requirements for justification, auditors written document, as indicated in the above paragraph, must be fulfilled in relation to the new proposal. Therefore, the certification of the management organ for the purposes of filing annual accounts shall be limited, where appropriate, to the approval of the annual accounts, and subsequently a complementary certification must be filed with the Commercial Registry regarding the approval of the proposal for the allocation of results.
- Remote notary functions:
A notary required to attend a general partners meeting and draw up a record of the meeting (in accordance with what is set forth in article 203 of the Spanish Companies Act) may use remote communication methods in real time which adequately guarantee the fulfilment of the notarial function.
- Suspension of the exercise of the right of withdrawal in companies:
In capital companies, the partners may not exercise the right of withdrawal, even if there is a legal or statutory cause (Articles 346 and thereafter of the Spanish Companies Act), until the end of the state of alert and any extensions thereof that may be agreed.
- Six-month extension for reimbursing the contributions to cooperative members who leave:
The reimbursement of the contributions of the cooperative members who leave during the effect of the state of alert shall be postponed until six months have elapsed as from the date upon which the state of alert is lifted.
- Two-month extension for the full dissolution of capital companies when the term set out in the by-laws has elapsed:
If, while the state of alert is in effect, the term of duration of the company as established in the company by-laws expires, the company shall not be wound up (article 360.1.a) of the Spanish Companies Act) until two months have elapsed as from the date on which the state of alert is lifted.
- Suspension of the obligation of the directors to summon a general meeting in order to agree the winding up of the company:
If, before the declaration of the state of alert and during the effect thereof, there is a legal or statutory cause for the winding up of a company, the legal deadline for the summons of the general partners meeting on the part of the management organ for passing the agreement for the winding up of the company or the agreements with the purpose of weakening the cause for winding up (article 365 of the Spanish Companies Act) shall be suspended until the date upon which the state of alert is lifted.
- Waiver of the director’s responsibility for company debts.
Article 367 of the Spanish Companies act establishes the joint and several liability of the directors for company obligations arising subsequent to the occurrence of the legal cause for winding up when the obligation to summon the general meeting within two months is not fulfilled, so that, where appropriate, the winding up resolution may be adopted.
In this respect and in line with measure 11 above, the Royal Decree provides that if the legal or statutory cause for winding up has occurred during the state of alert, the directors will not be liable for the company debts incurred during that period.
- Suspension of the term for the duty of filing for insolvency:
While the state of alert is in effect, a debtor in a situation of insolvency shall not have the obligation to file for insolvency. The courts shall not admit petitions for involuntary insolvency proceedings filed during the state of alert or during the two months following the lifting of the state of alert. Any applications filed for voluntary insolvency shall be admitted preferentially, even if they are filed at a later date.
Likewise, debtors who have notified the competent courts for the declaration of insolvency of the initiation of negotiation with creditors in order to reach a refinancing agreement, or an out-of-court payment agreement, or to obtain adherence to an advanced proposal for agreement, although the deadline of three months has expired to which section five of article five bis of the Insolvency Act 22/2003 of 9th July refers, shall not be obliged to file for insolvency, while the state of alert is in force.
Carla Villavicencio
Vilá Abogados
For more information, please contact:
9th April 2020
