New measures to support business solvency

Yesterday the Council of Ministers approved new measures aimed at solving the liquidity problems of companies and the self-employed by modifying the conditions of ICO credits and avoiding bankruptcy declarations or opening of the liquidation phase regarding companies that could be viable.

>>New conditions of credits with ICO guarantee (Novation) under Royal Decree-Law 8/2020, of March 17

• Extension of the term maximum to 8 years.
• Extension of the grace period maximum to 24 months.
• To be requested at financial institutions by the debtor before May 15, 2021, who must comply with certain eligibility requirements (no late payment, no CIRBE, no bankruptcy, and etc.) in order to qualify for such extensions.
• Financial entities may not unjustifiably increase the interest rate or demand the contracting of linked products and they must maintain working capital lines until June 30, 2021.
• Reduction up to 50% of notary and registry fees in term extensions.
• Exemption from the gradual fee for notarial documents of the ITP and AJD modality of public deeds derived from these operations.

>> Liquidity measures: extension of the term for granting public guarantee lines managed by the Official Credit Institute (ICO) until June 30, 2021. The eligibility criteria for companies and self-employed workers are the same. The maximum terms are those set out in the previous section. 

 >> Bankruptcy measures

• Extension until March 14, 2021 of the moratorium on the duty to request the declaration of bankruptcy.
• Extension until March 14, 2021 of the suspension of the admission for processing of the insolvency proceedings applications.
• The obligation of the judge to notify the bankrupt of the requests for breach of the agreement that are presented until January 31, 2021, but will not admit them for processing until April 30, 2021, period in which the debtor may request the modification of agreement.
• The judge's obligation to transfer to the debtor the requests for breach of the refinancing agreement that are presented until January 31, 2021, but without being admitted for processing until February 28, 2021, the maximum period in which the debtor may communicate a new start of negotiations with creditors, even if one year has not elapsed since the previous request for approval.

>> Commercial measures

• The term of validity is extended during the year 2021 so that, although it is not foreseen in the statutes of the entity, the general meetings of limited companies, the meetings of board of trustees of foundations and the assemblies of associates or partners of the rest of legal persons of Private Law (associations, civil societies and cooperatives), can be held by videoconference or multiple telephone conference as long as the attendees have the necessary means, the secretary of the body recognizes their identity and so expresses it in the minutes that will be sent below to the email addresses of the attendees. In the case of public limited companies, the call for the meeting may provide for attendance by telematics means and remote voting, as well as holding the meeting anywhere in the national territory. 
• The suspension period regulated in Law 19/2003 applicable to residents of other countries of the European Union and of the European Free Trade Association who intend to make direct foreign investments on companies listed in Spain is extended until June 30, 2021 or unlisted companies when the value of the investment exceeds 500 million euros. Direct foreign investments constitute those by virtue of which the acquirer (whether a resident of countries of the European Union and of the Spanish Free Trade Association or its beneficial ownership corresponds to residents of those countries) now hold a stake equal to or greater than 10% of the share capital or acquire a position of control as a result of a corporate operation or legal business.

 >> Tax Measures

• The VAT exemption applicable to the purchase of certain health products by hospitals is again established with effect from November 1, 2020 to April 30, 2021, and the VAT on masks is reduced from 21% to 4% until December 31, 2021.
• In the area of ​​tax credits, the framework of the Deduction for cinematographic investments are expanded; the previously established measures aimed at tax incentives for the automobile sector are extended to adapt them to community regulation; and the deduction for innovation is modified by increasing the type of deduction to 50% in the case of SMEs, and for the rest to 15%.

For more information:

Nerea Pérez de Guzmán
Partner. Restructuring Department

Xavier García
Associate. Insolvency Administration

Cristina Hernández Lería
Partner. Commercial Law Department

Jesús Pérez Esquide
Partner. Tax Law Department