Spanish measures to address the Covid-19 Crisis

The obligation to file for insolvency, which applies for the management of corporations, is suspended until 30 September 2020, if illiquidity was caused by the pandemic.

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Last Tuesday, 17th of March, the Spanish Government decreed some extraordinary measures to address the economic and social impact of the Covid-19 crisis. In this document, the Government approved mechanisms to protect small and medium sized companies, workers, families, and other groups which are vulnerable. The executive order has been updating all these days, in order to improve it and solve some legal loopholes.

These actions are divided in labour measures, economic measures and social measures.

Labour measures

The Spanish Institutions promoted Home Office as long as it is possible. The rest of employees who were not able to work from home had a permit to commute to their workplace. Last two weeks, the government suspended all non-essential activity, whereof all employees who belong to these activities had to stay at home. This restriction has revoked today.

The Government has agreed with companies the establishment of temporary lay-offs of staff, which ensures at least a 70% of their incomes. It could be applied in a partial or in a total way to the employee’s working hours.

Economic measures

In order to sustain businesses which are in a critical situation and guarantee of liquidity, the Government has approved a lifeline amount to €100bn which will be channel through finance institutions. These loans would be in favourable conditions and the credits will be guaranteed by the Official Credit Institute (ICO in Spanish). In addition, the Spanish Government has suspended the payment times regarding the area of taxation. The purpose of the line of guarantees is to cover new loans and other forms of financing and renewals granted by financial institutions to companies and the self-employed to meet financing needs arising, among other things, from the payment of salaries, bills, working capital requirements or other liquidity needs, including those arising from the maturity of financial or tax obligations.

Spain has also suspended the period of declaration of insolvency. During the State of Alert, the debtor shall not be obliged to apply for a declaration of insolvency. Until two months have elapsed since the end of the state of alert, the judges will not admit for processing the necessary applications for insolvency proceedings that have been filed during that state or that are filed during those two months. If an application for voluntary competition has been submitted, it will be admitted for processing, with preference, even if it is submitted later.

Social Measures

Consumers and micro-enterprises can make use of a moratorium with regard to contractual obligations. This right applies until 30 June 2020 for claims arising from contracts concluded before 8 March 2020.

You can find more information here.

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