Consequences for listed companies of Royal Decree-Law 11/2020 to face COVID-19

In this post, we analyze the main implications for listed companies arising from Royal Decree-Law 11/2020, of March 31, adopting additional emergency measures to face the social and economic impact of COVID-19.

The Council of Ministers approved Royal Decree-Law 11/2020, of March 31 (“RDL 11/2020”) with a new package of urgent measures to face the COVID-19 health crisis. It entered into force on April 2. Some of the measures are new, while others amend or clarify those provided under Royal Decree-Law 8/2020, of March 17 (“RDL 8/2020”).

The most prominent measures in the corporate sphere allow for greater flexibility in decision-making processes and corporate governance.

During the state of emergency, whether or not expressly provided for in the bylaws, the governing bodies and their committees may meet via video or telephone conference, provided that the secretary acknowledges the identity of all those attending and states so in the minutes, which will be immediately emailed to them. In accordance with Article 40(1) of RDL 8/2020, this measure could apply to all matters, not only those regarding annual accounts and the annual general meeting (as established in Article 41(2) of RDL 8/2020 specifically for listed companies).

RDL 11/2020 also includes some of the criteria laid down for listed and non-listed companies in the joint statement issued by the Spanish Securities and Exchange Commission (CNMV) and the Spanish Registrars Association on March 26. In particular, those companies that have prepared their financial statements and will call a general meeting after the entry into force of the exceptional measures may modify the proposed allocation of profit/loss. If the meeting has already been called, they may withdraw the proposed allocation and defer the decision to a subsequent meeting subject to certain conditions (including a justification from the governing body and a letter from the auditor, as well as the obligation to inform of these measures through the communication channel for inside and other relevant information, as the case may be, and attaching it as supplementary information to the annual accounts).

A new foreign investment regime is introduced requiring prior approval for investments in strategic sectors made by EU or EFTA residents acquiring a stake of at least 10% in the share capital of a Spanish company or acquiring effective participation in its management or control. This screening mechanism will also apply where non-EU and non-EFTA residents ultimately possess or control, directly or indirectly, more than 25% of the share capital or voting rights of the investor, or otherwise exercise control, directly or indirectly, over the investor.

Investments of less than €1 million will not be subject to prior approval until the entry into force of the implementing regulation of Article 7 bis of Act 19/2003, of July 4, as the case may be. A simplified authorization regime is established for: (i) investments between €1 million and €5 million (until the entry into force of the implementing regulation of Article 7 bis of Act 19/2003, as the case may be); or (ii) where there is evidence by any legally valid means that a binding agreement had already been reached prior to March 18, 2020 in which the price was already fixed, specified or subject to specification.