Financial measures derived from the state of alarm and the COVID-19 pandemic
The serious economic situation stemmed from the COVID-19 pandemic has led to the adoption of a several extraordinary financial support measures for companies and the self-employed, in order to alleviate the liquidity problems and the loss of activity derived from the economic crisis, and the various legal limitations that have arisen from it.
New measures are constantly being approved, and modifications are adopted on those already approved, so it is necessary to have a constant update in the information regarding these aids and to carry out a correct prior verification of their requirements and scope before using them.
That is why we highlight the most important ones, recommending that each company or self-employed person seek legal advice that allows them to know all the measures that they can apply for and design a complete strategy when establishing their own business plan.
No general suspension of obligations has been declared
Contrary to common beliefs, the aid measures regarding the contract obligations’ payment or the unilateral modifications of their conditions are neither generalized nor automatic, not even in a situation as extraordinary as the current one. The suspension of activities derived from the inevitable economic crisis does not grant debtors an automatic right to suspend their payment obligations derived from contracts, nor do they automatically entail new conditions adjusted to new circumstances.
The financial measures decreed by the Spanish Government are concrete and limited. Therefore, it is necessary to know their scope and to draw up a well-designed, global business viability strategy, resorting to other possible legal mechanisms, such as out-of-court payment agreements, pre-bankruptcy, bankruptcy or refinancing agreements.
Treasury mitigation measures
Some of the measures are aimed at temporarily reducing the burden of some of the activity’s own expenses. The most important are:
- Measures regarding business premises’ lease
Tenants who are considered self-employed or PYMEs (with an asset not exceeding 4 MM Euros, Net amount of the turnover not exceeding 8 MM and an average number of workers not exceeding 50), may obtain:
- If your landlord has the status of “large holder of real estate”: a mandatory moratorium for the landlord, during the state of alarm, up to a maximum of four that must be paid deferred within the following two years.
- If the landlord is not a “large property holder”: tenants may obtain a temporary and extraordinary postponement that must be agreed with the landlord.
To access these mechanisms, the lessee must have been forced to suspend its activity or demonstrate a decrease in billing of at least 75%. The owners of more than ten urban properties, excluding storage rooms or garages, or more than 1,500 square meters built have the status of large holder.
- Measures on suspension or moratorium on contracts
Various measures have been contemplated such as moratoriums on mortgage payment on buildings affected by economic activity, moratoriums of 6 months on Social Security contributions to companies and the self-employed, and reductions in interest rates in the payment of Social Security debts.
The temporary suspension of supply contracts and the modification of their contract modalities are allowed without penalty, a payment suspension mechanism is established regarding bills for electricity, gas and certain petroleum products, and the possible refinancing of various types of loans is established.
Access to financial assistance
The Spanish Government has established several endorsement through the Official Credit Institute (ICO) to provide funds for companies and the self-employed. This assistance amounts to 100.000,00 million euros. Its processing must be carried out before financial entities.
The application of these measures is very complex; It is important to obtain specific advice, therefore, do not hesitate to contact our specialized lawyers in commercial and bankruptcy law.