COVID-19: Any companies that apply for ERTE temporary layoff procedures due to force majeure and distribute dividends could lose their rights to relief from social security contributions

Spain - 05 / 13 / 2020

Royal Decree-Law 18/2020 determines that the distribution of dividends at companies applying for the special ERTE temporary layoff procedures can make them lose their rights to exemption from social security contributions and states that this measure will not be taken into account for the purpose of exercising the right to withdrawal of shareholders under article 348 bis 1 of the Capital Companies Law.

Royal Decree-Law 18/2020, of May 12, 2020, on social measures to protect employment, includes a corporate law measure, coming into force on May 13, 2020, and needing to be considered by any companies that (i) decide to apply for a special ERTE temporary layoff procedure based on the grounds set out in article 22 of Royal Decree-Law 8/2020, of March 17, 2020, and (ii) use the public funds allocated to those procedures, except for companies which, as of February 29, 2020, had fewer than 50 workers or individuals treated as if they were employees, registered for social security purposes, because the restriction on dividend distributions does not apply to these companies.

These companies:

a) Cannot distribute dividends for the fiscal year when these temporary layoff procedures are implemented, unless they first refund an amount equal to the social security contributions for which they claimed relief.

b) The fiscal year when the company does not distribute dividends as a result of applying the described restriction will not count for the purpose of the right to withdrawal of shareholders under article 348 bis.1 of the Capital Companies Law.