The Council of Ministers approved a Royal Decree-Law on extraordinary measures to support business solvency, mobilizing EUR 11 billion in direct aid to businesses, through subsidies, cost reduction and strengthening their capital.

These aids will be directed to viable enterprises in the sectors most affected by the pandemic, in order to channel resources to the economy as a whole and reduce the risk of over-indebtedness that could hamper economic recovery.

The objective is to continue to protect the productive fabric, maintain employment, prevent a negative impact on public finances and the financial system, and, finally, avoid a structural impact on the economy. To this end, the standard establishes various instruments for companies and freelancers to cope with the payment of invoices with suppliers, fixed costs and other debts, financial and non-financial, thus improving their balance sheets and ensuring the maintenance of their businesses.

The new measures, together with those already agreed for this year, represent a direct aid tax effort to protect the productive fabric, employment and health that exceeds 2% of GDP. Measures including resources transferred by the State to autonomous communities that are already allowing them to mobilize EUR 2 billion to help self-employed people and businesses in their territories.

These aids are in addition to other measures already in force, such as moratoriums on the payment of taxes and contributions to Social Security and other moratoriums on the repayment of public loans, mortgage loans and non-mortgage-guaranteed loans with financial institutions, or the payment of rents in the case of self-employed or vulnerable persons.

They also complement the different package of measures put in place to support self-employed people and businesses last year, with a mobilisation of aid of 20% of GDP that places the Spanish response to the social and economic consequences of COVID-19 among the highest in EU countries.

Four axes of action

The lengthening of the health crisis and the impact on the economy of the measures taken to curb its expansion make it necessary to approve new aid to strengthen solvency and prevent a deterioration in the assets of viable enterprises.

To this end, three aid funds are set up for viable undertakings whose economic situation has deteriorated as a result of the pandemic by a total of EUR 11 billion. In addition, the validity of some measures in the insolvency field is extended until the end of 2021.

Conditions for aid

The receipt of all these aids will be conditional on the recipient companies not having their domicile in a tax haven, are not in competition or have ceased their activity at the time of the application, are aware of payments of tax and social security obligations and do not pay dividends or increase the salaries of their management team for a period of two years , as well as the maintenance of its activity until June 2022.

7 billion euros line for direct aid to freelancers and businesses

The new Line of Direct Aid to Self-Employs and Businesses, with EUR 7 billion, aims to have autonomous communities grant direct aid to self-employed persons and businesses in the sectors most affected by the pandemic whose revenues have fallen by more than 30% compared to 2019.

 

These new non-reimbursable direct aid is added to the funds, amounting to EUR 24 billion, already transferred by the State to the autonomous communities in 2020 and 2021 to provide a health, economic and social response to alleviate the effects of the pandemic. The CCAAs have already announced their intention to use EUR 2 billion of these resources for direct aid to self-employed persons and businesses.

The new aid established will be a finalist character and will be used for the payment of debts incurred by companies since March 2020, such as payments to suppliers, supplies, wages, leases or reduction of financial debt.

These aids will be accessible to all companies and self-employed persons in the hospitality and catering sector, sectors with access to extended EREs established in Royal Decree-Law 2/2021, and others particularly affected by the pandemic, such as manufacturing industry activities related to trade and hospitality; wholesale and retail; transport ancillary sectors; aeronautical maintenance, and activities related to culture and sports activities. In total, about a hundred activities will be able to reach the resources.

This line will consist of two compartments: one of 5 billion, which will go to all autonomous communities, except the Balearic Islands and the Canary Islands. The allocation of funds will be carried out according to the same criteria as those used for the REACT EU: impact of the pandemic on CCAA wealth, impact of the crisis on unemployment and impact on youth unemployment.

he second compartment, of 2 billion euros, will go to the Balearic islands and the Canary Islands, because of the differential impact on its economy of the greatest weight of the sectors most affected by the pandemic.

Self-employed and viable enterprises that have had a revenue drop of at least 30% by 2020 may benefit from the previous year.

The aid will cover up to 40% of the additional drop in income of micro-enterprises and self-employed persons (with up to 10 employees), and 20% for other companies, with a fixed amount of EUR 3,000 for self-employed persons who pay on an objective estimation basis and a range of between EUR 4,000 and EUR 200,000 for the rest.

Aid for COVID financial debt restructuring

This second axis of action includes a set of measures to support and make publicly backed loans more flexible, thus allowing the ICO to be incorporated into the refinancing and restructuring processes agreed by banks and their clients, also protecting financial stability.

This axis is supported by the creation of a new line for the restructuring of, financial debt with state support, endowed with 3 billion euros.

The ICO Guarantee Lines launched in 2020 have mobilized more than 121 billion euros of funding for freelancers and businesses. The standard approved today extends until December 31 the deadline for applying for ICO-backed loans.

Measures were already taken in November to facilitate the payment of these debts, extending the period of non-payment of the principal to two years and extending the repayment period of the loans to eight years.

On the basis of the financial institution's analysis of the client, measures may be agreed to, first, extend for an additional period the maturity of publicly backed loans; secondly, to convert publicly backed loans into equity loans, a measure that will strengthen the resources of the beneficiary undertakings by having these loans equivalent to capital for commercial purposes.

As a measure of last resort in this area, direct aid is allowed to reduce funding with public support requested during the pandemic.

The aid may be allocated to undertakings meeting the eligibility criteria to be established by a subsequent Council of Ministers Agreement and within a renegotiation process agreed by customers with financial institutions, which shall assume the proportional share of the loan reduction.

For the articulation of these measures,a Code of Good Practice, voluntary accession by financial institutions and other agencies, similar to that existing in the mortgage field, will be adopted, the aim of which is to promote coordinated and efficient action by banks in support of viable companies with timely solvency problems.

Medium-sized enterprise recapitalization fund

Third, and in cases where the above measures have not been sufficient, a COVID-affected company recapitalization fund is set up to strengthen the balance sheets of companies that were viable in December 2019 but face problems of solvency by the pandemic.

 

This fund is endowed with 1 billion euros and will be managed by COFIDES, a company with public-private capital. The aid shall be made in the form of financial instruments, such as regular loans, equity loans, capital or other to undertakings which are temporarily difficult and which are unable to access the aid of the Fund to support the solvency of strategic undertakings, managed by SEPI, which has a minimum contribution amount of EUR 25 million.

Modernization of insolvency regulations to promote continuity of business

The approved Royal Decree-Law also establishes measures in the insolvency field, extending until 31 December the current moratoriums, in order to ensure that viable companies under normal market conditions have legal instruments that allow them to maintain their activity and employment.

Specifically, the moratoriums relating to the exemption from the debtor's duty to apply for the declaration of competition and the non-admission to the processing of applications for tenders submitted by creditors are extended; the deadline for renegotiating both refinancing agreements and out-of-court payment agreements (both pre-contest instruments) and the insolvency agreements themselves are extended; and the procedural measures that speed up processes, such as preferential processing and the promotion of out-of-court auction, are extended until 31 December 2021.

This extension will provide a period to address business analysis and restructuring processes without triggering an unnecessary loss of value as the insolvency regime is modernized and accelerated, favouring early action and debt restructuring agreements in order to prevent the destruction of employment and productive fabric, in connection with the transposition of the EU Directive on preventive restructuring frameworks , exemption from debts and disqualifications, and on measures to increase the efficiency of restructuring, insolvency and debt relief procedures.

Other measures

In addition, the objective of strengthening the solvency of companies extends the deadlines for the implementation of projects financed by the General Secretariat of Industry and the SME and the loans granted by Emprendetur to companies in the tourism sector.

The period is also increased to four months in order to delay the payment of tax debts without late interest.

The rule regulates the possibility that public limited companies that have not been able to modify their statutes may continue to hold the general meeting or assembly of partners by telematic means during the 2021 financial year, provided that the identity of the shareholder exercising their right to vote is guaranteed and the possibility of participating in the meeting by different means is offered.

Finally, the necessary mechanisms are established so that the National Securities Market Commission can regulate the advertising of cryptoactives or other assets or instruments presented as investment assets that are currently outside the perimeter of financial regulation. ​​