Law 5/2021 of 12 April, which modifies the consolidated text of the Capital Companies Act, approved by Royal Legislative Decree 1/2010 of 2 July, and other financial regulations, regarding the promotion of shareholders’ long-term involvement in listed companies. (“Law 5/2021”).

Law 5/2021 was published on 13 April 2021 in the BOE [Boletín Official del Estado (Official State Bulletin)], with the intention of transposing to the Spanish legal system Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017, which amends Directive 2007/36/EC with respect to the promotion of shareholders’ long-term involvement in listed companies. However, other aspects relevant to the functioning of capital companies have been amended in this.

Below is a summary of the amendments included in Law 5/2021 pertaining to capital companies, whether anonymous or limited, and then to listed companies.

I. Modification to the Consolidated Text of the Capital Companies Act (hereinafter, the “CCA”):

The CCA is amended as follows:

A. Amendments affecting all capital companies:

• Telematic attendance at meetings: general meetings may be held telematically in all capital companies if the by-laws provide for this possibility. In this case, the identity of those attending must be duly guaranteed and, in addition, the convening order must specify the deadlines, forms and methods of exercising the partners’ rights as provided for by the management in order to allow the meeting to be conducted properly. Likewise, any responses to partners or their representatives who, when attending telematically, exercise their right to information during the meeting, must be given during the meeting itself or in writing within seven days following the end of the meeting (amendment to Article 182);

• companies’ by-laws may authorise the administrators to convene meetings to be held without the physical attendance of the partners or their representatives (new Article 182 bis);

• the particular interest of the administrators is especially subordinate to the interest of the company, in all cases (amendment to Article 225.1);

• it is specified who will be considered as persons linked to the administrators, both as individuals and as legal entities (this amends Article 231);

• it is established who, within intra-group operations, is responsible for approving those transactions that the company enters into with its parent company or other companies of the group that are subject to conflicts of interest (new Article 231 bis); and

• all companies shall at any time have the right to obtain information that allows them to determine the identity of their shareholders, so that they may communicate directly with them in order to facilitate the exercise of their rights and their involvement in the company (amendment Article 497).

B. Amendments that affect listed corporations, among others:

• the right is introduced of listed companies to identify the final beneficiaries in the event that the entity or someone legitimised as a shareholder according to the accounting register of shares is an intermediary entity (new Article 497 bis);

• the minimum term for the exercise of the right to subscribe new shares, counting from the corresponding publication in the BORME [Boletín Oficial del Registro Mercantil (Official Bulletin of the Commercial Register)], is reduced to 14 days (amendment Article 503);

• the regime of exclusion of the right of preferential subscription is amended, requiring the preparation of a report from an independent expert in the event that the shares or securities object of said exclusion represent more than 20% of the share capital. This is voluntary in the remaining cases. Shares may be issued at a value lower than their fair value provided that the corporate interest is justified by a report from the administrators. In addition, it will be necessary to have a report prepared by an independent expert who will specifically rule on the expected economic dilution and the reasonableness of the justifications. In addition, particularities are established in the process of determining the price determination (amendment to articles 504 and 505);

• any order to increase the share capital while excluding the right of preferential subscription is limited to 20% of the share capital. (amendment to Article 506);

• the possibility is simplified of registering capital increases in the Commercial Register even before they are completed or despite an incomplete subscription, unless it has been expressly excluded (amendment to Article 507);

• As regards the issuance of debentures convertible into shares, no independent expert report shall be required as long as the issuance does not reach twenty percent of the capital, although this may be done voluntarily; and with regard to the mandatory nature of the regulations of the general board meeting, the general shareholders’ meeting of the publicly traded company, constituted with the quorum required under Article 193 or with the higher number provided for this purpose in the by-laws, a specific regulation will be approved for the general meeting (amendments to articles 510 to 512);

• an obligation is established to transfer certain information from the company to the shareholders and final beneficiaries (new articles 520 bis and 520 ter);

• remote participation is permitted in the event that the general meeting of the listed company is only held telematically, and in this regard, shareholders may also delegate or exercise in advance the vote of the proposals on points included in the agenda by any of the means provided and the minutes of the meeting are issued by a notary (amendment Article 521);

• Intermediary entities that are authorized as shareholders may divide the vote and exercise it in a different manner as voting instructions require, if they have received these (amendment to Article 524);

• When voting has been done electronically, the company must send an electronic confirmation of receipt to the shareholder who have voted (new Article 527 bis);

• the necessary majorities are established for the approval, calculation, cancellation and elimination of the statutory provision clause relating to double voting, and, among other amendments, the transfer of shares by the shareholder with a double vote. The necessary majority, which will be established in the Corporate By-laws of each listed company, must be greater than 60% (amendment to Article 527 ter et seq.);

• listed companies must be administered by a board of directors that will be composed exclusively of individuals (amendment Article 529 bis, section 1);

• there is an amendment to the nature of the remunerated of board members of quoted companies for the performance of their functions, as well as the approval of their remuneration policy (amendment to Articles 529(o) et seq.);

• the new concept of related transactions, their advertising and approval, and rules of calculation is defined(amendment 529(s) et seq.);

• included is information on corporate governance and remuneration in the management report of listed companies that have issued securities admitted for quotation in the regulated market of any Member State of the European Union (amendment to Article 538); and

• the content of the annual report on the remuneration of the directors is amended (amendment to Article 541).

II. Amendment to Law 22/2014, of 12 November, which regulates venture capital entities, other closed-type collective investment entities and companies managing closed-type collective investment entities and which amends Law 35/2003 of 4 November on Collective Investment Institutions (hereinafter Collective Investment Institutions “Law 22/2014”):

As regards the amendments introduced in Law 22/2014, Law 5/2021 adds two new articles, 67 bis and 67 ter. In this regard, and with respect to Article 67 bis, the obligation is established of managing companies (“SGEIC” [Sociedades gestoras de entidades de inversión colectiva (collective investment institution management companies)]) to develop and make known to the public a policy of involvement that describes how they integrate the involvement of shareholders in their investment policy in the case of investments on behalf of the ECRs and EICCs managed in shares admitted for negotiation in a regulated market that is located or operates in a Member State and the characteristics of this policy.

For its part, Article 67 ter establishes the reporting obligations of SGEICs when they provide the services of asset management for insurance entities or pension plans and funds.

III. Other laws that have been amended by Law 5/2021:

• Law 35/2003, of 4 November, on Collective Investment Institutions;
• Commercial Code;
• Law 22/2015 of 20 July on the Auditing of Accounts;
• Revised Text of the Securities Market Law; and
• Law 22/2014 of 12 November, which regulates venture capital entities, other closed-type collective investment entities and companies managing closed-type collective investment entities and which amends Law 35/2003 of 4 November, on Collective Investment Institutions.

IV. Entry into force:

In accordance with the fifth final Provision, Law 5/2021 will enter into force twenty days after its publication in the BOE, i.e. on 11 May 2021.

However, the amendments introduced by this Law 5/2021 in Article 529(r) of the CCA will enter into force six months after its publication in the BOE. In this regard, companies must submit for approval the remuneration policy adapted to such amendments at the first general meeting held after that date.

The amendments introduced by this Law in Article 541 of the CCA, will enter into force for the annual reports on the remunerations of the directors for the tax years ending on 1 December as from 2020.

For its part, the obligations established in the new Chapter VII bis of Title XIV of the CCA will not apply until two (2) months after the entry into force of Law 5/2021.

Finally, the requirement for the board members of listed companies to be individuals shall only apply to appointments, including renewals, occurring from the month following their publication in the BOE. As long as legal entities remain, it shall apply to the natural persons representing them as provided for prior to said statutory amendment.

The main new developments of Law 3/2021, of 12 April, which adopts complementary measures, in the workplace, to alleviate the effects derived from COVID-19 (hereinafter, “Law 3/2021”) are summarised below.

1. MAINTENANCE OF ACTIVITY AND EMPLOYMENT IN HEALTH AND SOCIAL CENTRES

During the validity of the state of alarm decreed by Royal Decree 463/2020, of 14 March, which declares the state of alarm for the management of the health crisis situation caused by COVID-19 and its possible extensions (hereinafter, “RD 463/2020”), the following will be understood as essential services, regardless of ownership or management regime:

• The sites, services and health establishments determined by the Ministry of Health.
• The centres, services and social establishments dedicated to childcare and adolescent care, elderly care, and care of people in dependent situations, of people with disabilities, of people with addiction or drug addiction problems, or of people at risk or situation of social exclusion and of people without home, in the terms specified by the Ministry of Social Rights and the 2030 Agenda.

2. EXTENSION OF ARTICLES 2 AND 5 OF ROYAL DECREE-LAW 9/2020, OF 27 MARCH, ADOPTING ADDITIONAL MEASURES IN THE WORKPLACE TO MITIGATE THE EFFECTS ARISING FROM COVID-19

The extension of Articles 2 and 5 of Royal Decree-Law 9/2020 to 31 May 2021.

• Article 2 establishes the so-called “dismissal prohibition”, with the understanding that contract terminations and dismissals shall be considered unjustified based on objective grounds that justify the suspension of contracts based on force majeure or on objective grounds.

• Article 5 sets out the interruption of the calculation of the maximum length of time for temporary contracts in the event of suspension of the contract by ERTE.

3. PROCEDURE FOR THE RECOGNITION OF UNEMPLOYMENT CONTRIBUTION BENEFIT FOR PERSONS AFFECTED BY TEMPORARY EMPLOYMENT OR FORCE MAJEURE REGULATION RECORDS PROVIDED FOR IN ARTICLES 22 AND 23 OF RD-LAW 8/2020, OF 17 MARCH

The Companies, acting on behalf of the persons affected by ERTEs (Temporary Redundancy Plan [Expediente de Regulación Temporal de Empleo]) ETOP (Economic, Technical, Organisational or Production Causes [Causas Económicas, Técnicas, Organizativas o de Producción]) or force majeure, must initiate the procedure by means of a collective application, completing the model provided by the SPEE (State Public Employment Service [Servicio Público de Empleo Estatal]), also including the following information personalised for each affected workplace:

• Name or company name of the company, address, tax identification number and contribution account code for Social Security to which the working persons whose requested suspensions or reductions of working hours are assigned.

• First and last names, tax identification number, telephone number and email address of the company’s legal representative.

• File number assigned by the labour authority.

• Specification of the measures to be taken, as well as the start date on which each of the working persons will be affected by them.

• In the event of reduced working hours, determination of the percentage of temporary reduction, calculated on a daily, weekly, monthly or annual basis.

• Responsible statement stating that authorisation has been obtained from the legal representation of the workers for their submission.

• Supplementary information that, where appropriate, is determined by resolution of the General Directorate of the State Public Employment Service.

The aforementioned communication must be submitted by the company within 5 days of the ERTE request of force majeure referred to in Article 22 of RD-Law 8/2020, of 17 March, or from the date on which the company notifies the competent labour authority of its decision in the case of the ERTEs regulated in Article 23 of the same standard.

Failure to comply with the above communication shall be considered a serious violation in accordance with the provisions of Article 22.13 of the restated text of the Law on Violations and Sanctions in the Social Order (hereinafter, “LISOs”).

4. ADOPTION OF AGREEMENTS IN TEMPORARY EMPLOYMENT REGULATION FILES IN COOPERATIVE COMPANIES

When, due to the lack of adequate or sufficient means, the General Assembly of cooperative companies cannot be called to hold it through virtual means, the Governing Council may assume the competence to approve the total or partial suspension of the provision of work of its partners and partners and issue the corresponding certification for its processing, under the terms provided for in Articles 22 and 23 of Royal Decree-Law 8/2020, of 17 March.

5. TEMPORARY LIMITATION OF THE TEMPORARY EMPLOYMENT REGULATION FILES PROVIDED FOR IN ARTICLE 22 OF RD-LAW 8/2020

The ERTEs duration provided for in Article 22 of RD-Law 8/2020 may not be extended beyond the period in which the state of alarm decreed by Royal Decree 463/2020 remains in force.

6. SANCTIONING REGIME AND REIMBURSEMENT OF IMPROPER BENEFITS

In accordance with LISOs, the following may be subject to sanction:

• Applications submitted by the company that contained falsehoods or inaccuracies in the data provided by the company.

• The request for measures in relation to employment that are not necessary or have not had sufficient connection with the cause that originates them, when said circumstance is deduced from the falsehoods or inaccuracies in the data provided by them and provided that they give rise to the generation or receipt of undue benefits or the application of undue deductions in Social Security fees.

The improper recognition of benefits to the employee for reasons not attributable thereto, as a result of any of the breaches provided above, will result in the return of the benefits improperly generated and, likewise, the employee will retain the right to the salary corresponding to the period of employment regulation, with the discount of the economic amount received as unemployment benefit.

7. DATE OF EFFECTS OF UNEMPLOYMENT BENEFITS DERIVED FROM THE OTHERS REGULATED IN ARTICLES 22 AND 23 OF RD-LAW 8/2020, OF 17 MARCH

• In force majeure ERTEs: the date of effects will be the date of the event causing it.

• For ETOP-related ERTEs: the effective date will be the same or later than the date in the company, inform the labour authority of the decision taken.

8. ENTRY INTO FORCE AND EFFECTIVENESS OF THE STANDARD

This standard comes into force on the same date of its publication in the Official State Gazette, 13 April 2021.

• Law 4/2021, of 12 April, has been published, which regulates a recoverable paid leave for salaried workers who do not provide essential services in order to reduce the mobility of the population in the context of the fight against COVID-19 and which does not modify anything of the repealed Royal Decree-Law 10/2020, of 29 March, which regulates a recoverable paid leave.

RD 2/2021 includes the:

• Extension of temporary lay-offs due to force majeure in force at the entry into force of Royal Decree 2/2021
• ERTES of force majeure due to impediment or limitations of activity
• ETOPs
• Companies belonging to sectors with a high rate of coverage by temporary lay-off proceedings and a low rate of recovery of activity
• Limits related to the distribution of dividends and fiscal transparency
• Safeguarding employment
• Extension of Articles 2 and 5 of Royal Decree-Law 9/2020, of 27 March, adopting complementary measures in the labour field to mitigate the effects of Covid-19
• Overtime and new outsourcing of activity during the application of the temporary employment regulation procedures regulated in this regulation
• Mecuida Plan
• Extraordinary measures in the area of unemployment protection 
• Measures to support the self-employed

The Sentence handed down by the Girona Provincial Court on 03/02/2021, condemning an insurance company to pay its insured - a pizzeria - compensation for the stoppage of activity due to Covid-19, has given rise to a number of headlines in the press asking whether it is opening the door to a wave of claims from all the businesses that have had to close temporarily due to the coronavirus pandemic.

The issue is not as simple as it appears, nor can the reasons for the Court's decision be simply transposed to all cases.

By means of the insurance contract, the company undertakes, in exchange for a premium, to compensate the insured, within the agreed limits, for the damage caused when the covered loss occurs. In the specific case of loss of earnings insurance, the insurer compensates the loss of economic yield that would have been obtained with an activity if the loss described in the contract had not occurred (Art.63 of the Insurance Contract Law -LCS-). Consequently, in order for the stoppage of the activity to be indemnifiable, it must be the consequence of damage covered by the policy. In other words, a prior damage whose risk has been insured is unavoidably required.

In the sentence issued by the Court of Girona, it is stated that the insurer objected that neither in the general conditions, nor in the particular conditions, nor in the informative leaflet, was it included that the expenses of paralysis derived from a governmental resolution in the event of a pandemic were covered. Therefore, it would seem that it was the company itself who raised its defence from the point of view of the restriction of the contracted cover, which, in effect, placed the axis of the debate on the requirements that the limiting clauses must fulfil, insofar as they reduce, condition or modify the insured party's right to compensation. 

Examination of the policy by the Court confirms that, on the one hand, in the particular conditions, in the clause delimiting the risk covered, the event of loss of profits due to stoppage of activity was contemplated, and on the other hand, in the general conditions, as alleged by the insurer, the event of stoppage of activity due to government resolution in the event of a pandemic was not contemplated, which, in the opinion of the Court, implies a clear limitation of the insured's rights, and therefore, that the provisions of Art. 3 LCS for this type of clause should be applied, with the result that, in the case examined, the requirement of such a limitation being specifically accepted in writing was not met, meaning that it has no exclusionary effect.

However, if instead of having focused the controversy from the outset on the non-inclusion of the pandemic as an event generating the risk of paralysis of activity, the debate had focused on the delimitation of the object of the risk, perhaps the result would have been different.

As indicated in the sentence, in the general conditions of the policy, depending on the type of compensation agreed and up to the economic and time limit agreed in the particular conditions (200 euros/day up to a maximum of 30 days),the coverage for loss of profits covered economic losses caused by the temporary total or partial paralysis of the insured business activity when it was the direct consequence of a loss covered by the policy included in the cover for damages that had been expressly contracted. As stated at the beginning, Art. 63 LCS, when defining loss of profit insurance, requires the occurrence of a loss described in the contract. In fact, the sentence of the Court of Appeals also points this out: Finally, insurance and coverage referring to loss of profits or loss of benefits such as the one analysed, are normally subject to the existence of prior material damage and in the present case, this point is not even questioned by the insurer.

The loss of profits is only covered when it is the consequence of a previous damage covered by the policy, which inevitably entails examining the objective or material coverage of the policy to determine the risk assumed in the contract, its content, and the scope to which it extends, so that not any paralysis of the activity is compensable, but only that which is within the orbit of the risk covered (fire, floods, rain, wind, vandalism, theft, sea raids, etc.). It is not a question of coverage including all loss of profits produced by any cause or incident, but only that derived from incidents covered by the insurance contract (Sentence 213/2017 of 25 April of the 1st Section of the Provincial Court of Cáceres: ...Consequently, the loss that caused the collapse of the roof of the premises was not covered by the insurance policy taken out by the parties, so that there is no claim for loss of profits derived from a loss not covered in the contract, because article 63 of the LCS requires that the loss is described in the contract in order for there to be compensation for loss of profits derived from the same, as there was no loss of profits due to any of the incidents covered by the policy. ...).

In short, the Sentence of the Provincial Court of Girona does not allow us to affirm that any new doctrine in favour of claims against insurers for the loss of benefits derived from the temporary closures of Covid-19 is generated, but rather that each case will require a detailed study of the policy signed.

For this reason, both international supervisory bodies and the companies in the sector are becoming increasingly aware of this and are promoting the regulation of these services, to implement more guarantees and legal security for companies and for the end users of these services.

In this regard, on an international level, we have observed the willingness of regulators to establish a legal framework for cryptocurrency service providers (commonly referred to as "exchanges" or "wallets"), and on an European level, we are awaiting the future regulation of cryptoassets in Europe ("Market in Crypto Assets" (MiCA)), which should provide a regulated framework for the development of the different classes of tokens and the requirements for service providers linked to Blockchain / DLT technology.

On a national level, regulators-mainly the CNMV- have always been very direct with cryptocurrency providers operating in national territory, issuing warnings that they are service providers not regulated by the CNMV or the BdE.

Consequently, with the publication of RD-L 7/2021, which transposes several European directives, including the Fifth Directive on the Prevention of Money Laundering and Terrorist Financing (hereinafter "PML/TF"), providers of services for the exchange of virtual currency for fiat currency and custody of electronic wallets, i.e. businesses related to cryptocurrencies, wallets, exchanges, etc., were incorporated as obliged parties to this regulation.

• Information Alert: RD-L 7/2021 Transposition of European Directives for the fight against money laundering and terrorist financing
• Information alert: RD-L 7/2021 on Control of electronic currency service providers and virtual currency exchange services

The aforementioned Royal Decree-Law added to the LPBC/FT a second additional provision which determined that the Banco de España would be in charge of supervising the obligation to register and the conditions required for access to and maintenance of registration. In the same way as many financial sector institutions must request authorisation from the Bank of Spain (credit institutions and payment institutions), the National Securities Market Commission (CNMV) (venture capital institutions) or the corresponding supervisor to authorise or register their activity before they start to operate, starting last Friday, the date on which the Bank of Spain set up the corresponding register for this type of activity, being included in the register will also be mandatory prior to its implementation.

In addition, as is mandatory for this type of activities, regulated entities must submit the application for registration by means of forms accompanied by specific documentation, including, among others,  the AML/CFT procedures: the Risk Self-Assessment Report and the AML/CFT Manual.

What we should know if our activity is related to this sector?

Here are 4 guidance notes on the registration process:

• The following must be registered: both natural and legal persons offering services in Spain, as well as those offering services to any location if such activities are based, directed or managed in in Spain.
• The procedure may be carried out in person, by post or electronically, and it is mandatory for legal persons to do it electronically.
• The registration process must be accompanied by a minimum of mandatory documentation, apart from the forms provided by the Banco de España, which will be different for natural and legal persons.
• Companies and individuals that were already operating before the creation of this register have a maximum of 9 months from the publication of the RD-L in April within which to register.
• New companies will not be able to operate until they have obtained the resolution for their registration in the corresponding register of the Banco de España.
• The deadline for the resolution of the registration is 3 months from the date of the request for receipt.