Limit on the distribution of dividends under Royal Decree-Law 18/2020 on social measures in defence of employment
On 12 May, Royal Decree 18/2020 on social measures in defence of employment was published in the Official State Gazette, the purpose of which is basically to extend the ERTEs due to force majeure until 30 June 2020 for those companies that cannot resume their activity due to force majeure.
Article 5 of the Royal Decree includes a commercial measure referring to the distribution of dividends and tax transparency. Thus, with regard to tax transparency, it is established that companies and entities with tax domicile in countries or territories classified as tax havens under current legislation cannot benefit from the extension of TREEs due to force majeure.
With regard to the distribution of dividends, it is established that commercial companies or other legal entities that take advantage of the extension of the ERTE by force majeure and use the public resources allocated to them will not be able to distribute dividends during the tax year in which these Temporary Layoff Schemes are applied. Except if they previously pay the amount corresponding to the exemption applied to the social security contributions, not taking into account for the purposes of the exercise of the right of separation of the shareholders provided for in paragraph 1 of Article 348 bis of the revised text of the Law on Corporations, the financial year in which the company does not distribute dividends due to the application of the above. In other words, in those companies that have joined the ERTE by force majeure until 30 June and that use the public resources allocated to them, the shareholders will not be able to take advantage of the lack of distribution of dividends for the financial year 2020 in order to exercise their right of separation.
There is also an exception to the limitation on the distribution of dividends, in the sense that it will not apply to those entities which, on 29 February 2020, had fewer than fifty employees, or similar, registered with the Social Security.
