The year 2020 was the start of the pandemic and extremely difficult for companies. The government established various measures and mechanisms so that the general halt of activity did not provoke their definitive closing. Employment measures (temporary collective dismissal procedures, or “ERTEs”) as well as economic aid (direct and/or indirect subsidies to freelancers and companies) are distributed among various regulations, such as Royal Decree-Laws (“RDL”) 18/2020, 25/2020, 30/2020, 2/2021 or 5/2021 and have been made available to companies with varying results. In order to avoid public resources serving to finance private interests, said measures also have restrictions, such as the limitation on entities to distribute dividends during a specific period of time.
As an example, those companies that used ERTEs and the public resources earmarked for them may not distribute profits obtained during the financial year in which the ERTEs are used. This limitation is not applicable for those entities that (i) as of 29 February 2020, had fewer than 50 workers or similar personnel registered with the Social Security or that (ii) previously returned the amount corresponding to the exemption applied to its Social Security contributions.
Furthermore, RDL 5/2021 establishes that if a company takes advantage of economic subsidies that are set forth therein, it may not distribute dividends during financial years 2021 and 2022.
As indicated above, the reason for these restrictions is simply to avoid that companies use such subsidies or exemptions as a means to benefit its shareholders, when what is intended is, in a crisis situation, to strengthen corporate equity and thus promote companies’ survival and maintenance of employment.
That said, it is advisable to carefully analyse the subsidies obtained and the limitations associated with them.