As a result of the health crisis arising from the pandemic caused by COVID-19, many companies have been forced to promote Record of Temporary Employment Regulation (“ERTES“) to mitigate the negative effects caused by such situation. Specific regulations have been issued throughout the duration of the pandemic.

For the purposes of this article, those companies benefiting from an ERTE due to any of the causes indicated below and which have therefore taken advantage of the social security contribution benefits set forth in the applicable regulations are subject to a legal limitation on distributing dividends (including interim dividends) among their partners/shareholderscorresponding to the fiscal year in which the ERTE was carried out, except in the following cases:

• provided that the company has previously paid the amount corresponding to the exemption applied to social security contributions and waived it; or

• if the company had fewer than 50 employees, or treated as such, registered with the Social Security on 29 February 2020.

Consequently it excludes the exercise of the right of withdrawal by partners/shareholdersset forth in article 348 bis of the consolidated text of the Spanish Companies Act, approved by Royal Legislative Decree 1/2010, on 2 July, in the fiscal year in which the company does not distribute dividends.

As regards the causes that could give rise to ERTES subject to this limitation on the distribution of dividends, firstly, Royal Decree-Law 18/2020, on 12 May establishes this limitation for so-called force majeure ERTES.These were those based on the causes set forth in article 22 of Royal Decree-Law 8/2020 of 17 March, i.e. those that were directly caused by losses of activity as a result of COVID-19, including the declaration of a state of alarm, involving the suspension or cancellation of activities, temporary closure of public premises, restrictions on public transport and, in general, on the movement of people and/or goods, lack of supplies that seriously impede the continuation of the ordinary development of the activity, or in urgent and extraordinary situations due to the infection of the workforce or the adoption of preventive isolation measures decreed by the health authority, which are duly justified.

Secondly, Royal Decree-Law 24/2020, on 26 June, also extended this limitation to so-called ERTES for economic, technical, organizational and production reasonsarising from COVID-19.

Thirdly, Royal Decree-Law 30/2020, on 29 September, applied this limitation to so-called ERTES due to impediment or limitation of activity requested due to new restrictions or health restraint measures adopted, as from 1 October 2020, by Spanish or foreign authorities.

Finally, Royal Decree-Law 18/2021, on 28 September, has already extended the limitations on the distribution of dividends up to 28 February 2022 for all ERTES authorized before or by virtue of this Royal Decree-Law, i.e., ERTES due to force majeure, ERTES due to economic, technical, organizational and production causes and ERTES due to impediment or limitation of activity.

In summary, those companies subject to an ERTE for any of the aforementioned causes (i.e. ERTES due to force majeure, ERTES due to economic, technical, organizational and production causes and ERTES due to impediment or limitation of activity) as from the declaration of the first state of alarm (i.e. 14 March 2020) and until 28 February 2022 may not distribute dividends (nor interim dividends) arising from the result achieved during the fiscal year in which said ERTE has been applied (i.e. 2020, 2021 or 2022, as the case may be), unless they waive the exemption and return the amounts benefited with the corresponding legal interest or if they are companies with less than 50 employees or treated as such on 28 February 2020. Nor will the partners/shareholders of companies benefiting from any of such ERTES be able to exercise their right to withdraw from the company due to the non-distribution of dividends during the fiscal year in which the ERTES has been implemented.