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Amendment of the proposed allocation of profits by listed companies following the situation caused by COVID-19 (new Art. 41 RDL 8/2020)

8 April 2020



Royal Decree-law 11/2020 of 31 March has given a new wording to Art. 41 of Royal Decree-law 8/2020 of 17 March (“Extraordinary measures applicable to the functioning of the governing bodies of Listed Public Limited Companies”). The amendment consists solely in adding a new sub-art. 3 to said Art. 41, which incorporates part of the content of the Collective communiqué of the Association of Registrars of Spain and of the Securities Market Authority in relation to annual accounts and the proposed allocation of profits of commercial companies in the context of the health crisis caused by COVID-19, of 26 March 2020, giving many of its provisions the force and effect of an act of parliament should listed companies consider it necessary to amend the proposed allocation of profits included in the already prepared annual accounts report (see. GA_P Analysis of 27 March on this Communiqué).

The rule (new Art. 40(6) bis Royal Decree-law 8/2020 to which Art. 41(3) refers) makes a distinction depending on whether the ordinary general meeting has been convened or not.

1. In the first case (meeting convened), the board of directors may resolve to withdraw from the agenda the proposed allocation of profits and submit a new proposal to be approved by a later general meeting before 31 October 2020. The decision must be published before holding the already convened general meeting. Withdrawing the proposal from the agenda must be justified by the board based on the situation caused by COVID-19 and be accompanied by a letter from the auditor of accounts indicating that he would not have modified its audit opinion if he had known the new proposal at the time of his signature.

The board of directors’ certified transcript for the purposes of filing the accounts will be limited to, where applicable, the approval of the annual accounts. A supplementary certified transcript regarding the approval of the proposed allocation of profits must be subsequently submitted to the Register of Companies.

2. If the accounts have already been prepared but the ordinary general meeting has not yet been convened, the board may substitute the proposed allocation of profits contained in the report for another proposal, justifying the substitution accompanied by a letter from the auditor under the terms referred to in the preceding paragraph.

3. Given this concerns listed companies, Art. 41(3) provides that “the new proposal, its justification by the board of directors and the letter of the auditor must be made public as soon as approved as supplementary information in respect of the annual accounts on the website of the company and on the website of the Securities Market Authority as other relevant information or, if required, taking the specific case into account, as inside information”

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