As a result of the international financial situation in recent years and its repercussions on the Spanish financial market and, in particular, the restriction of the financing offered to small and medium-sized companies, the Spanish Government has been approving a series of exceptional measures in order to improve and facilitate said financing.
Consequently, last 13 December 2008, as part of the anticrisis measures adopted by the Government, the Royal Decree - Law no. 10/2008, of 12 December, came into force, adopting diverse financial measures for the improvement of the liquidity of the small and medium-sized companies, and other complementary financial measures.
Among these measures an exceptional system stands out (with a limited temporary validity) for the mandatory reductions of share capital and the winding up of Joint-Stock Companies and Limited Liability Companies a result of their losses.
In accordance with Article 327 of the Share Capital Companies Act, the share capital reduction of a Joint-Stock Company will have a mandatory nature when the losses incurred have reduced its net equity to less than two thirds of their total share capital and a fiscal year has elapsed without the net equity being recuperated.
Additionally, in accordance with Article 363 of the Share Capital Companies Act, both the Joint-Stock Companies as well as the Limited Liability Companies will be dissolved as a result of losses which reduce their net equity to less than half of their share capital, unless such share capital is then increased or decreased to a sufficient extent, and as long as bankruptcy proceedings does not need to be requested.
In accordance with the foregoing, the losses due to deterioration, which are significant in certain companies, as they are included in the Profit and Loss Account will have to be taken into account to the effects of determining the loss of net equity under the indicated events of share capital reductions and winding up of companies. However, the evolution of the international economic activity in recent years situates us within an extraordinary context which give place, in accordance with the aforementioned Royal Decree - Law no. 10/2008, to the application of an exceptional system, which consists of not taking into account the losses due to deterioration recognized in the annual accounts derived from the Tangible Fixed Assets, the Real Estate Investments and the Stock for the purposes of determining the losses for the mandatory reduction of the share capital and for the winding up of the companies foreseen in the foregoing articles.
Regardless of the foregoing and, as we have already mentioned above, the aforementioned exceptional system had a temporary validity consisting of the two fiscal years ending as of 13 December 2008.
When the 2009 fiscal year came to an end and given that the evolution of the international economic activity still finds us within an exceptional context, it continues to be necessary to maintain the suspension of the afore-mentioned corporate system, applicable only for the cases of losses due to the deterioration of the Tangible Fixed Assets, the Real Estate Investments and the Stock and for the purposes also mentioned above.
It is for this reason that last 1 April 2010, Royal Decree - Law no. 5/2010, of 31 March, came into force, extending the validity of the afore-mentioned exceptional system for the mandatory reductions of share capital and the winding ups of Joint-Stock Companies and Limited Liability Companies, as a result of the indicated losses, for an additional term of the two new fiscal years to be closed as of this new Royal Decree – Law enters into force. The foregoing refers to the fiscal years 2010 and 2011, unless, during said years, the corporate fiscal year of the company is modified and with it, it is created a corporate fiscal year of less than one year, in which case, the benefits of this exceptional system will be temporarily limited to the two fiscal years instead of the two years.