Direct aid and solvency support for businesses and self-employed hit by COVID-19

Automatic summary, not yet reviewed

1. A Covid direct aid line is created, with 7 billion euros, for self-employed people and companies whose sales fell by more than 30% in 2020 compared to 2019 and whose activity is listed in Annex I. The aid is restricted to specific uses: it must go to paying debts, suppliers and fixed costs, and reducing State-guaranteed debt comes first.
2. The Autonomous Communities and the Cities of Ceuta and Melilla run the aid programs in their territory. The Balearic Islands and the Canary Islands have their own 2 billion euro compartment, and the rest share 5 billion distributed using income, unemployment and youth unemployment indicators.
3. Maximum aid amounts vary by size and sales drop: up to 3,000 euros for those taxed under the objective estimate regime, and for everyone else a percentage of the drop (40% with 10 or fewer employees, 20% with more), with a minimum of 4,000 and a maximum of 200,000 euros.
4. Aid recipients must keep the activity running until June 30, 2022, pay no dividends in 2021 and 2022, and not raise senior management pay for two years. If they fail, the money must be returned.
5. A Covid financial debt restructuring line is created, with 3 billion euros, allowing as a last resort part of the public guarantee to be converted into transfers to reduce the debt of viable businesses and self-employed people, within a renegotiation with the banks. Maturity dates of guaranteed loans can also be extended, and loans can be converted into participative loans while keeping the guarantee.
6. A voluntary Code of Good Practices is created for financial institutions, coordinating support measures for debtors. A bank that applies it incorrectly can be sanctioned as a minor or serious offense under the credit institutions law.
7. A Fund for the recapitalization of companies affected by Covid is created, with 1 billion euros, managed by COFIDES, to strengthen the solvency of viable medium-sized companies hit by the pandemic. The Fund will not support companies that were already unviable before COVID-19, and it ends after a maximum of eight years.
8. Insolvency moratoriums are extended until December 31, 2021: debtors are not required to file for insolvency proceedings and courts will not accept creditors' compulsory insolvency petitions. Also, tax debt deferrals are extended to four months without interest for debtors with turnover of up to 6,010,121.04 euros.

Who it affects

• Self-employed people and companies in the sectors listed in Annex I with a sales drop above 30% in 2020: They can apply for direct aid to pay debts, suppliers and fixed costs.
• Companies and self-employed people with State-guaranteed loans: They can access maturity extensions, conversion into participative loans, or debt reduction through public transfers.
• Financial institutions: They can voluntarily join the Code of Good Practices and take on part of the principal reduction in renegotiations.
• Viable medium-sized companies affected by the pandemic: They can receive support from the new recapitalization fund managed by COFIDES.
• Individuals and entities with tax debts and turnover of up to 6,010,121.04 euros: They can defer tax payments for six months, interest-free during the first four months.

Words worth knowing

Aval público (public guarantee)

A State guarantee: if the company does not repay the loan, the State answers to the bank.

Préstamo participativo (participative loan)

A loan whose interest partly depends on the company's profits and which, for commercial law purposes, is treated like capital.

Concurso de acreedores (insolvency proceedings)

A court procedure for a company or person that cannot pay its debts, in which a judge organizes payment to creditors.

CNAE

National Classification of Economic Activities: codes that identify each company's line of business.

Estimación objetiva (objective estimate regime)

A tax regime (formerly known as 'módulos') under which self-employed people and small businesses pay taxes based on fixed indexes, not their actual books.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries