MERCANTILE LAW
Manuel Martín Sala
What is the corporate moratorium?
One of the measures adopted in response to the Covid-19 pandemic to mitigate the effects of the health crisis on businesses was the temporary modification of the regime established in the Law on Capital Companies (LSC) regarding dissolution due to severe losses (Article 363). Under this regime, if a company experiences losses that reduce its net assets to less than half of its share capital, the administrators must either promote the company’s dissolution or implement measures to rectify the f inancial imbalance.
The corporate or accounting moratorium meant that losses incurred in 2020 and 2021 would not be considered when determining whether the cause for dissolution applied. After several extensions, the moratorium was set to last “until the end of the financial year beginning in 2024” (RDL 20/2022), effectively covering 2022, 2023, and 2024.
What are the consequences of the corporate moratorium?
The corporate moratorium is particularly significant in terms of directors’ liability, as they are legally obliged to take appropriate actions when a company faces insolvency.
As mentioned, in cases of financial imbalance as described in Article 363 of the LSC, administrators must call a general meeting within two months to adopt a dissolution agreement. Failure to act as required by law may result in personal liability for the administrators.
The corporate moratorium essentially creates a legal fiction whereby companies that would normally face dissolution do not fall under this situation if their 2020 and 2021 losses are disregarded. Consequently, administrators are not required to promote the company’s dissolution nor face liability for failing to do so.
Has the accounting moratorium been extended again?
As the end date for the latest moratorium period approached (“the end of the financial year beginning in 2024”), uncertainty arose about a possible extension, which was ultimately introduced through RDL 9/2024. This decree extended the moratorium for two additional years, until the end of the financial year beginning in 2026. However, political instability prevented the necessary parliamentary approval, meaning the decree never took effect, leaving the potential extension in limbo.
The approval of RDL 1/2025 on January 28 further complicated the matter, removing any reference to a general extension of the moratorium for losses incurred in 2020 and 2021. Instead, it introduced a new moratorium for losses specifically caused by the Isolated High-Level Depression (DANA) that affected large parts of mainland Spain and the Balearic Islands between October 28 and November 4, 2024.
Unlike the previous general moratorium, which applied to all losses in 2020 and 2021, regardless of their cause, the new specific moratorium only applies to losses directly caused by DANA. According to the new law, these losses will not be counted “until the end of the financial year beginning in 2026.”
What should company administrators do in these cases?
Given the ongoing political uncertainty, for the 2025 financial year, administrators of companies that did not suffer losses due to DANA must now factor in their 2020 and 2021 losses to determine whether the company falls under the dissolution clause in Article 363 of the LSC.
For administrators of companies affected by DANA, their course of action will depend on calculations: After accounting for 2020 and 2021 losses but excluding those caused by DANA, they must assess whether the company is still subject to dissolution due to losses in other financial years. If so, they must convene a general meeting within two months to either dissolve the company or take action to rectify the financial situation.
