What happens with the distribution of dividends in companies in 2020?
The answer is found in the recent publication of the BOE on May 13, of Royal Decree-law 18/2020, of May 12, on social measures in defense of employment, which introduces in its article 5.2 related to “Limits on dividend distribution and tax transparency” a prohibition on distributing dividends for those companies that have availed themselves of a temporary employment regulation file (ERTE) under the terms set out in article 1 of the aforementioned Royal Decree-law.
However, this second section also establishes a temporary limitation on the distribution of dividends, applicable only to commercial companies or other legal entities that, as of February 29, 2020, had more than 50 employees registered with Social Security and in which the following two conditions also concur:
- They have availed themselves of the special ERTE regime according to the causes set out in article 22 of Royal Decree-law 8/2020, of March 17, on urgent extraordinary measures to address the economic and social impact of COVID-19.
- They have used public resources allocated to ERTEs.
In conclusion, according to the literal wording of article 5.2, companies that, as of February 29, 2020, had more than 50 employees registered with Social Security, cannot distribute dividends from the results of the 2020 fiscal year.
Article 5.2 includes an exception that allows for the distribution of dividends “unless the amount corresponding to the exemption applied to social security contributions is previously paid.”
However, from the reading of article 5.2 of Royal Decree 18/2020, we understand that this does not affect dividends related to the previous fiscal year, i.e., 2019, as well as the possibility of distributing profits from reserves.
Leocricia González Abogados.