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Madrid – December 25, 2023 – The Spanish government has extended a crucial lifeline for businesses struggling in the wake of the COVID-19 pandemic, postponing the rules around company dissolutions due too losses until 2026. It’s a move that feels like a collective exhale for entrepreneurs still navigating the economic fallout, adn it begs the question: how long can these temporary fixes truly hold up a fragile recovery?
Breathing Room for Businesses Hit Hard by COVID
The extension allows companies to absorb pandemic-era losses over a longer period, preventing a wave of closures.
- The suspension of dissolution rules for pandemic-related losses now extends through 2026.
- Losses incurred in 2020 and 2021 will not be considered when assessing a company’s solvency for dissolution purposes.
- The move aims to give viable businesses time to recover from unusual, unforeseen circumstances.
- The government is also extending repayment terms on over €9 billion in loans to Social Security.
Specifically, the government has decided not to consider losses from 2020 and 2021 when determining if a company’s net worth has fallen below half of its share capital – a key trigger for dissolution proceedings. This provides a critical buffer, allowing businesses to rebuild without the immediate threat of being forced to close. The official declaration was published today in the Boletín Oficial del Estado (Official State Gazette).
What does this meen for struggling companies? The government believes this measure will allow “viable companies facing certain difficulties” to continue operating, giving them a “reasonable time” to absorb the financial shocks of the pandemic. It’s a pragmatic approach, acknowledging that recovery isn’t linear and that some businesses simply need more time to get back on their feet.
though, the reprieve isn’t without its critics. Some economists argue that prolonging the unavoidable for struggling businesses simply delays necessary restructuring and could ultimately hinder long-term economic growth. The question remains: at what point does support become a crutch?
Adding to the relief package, the government also announced an extension of repayment terms for over €9 billion in loans to Social Security. This will provide further financial flexibility for businesses grappling with cash flow challenges.
Looking Ahead: A Temporary Solution? While the extension offers immediate relief, it doesn’t address the underlying structural issues that many businesses face. The Spanish economy is still grappling with high unemployment, inflation, and the lingering effects of the pandemic.
The government hopes that by 2026, the economic landscape will have improved sufficiently for businesses to stand on their own two feet. But with global economic uncertainty looming, that’s a big assumption.For now, the extension provides a much-needed breathing space, but the clock is ticking.
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