Protection against the control of strategic companies

The attack of the coronavirus against the economies has provoked governments taking measures to protect their economies. For example, Pedro Sánchez, the Spanish Prime Minister, has decided to focus on the protection against the control of strategic companies. This decision has been taken due to the decrease of the capitalization recorded by some IBEX 35 big companies. In order to carry out this measure, the president approved the reform of foreign investment regulations

The emerge of COVID-19 provoked a Stock market crash, causing threats to both listed and non-listed Spanish companies whose heritage value has decreased. In addition to the measures taken to protect the companies from those ones who are looking for bargains, some measures of liquidity and protection to the more vulnerable people have been taken in this situation. 

The decree-law approved by the Council of Ministers has modified the 19/2003 4th July Spanish Law about law and jurisdiction of capital movements and the economic transactions abroad. Consequently, an article about the prohibition of making direct investment by residents of countries outside the European Union and the European Free Trade Association has been published. The reason of this prohibition is associated with public health, order and security issues

This decision aims to avoid foreign investors (either a private company or an entity controlled by a non-EU state) taking over some essential companies in our country during this huge economic weakness period. That is why its control is limited to a maximum of 10% of its share capital in strategic sectors and they are not allowed to take control of the administration body of such a company. 

According to the law “Those investments that, given the circumstances mentioned above of participation in the share capital and takeover, come from public companies or sovereign wealth funds of third countries are cancelled. Due to their low share price, these companies would be much more defenseless against any offer to buy from non-EU investors, mainly against countries such as China and the United States, whose stock markets have not been as affected as Spain’s. 

This necessary measure will be temporarily effective (only during coronavirus period). It is important to mention the so-called Golden share, a Spanish mechanism used to avoid our companies from strategic sectors could be under the control of non-EU companies just for the fact of having a lower value in the stock market. This mechanism was repealed at the request of Brussels. 

In case a non-EU company wanted to invest, a governmental approval would be requested in order to carry out the operation, and, if it is not accomplished, it will be sanctioned for a very serious infraction, according to the decree. These mentioned sanctions “will correspond to the Council of Ministers, at the proposal of the head of the Ministry of Industry, Trade and Tourism”. Furthermore, it has been specified that “the investment operations carried out without the previous requested authorization shall have no validity or legal effect, until they are legalized in accordance with the provisions of Article 6 of the Law”.  

Strategic sectors in which the Law is applied 

Firstly, the critical infrastructures, whether physical or virtual, such as energy, transport, water, health, communications or defense. Others like land and real estate (essential for the use of these infrastructures) may also be included, as well as the critical technologies and dual-purpose products such as robotics, cybersecurity, aerospace technologies or defense technologies. Furthermore, we can include supplies of critical inputs such as energy or those related to raw materials, such as food security.  

The media, and companies which contain overly sensitive data, such as personal data or the ability to control this information are also added among the strategic companies. Despite these temporal restrictions, it is believed that all the necessary elements are being given in the market so that when the situation returns to normality, the so called OPAs (Organizational Process Assets) or purchases of large stock packages

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