Spain Bans Bonuses, Dividends at Firms Getting Coronavirus Aid

(Bloomberg) --

Spain will stop companies from paying dividends or bonuses to their executives if they receive funds from the latest government program to boost their business after damage from the coronavirus pandemic.

The eligible “strategic” firms will “have to face certain restrictions” to get the aid, Spanish government spokeswoman Maria Jesus Montero said in a news conference on Tuesday. They will be “prohibited from distributing dividends and their board members won’t be allowed to receive bonuses nor variable compensation.”

At the beginning of this month Spain pledged 10 billion euros ($11.4 billion) to fund struggling companies regarded as strategic for the national economy. The country will invest in them through a public holding company known as Sepi. Unlike other European governments, Spain has taken no direct stakes since the global pandemic started.

In order to receive funds, moreover, companies “won’t be allowed to carry out an aggressive commercial expansion nor assume excessive risks,” Montero said. They’ll have to submit a viability plan for the medium and long run, including a commitment to give back the public money they have received.

Firms will also have to prove that they wouldn’t be viable without public aid and demonstrate that the closing of their business would have a “significant negative impact” on the national economy or employment.

The government had said that aid from Sepi could come through different forms, including equity injections and revenue-sharing loans. The funding is separate from a larger loan-guarantees program.

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