COVID-19: Business Restructuring

The COVID-19 health crisis is causing damage in many sectors of our economy. The confinements suffered, the closure of many establishments, the decrease in tourism, the ERTES carried out in many companies and the reduction of hours and capacity in certain activities, among others, are leading our country to go through an economic crisis.
One of the consequences with more impact, this being the decrease in income in a large number of companies in our country. However, this reduction does not necessarily lead to the dissolution of society or its declaration of bankruptcy. There are several options to restructure our company and save it from the crisis it may face.

But what can we do to improve our company’s economic situation? At the corporate level, there are several options that involve transformations in society to adopt a new business model, which is more adapted to the economic and operational needs of today. This is what is defined as business restructuring.

Among the operations that we could carry out, we find:

Exit of assets from a company

As its name indicates, it implies that the company “takes out” one or more of the assets of a company (such as a property, a vehicle or some shares), and these become part of the assets of another company, or become the property of another partner and/or administrator, or of third parties.

It can be done through a purchase and sale (to one of the partners or to another related company), with a partial spin-off, through the distribution of dividends in kind or by reducing the share capital.

  • Partial Excision

A partial spin-off, based on the provisions of Article 70 of Law 3/2009, of 3 April, on structural modifications of commercial companies (hereinafter, LME), is the transfer en bloc by universal succession, of one or more parts of the assets of a company -each of which forms an economic unit-, to one or more newly created or existing companies. The partners of the company being spun off receive a number of shares, participations or social quotas of the company being spun off, in the same proportion as their respective participation in the company being spun off. In turn, the company being spun off reduces its capital stock by the necessary amount. This process is intended to decentralize or separate activities, in order to achieve an autonomous personal structure with independent legal personality.

  • Distribution of dividends in kind

A dividend is the right to receive an amount of money. The distribution of dividends in kind can be agreed upon by the partners at the General Meeting, so that, instead of distributing them as a monetary credit, they are made in kind. This agreement, as established in the Resolution of July 30, 2015, must be approved unanimously by the General Directorate of Registries and Notaries (DGRN). In this way, the credit that the partner has recognized before the company due to the agreed dividends, will be paid through the award of goods of equivalent value. This payment must be recorded in a public deed, and must be registered in the Property Register or in the relevant Register, depending on the asset in question.

  • Reduction of share capital

It is a corporate operation that consists of reducing the company’s equity. Through it, the partners can be attributed assets equivalent to the value of the contributions made to the company. It is not necessary that the partner who receives a specific asset has been the contributor of that asset, which may have been acquired directly by the company or by other partners.


Segregation consists of transferring en bloc by universal succession one or more parts of the assets of a company (transfer of an economic unit), each of which forms an economic unit, to one or more other companies, with the segregated company receiving in exchange shares, holdings or quotas of the beneficiary companies (ex Article 71 of the LME).
The shares, participations or quotas are not received by the members, but by the company that is segregated. The segregating company subsists, not being extinguished.

Business Unit Sales

A business unit can also be called a branch of activity, and it is a set of assets that constitute an autonomous economic unit, with an activity that can be differentiated from the rest of the company, and without which it can continue to operate. It does not have its own share capital or legal personality. Its transfer includes all the assets necessary for the development of a business, not a simple transfer of goods or stocks.

Transmission of a productive unit

Similar to a sale of a business unit, a productive unit is an organized set of resources (both material – such as real estate or machinery -, and human – the workers -, and legal – which could be subsidies, contracts and administrative authorizations -), which supports the productive or business activity, and can be transmitted by disengaging from the company. The Bankruptcy Law defines them as the set of means organized for the exercise of an essential or accessory economic activity (Article 200 of the Royal Legislative Decree 1/2020, of May 5, by which the revised text of the Bankruptcy Law is approved), since normally, this transfer is framed within a bankruptcy proceeding. However, they can also be transmitted outside of the bankruptcy proceedings, valuing the productive unit and making a sale in favor of another businessman, who will subrogate himself in the position of the seller.

Refinancing or restructuring agreements

They are adopted between a debtor company and its creditors, to avoid bankruptcy. Their purpose is the modification or extinction of the obligations, and the companies can agree to reduce their debts, extend the term to pay them or establish other obligations. These agreements always respond to a viability plan to continue with the business activity, and later they can be judicially homologated so that they are shielded before a possible insolvency proceeding.

Creation of a holding company

A holding company is a company that holds shares or shares in other companies of the same group. The holding company participates in all the subsidiary companies, which have legal entity. It allows the different lines of business to be broken down into several companies, so that all the services are centralised in the parent company, in order to optimise costs and benefit from economies of scale and tax advantages.

As we see, there are many options to save the continuity of our company. The decision that is most convenient for each company will depend on many factors, not only commercial but also fiscal.