Government restricts foreign investment regime a second time in one month

01 Apr 2020

On 31 March 2020, Royal Decree-Law 11/2020 was adopted, enlisting additional measures that the Spanish Government undertakes to battle the consequences of the COVID-19 pandemic, including special provisions on the foreign investment regime. The new Decree-Law clarifies, among others, the definition of a foreign investor, whose investment is subject to prior authorization. The earlier Decree-Law applied only to non-EU and non-EFTA investors, but the new Decree-Law extends the scope of FDI screening to cover also EU and EFTA residents, whose real ownership corresponds to residents of countries outside the EU and EFTA. The amendment specifies that a real ownership exists, when a non-EU/EFTA resident controls - directly or indirectly - more than 25% of the investor's capital or voting rights or otherwise exercises control over an investor.

Furthermore, Royal Decree-Law 11/2020 establishes a simplified procedure for an investment prior approval to apply to 1) those transactions that have been concluded before the entry into force of the Royal Decree-Law 8/2020, but not implemented yet; and 2) all transactions between EUR 1 million and EUR 5 million. All investment below the threshold of EUR 1 million is excluded from the obligation of prior governmental authorization.

Finally, Royal Decree-Law 8/2020 indicated that the suspension of the liberalization regime for certain foreign direct investments, which now require governmental approval, was temporary in nature and to be lifted by the Spanish Council of Ministers through a resolution. However, the new Royal Decree-Law 11/2020 deleted this notion.