COVID-19 has led to a new situation in Spain. But deals are still closing.
Further to the national emergency declared in Spain on 14 March 2020, and subsequent lockdown of the country, one may think that the market has come to a complete stop and that no transactions are being closed at all.
This is however far from being the case. Dealmaking has become more challenging, and logistics more complex, although deals are still closing. In many cases, those were deals for which the transaction documents were already in agreed form (or very close to), and the parties have decided to proceed with closing even in view of the current circumstances whilst in others, negotiations and drafting sessions have taken place remotely with a view to agreeing the documents even in this scenario and conscious of it.
Some of those deals, where practicable, have been closed remotely, but those who are familiar with the Spanish market will immediately think of one distinctive feature of Spanish transactions which has a particular relevance when the deal comes to signing or closing: notarisation. And some related topics, such as powers of attorney and Spanish tax ID required for notarisation purposes come to mind, too.
To this extent, Spanish notaries are still open for business, but subject to certain limitations prescribed by their governing body further to the regulations currently in force in respect of the national emergency and lockdown. In a nutshell, notaries can only act where their intervention is urgent, only signatories will be allowed to attend the notarial meeting and certain health and safety measures will have to be observed at the notary's offices (people should wear protective gear and should keep safety distance, amongst others). In practice, signatories are being directed to different rooms and there is very limited (if any at all) contact between them and also with the notary – and closing takes place as expeditiously as possible to minimise any risk of infection.
A number of transactions have been closed over the last few days in front of Spanish notaries with the precautionary measures identified above, whilst others, due to different reasons, have been closed remotely on the basis of private documents that may be raised to the status of public deeds afterwards. Arranging notarised and apostilled powers of attorney (which need to be produced to the Spanish notary) in the relevant jurisdiction under the existing circumstances is one of those reasons. Also, obtaining a Spanish tax ID (which the Spanish notary requires for identification purposes where granting a public deed) is proving to be difficult in the current lockdown scenario.
For the above reasons, amongst others, some of the documents that would have typically been notarised contemporaneously with their signing have been amended to include conditions subsequent providing for notarisation at a later point, where the situation in Spain – as well as in other jurisdictions where notarised and apostilled powers of attorney have to be arranged returns to normality. Including a 90-day period for subsequent notarisation may be seen as a reasonable approach but in other transactions it may be agreed that notarisation will take place, for instance, on the occasion of the next accession of a party or the amendment of any of the transaction documents.
One of the topics on which questions usually arise where notarisation is postponed is the effect of not having notarised documents. Notarisation has a number of relevant consequences under Spanish law – it may grant access to executive proceedings which are shorter and less costly than ordinary proceedings, and it also creates an irrebuttable presumption with regard to the date of the document for hardening periods under insolvency (as well as with regard to the content thereof), and also with respect to signing authorities.
However, lack of notarisation is not the end of the world since ordinary proceedings will still be available if enforcement is sought and proof of the date, content and signing authorities can be established under such proceedings. Besides, it should be noted that there is no time limit for notarising documents (security documents, however, are typically, and to the extent practicable, notarised where signed – and mortgages must be in any event notarised for them to be validly created). In the particular case of finance documents, whether it is a facility agreement, an accession deed or transfer documents, they can even be notarised just before enforcement, noting that tracing back a chain of transfers may be cumbersome and that the benefits of notarisation will not be afforded retroactively, but on a case-by-case basis and weighing risks and transactional costs this might certainly be an option.
The new scenario created by COVID-19 may lead to certain situations where reaching to a solution that would have been optimal under other circumstances may not be practicable. And the goal would still be to close (in particular, if for any reason the parties involved do not want to lose momentum) in the best achievable scenario. For this purpose, participants may need to stay open minded to new alternatives that, whilst being legally robust, may not be optimal, but will still allow for closing and can be made stronger at a later point. This is a challenging time that requires a different approach and a switch to another mindset where it comes to closing a deal.