The literal wording of the regulation indicates that "the mercantile companies or other legal entities that take advantage of the temporary layoff plans [...] and that use the public resources allocated to them may not proceed to the distribution of dividends corresponding to the fiscal year in which these temporary layoff plans are applied".
In view of the literal wording of the provision and the fact that an extensive interpretation of a prohibitive provision should not be made, we understand that the limitation is only applicable to dividends generated during the fiscal year in which the ERTE is applied, i.e., dividends that originate in the results of this fiscal year, not affecting the profit reserves of previous years.
This interpretation has also been the one adopted by the General Council of Economists of Spain which, in its response to a consultation formulated by the Ministry of Economic Affairs and Digital Transformation, concluded that:
"In the interpretation of that Ministry, Article 5.2 of Royal Decree-Law 18/2020, by establishing that they may not proceed to the distribution of dividends corresponding to the fiscal year in which these temporary employment regulation proceedings are applied, determines limits to the distribution of dividends corresponding to 2020 (fiscal year in which the employment regulation proceedings are applied) and that they will be distributed, consequently, in fiscal year 2021".
Therefore, we understand that companies will be able to distribute dividends charged against the profit for the 2019 fiscal year (i.e. dividends corresponding to the fiscal year prior to the ERTE) and dividends charged against available reserves generated in previous fiscal years (for profits allocated to free reserves or share premium).
This limitation disappears if the amount corresponding to the exemption applied to social security contributions is paid prior to any distribution of dividends. Likewise, this limitation to distribute dividends will not be applicable to those entities that, as of February 29, 2020, had less than 50 employees, or equivalent workers, registered with the Social Security.
Finally, it should be recalled that this is a controversial issue, since there is no consistent criteria, and it can be understood that through this operation (the distribution of dividends corresponding to previous years) fraud is being committed, by avoiding the ultimate purpose of the rule: to prevent companies that received aid from distributing profits among shareholders. Therefore, this issue is not exempt from legal debate and must be assessed on a case-by-case basis.