Legal Alert Covid-19: Chilean banking and credit measures in the context of Coronavirus

16 April, 2020

April 16, 2020 / By Mauricio Halpern y Vicente Vergara The financial tensions originated as a result of the recent worldwide outbreak of the coronavirus (also known as COVID-19), has motivated the Chilean Government, in conjunction with the Central Bank (“BC”) and the  Financial Market Commission (“CMF”), to put into effect an “Emergency Economic Plan”, which seeks to provide support to the most vulnerable workers, companies and families in the country, and will permit to grant new loans in the amount of up to USD 24,000 million and complement the capitalization of the Small Business Guarantee Fund (FOGAPE), a state-run fund to support small entrepreneurs. As part of the contingency plan, the following measures have been adopted and/or announced to date: Capitalization of Banco Estado: an extraordinary capitalization of Banco Estado (the most important public banking institution of the country) for USD 500 million within a period of 12 months was approved, which will increase the capacity of Banco Estado to grant loans, reaching USD 4,400 million (Law No. 21,225). CMF Measures: to safeguard the solvency and liquidity of its audited entities, the CMF, among other measures, has announced: Facilities for the Payment of Mortgage Loans. For the borrowers who were in compliance at the time of the state of emergency was ruled, it was agreed to allow the rescheduling of the payment of up to 3 installments to dates after to the original maturity of the loan, without being treated as renegotiations for banking provision purposes. Softening the Payment of Consumer Loans: For individuals and PYMES (acronym for “pequeñas y medianas empresas”, which is small and medium businesses), the payment dates are extended in up to 6 months, without being treated as renegotiations for banking provision purposes. Extend the Term of Disposal of Goods Received in Payment. The term for banks to dispose of the assets they receive in payment of past due debts is extended to 18 months, to prevent such assets from being sold at prices lower than the regular prices in the market (CMF Resolution No. 2432, as of March 25) Central Bank Measures: On April 8, the Central Bank of Chile announced a package of measures to provide liquidity and supporting to the flow of credit, whose main cornerstone is the granting of credit facilities for banks in order to motivate them to continue financing and refinancing loans to individuals and companies. The measures are the following: Creation of a Credit Line Conditioned to the Increase of Placements (“FCIC” for its initials in Spanish): consists on a special facility destined for banking entities that have commercial and/or consumer loans placed, for an amount corresponding to 3% of the base portfolio. Creation of a Liquidity Credit Line (“LCL”): consists on a credit line in Chilean pesos, limited to the average reserve requirement in pesos of each bank. The access and use of the LCL will be subject to the same conditions associated with the increase in the placements established for the FCIC. The initial amount of the FCIC and LCL lines is equivalent to USD 4,800 million. Creation of an Additional Credit Line: the initial amount […]

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Legal Alert Covid-19 Update on Business Interruption and the “Employment Protection Law”

8 April, 2020

April 8, 2020 / By Luis Parada On April 8, it was published in the Official Gazzete the first resolution establishing the areas and territories affected by declarations of authority involving the cessation of activities (Resolution 88 of the Ministry of Finance). This to ensure that workers of the affected companies who are unable to fulfil their labour obligations due to the cessation of activities can receive the benefits of unemployment insurance, in accordance with the provisions of Law 21,227, known as the “Employment Protection Law”. This resolution does not create new health restrictions, but rather declares the aforementioned cessation of activities for those areas and territories for which the Ministry of Health has currently decreed measures of isolation or quarantine; suspension, prohibition or closure of activities (e.g., sports activities, cafes, cinemas, etc.); and sanitary cordons. The resolution also determines those industries or activities that should be considered excluded from the standstill, despite being in one of the territories currently with health measures imposed by the Ministry of Health. These include establishments and activities related to health (hospitals, pharmacies, veterinarians); emergencies; public utility services (electricity, ports and airports, fuel distributors, food delivery, etc.); food and essential trade; transportation; security and press, among others. The duration of the shutdown will depend on each area, according to the restriction in each case imposed by the Ministry of Health. Contacts For more information, please contact: Luis Parada Partner – Labour lparada@dlapiper.cl * This report provides general information on certain legal or commercial matters in Chile, and not intended to analyze in detail the matters contained in it, not is it intended to provide a particular legal advice on them. It is suggested to the reader to look for legal assistance before making a decision regarding the matters contained in this report. This report may not be reproduced by any means or in any part, without the prior consent of DLA Piper BAZ | NLD SpA 2020.

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Legal Alert: Law that modifies Law No. 19,983 that regulates the transfer and grants executive merit to the copy of the invoice

7 April, 2020

April 7, 2020 / By Macarena Iturra, Ricardo López, Manola Quiroz, Luis Parada, Felipe Riedel, Ignacio Schwerter, Claudio Sepúlveda and Andrea de la Vega. In this legal alert prepared in the framework of the Coronavirus in Chile, you can find information about (I) law N°21,217 that modifies law N°19,983 that regulates the transfer and grants executive merit to the copy of the invoice; (II) the law that establishes an exceptional legal regime for judicial proceedings and about (III) the crime of fraudulent obtaining of benefits from the unemployment insurance and criminal liability of the legal entity. I. Law No. 21,217 that modifies Law No. 19,983 that regulates the transfer and grants executive merit to the copy of the invoice On April 3, Law No. 21,217 was published in the Official Gazette, amending Law No. 19,983, which regulates the transfer and grants executive merit to a copy of the invoice, in order to limit exceptional payment term agreements in cases of smaller companies issuing invoices (hereinafter the “Law”). In summary, the Law -which amends Article 2 of Law 19,983 and which will enter into force 60 days from its publication, except for the public nature of the registry of agreements maintained by the Ministry of Economy indicated below, which will enter into force from its publication- prevents the possibility of the parties from agreeing to exceed the maximum term of 30 days for the payment of invoices in the event that a smaller company (defined in Law No. 20,416) participates as a seller or service provider and, as buyer or beneficiary of the good or service, a company that exceeds the highest value of the annual income indicated in Law No. 20,416, unless the longer term is for the benefit of the smaller creditor company, and in those cases that contemplate tests, advance payments, partial payments or advance payments. In addition, this Law grants the character of public to certain information of the registry maintained by the Ministry of Economy, and in which the agreements that extend by common agreement the term for the payment of the invoices must be registered. On the other hand, the Law establishes as a new clause that does not produce effect, whatever the term stipulated by the parties, those that have the purpose of delaying the term of payment of the invoice, establishing partial payments, except for the cases mentioned above (that the longer term be in benefit of the smaller creditor company, and in those cases that contemplate tests, advance payments, partial payments or payments in advance). Finally, the Law states that the stipulations regarding the payment term contained in the agreements concluded between smaller companies, such as sellers or lenders, and the companies that exceed the highest value of the annual income indicated in Law No. 20. 416, as purchasers or beneficiaries of the good or service, registered prior to the entry into force of the law in the registry of agreements maintained by the Ministry of Economy, and that are not in the exceptional cases of the Law mentioned above (that the greater term is in benefit of the smaller creditor company, […]

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Legal Alert: Tax Measures Aimed to Reduce The Economic Impact Created by COVID-19

2 April, 2020

April 7, 2020 / By Rodrigo Álvarez, Germán Vargas y Gonzalo Zegers. On April 1 2020, the Chilean government issued Decree Nº 420, which established tax measures aimed to reduce the economic impact created by COVID-19. These measures will be valid for a period of 12 months and until the effects of the Covid-19 are exhausted. The following list contains a summary of the approved measures and their validity: 1. Forgiveness of Monthly tax returns (“PPM”) due on April, May and June of this year. PPM due through Forms No. 29 and 50 will be waived for the months of April, May and June. This benefit applies to all taxpayers subject to Corporate Tax (Impuesto de Primera Categoría) or Employment Taxy Tax (Impuesto de Segunda Categoría) who are obliged to pay it. 2. Postpone payment of VAT to be declared or paid within April, May and June 2020. For Small and Medium-sized Enterprises (“SMEs”) covered by the Pro-SMEs tax regime established in the Chilean Income Tax Law (“CITL”) The VAT shall be pay from July, in 12 monthly installments, equal and adjusted. For companies whose annual income does not exceed UF 350,000 (approx. USD 11,600,000) The income limit will be calculated considering the income obtained by related parties in the terms established in article 8 No. 17 letters a) and b) of the Tax Code, which refers to the relationship between companies belonging to the same business group. The VAT shall be pay from July, in 6 monthly installments, equal and adjusted. The delay will apply for taxes declared and paid through forms Nº 29 and 50 of the respective months. 3. Postpone payment of the first installment of contributions (land tax). Benefit applicable to companies whose annual income does not exceed UF 350,000, with the same limitations abovementioned; and for individuals with properties whose tax value (set by the Chilean IRS or Servicio de Impuestos Internos “SII”) is less than $133,000,000 as of March 2020 (approx. 156,000 USD). Said contribution shall be pay in 3 installments, equal and adjusted, in the futures installments due on June, September and November. 4. Advance refund of income tax declared for tax year 2020. Benefit for SMEs under the Pro-SMEs tax regime established in CITL. The tax refund will be paid in April 2020. 5. Deadline extension to pay the Corporate Tax. Benefit for SMEs under the Pro-SMEs tax regime established in CITL . Beneficiaries will be able to pay until July 31, 2020 taxes declared on the Annual Tax Return of the current year. 6. Extension until July 31, 2020, the deadline to avail of the tax regimes established by the recently approved Tax Reform (Law No. 21,210). 7. Forgiveness and refund of the Withholding Tax to taxpayers who perform independently professions or other lucrative activities established in article 42 Nº 2 CITL. Applies to tax withheld on January and February 2020. Taxpayers will be refund during April 2020. 8. Flexibility for payments to the General Treasury of the Republic Benefit for taxpayers of Surtax (payable by individual residents or domiciled in Chile) or Employment Tax, whose annual income does not exceed […]

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Legal Alert: Approved law enabling access to unemployment insurance benefits in exceptional circumstances

2 April, 2020

April 6, 2020 / By Luis Parada and Iñaki Irisarri. On April 6, the Law 21,227 (Law on Protection of Employment Positions during Covid-19 crisis) was enacted by means of its publication in the Official Gazette (Diario Oficial). This law authorizes the following regime: /a/ Automatic suspension of employment agreements: The law provides that, unless otherwise agreed by the parties, employment agreements will be automatically suspended in those territories where the authority has declared a cessation of activities, provided that the decision necessarily prevents or totally prohibits the provision of the worker’s services (not applicable to workers who can provide services at a distance, nor to those companies expressly exempted from activities cessation by the authority’s order). In this case the company will continue to be obliged to pay social security contributions (with the exception of insurance against accidents at work), based on 50% of the workers’ remuneration, and the worker will receive the benefits of unemployment insurance. /b/ Conventional suspension of employment agreements: The Law authorizes to suspend the employment agreement by mutual consent between the company and each employee, after union consultation, if the company has been affected in its activity due to the crisis. This can be agreed at any time, except when the cessation of activities has been declared by order of the authority. Employees are entitled to receive the benefits of unemployment insurance and the company will maintain the obligation to pay social security contributions in the manner indicated in section a). /c/ Agreement on reduction of remuneration: Companies that are experiencing verifiable financial difficulties or that have been excluded from the cessation of operations by the authorities, are authorized to agree with their employees, after consultation with the trade unions, on a reduction in working hours and remuneration of up to 50%, and at the same time, the employees will be able to access to a minor part of the unemployment insurance benefits for the balance of the reduced remuneration. These agreements may be extended for a maximum of 5 continuous months for employees with indefinite-term contracts, and 3 months for employees with fixed-term employment agreements or employment agreements for a defined task (d) The law prohibits the termination of employment contracts on the grounds of force majeure, arising from the Covid-19 crisis, and in respect of employees whose employment agreements are suspended by application of the law, they may be terminated only on the grounds of article 161 of the Labor Code. The law also allows any termination of an employment agreement that has taken place from 18 March until the day of application of the law, may be rescinded by mutual agreement between the parties. (e) The law provides for the criminal liability of companies that misuse these benefits. Entry into force of Law about Remote Work or Teleworking: On March 26, 2020, Law 21,220 which amends the Labor Code on matters about Remote Work, was published in the Official Gazette, so the aforementioned legal amendment comes into force on April 1, 2020. As of that date, a period of 3 months starts, in order to comply with the obligation to adjust […]

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Legal Alert: CMF authorizes corporations under its control to use electronic signature for board of directors meetings minutes

26 February, 2020

February 25, 2020 / By Matías Zegers and M. del Pilar Paredes On February 13, 2020, the Commission for the Financial Market (“CMF”) issued General Rule No. 434 (“NCG 434”) that authorizes corporations that are under its control, the use of electronic signature for the subscription of minutes of board of directors meetings. The NCG 434 permanently authorizes the use of electronic signature for the subscription of board of directors meeting minutes of corporations under its control, which, to date, according with the provisions of the final paragraph of Article 48 of Law No 18,046 on Corporations, was not allowed, and was optional for the CMF to do so. The CMF establishes in NCG 434 that the use of the electronic signature must be carried out through mechanisms that comply with the conditions set forth in Law No 19,799 on Electronic Documents, Electronic Signature and Certification Services of said Signature. Therefore, in accordance with the provisions of Article 2 letter f) of said Law, any electronic sound, symbol or process that allows the recipient of any electronic document to at least formally identify its author, will be sufficient. NCG 434 is clear, and in order to avoid doubts about the verification of the identity of the director who electronically signed the minutes, it expressly states that, in those cases in which no advanced electronic signature is used, the sounds, symbols or electronic processes that are employed for this purposes, must be previously agreed by the board. Additionally, states that the general manager, or who offices as secretary in the respective session, must record in the minutes the fact that said electronic signature corresponds to the director who appears subscribing it. Contacts We hope you find this information helpful: Matías Zegers Partner mzegers@dlapiper.cl * This report provides general information on certain legal or commercial matters in Chile, and not intended to analyze in detail the matters contained in it, not is it intended to provide a particular legal advice on them. It is suggested to the reader to look for legal assistance before making a decision regarding the matters contained in this report. This report may not be reproduced by any means or in any part, without the prior consent of DLA Piper BAZ | NLD SpA 2020.

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Legal Alert: Procedure to approve a New Constitution in Chile

10 January, 2020

January 14, 2020. By: DLA Piper Chile On December 2019 Chilean Congress approved Law 21,200 (the “Law”) stating a procedure aimed to elaborate a new Constitution which would replace the current Constitution. Pursuant to such procedure, Chileans shall vote on April 26, 2020 either approving or rejecting the possibility of having a new Constitution. In such a referendum, Chileans shall also vote as to the type of assembly that would be responsible for the drafting of the new Constitution if the approval option won: a convention exclusively formed by citizens elected by the people or a convention formed half, by citizens elected and the other half also by certain members of the Congress (the “Convention”). If the option for the approval of a new Constitution wins, then Chileans shall elect the members of the Convention on October 25, 2020. Any matter to be discussed by the Convention shall require a 2/3 quorum of the Convention´s members for approval. The Convention shall have a maximum term of nine months (renewable once for additional three months) to propose the new Constitution text. The proposed text must respect the nature of the Republic of Chile, its democratic regime, the rule of law and international treaties ratified by Chile. Within 60 days from the delivery of the proposed text by the Convention, Chilean people shall vote either approving or rejecting it. If the people approve the new Constitution it shall be in effect once duly promulgated according to the Law. If the people reject it, the current Constitution shall continue in full force and effect. Contacts We hope you find this information helpful: comunicaciones@dlapiper.cl * This report provides general information on certain legal or commercial matters in Chile, and not intended to analyze in detail the matters contained in it, not is it intended to provide a particular legal advice on them. It is suggested to the reader to look for legal assistance before making a decision regarding the matters contained in this report. This report may not be reproduced by any means or in any part, without the prior consent of DLA Piper BAZ | NLD SpA 2020.

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