Royal Decree-Law 7/2012 of 9 March creating the Fund for the Financing of Payments to Suppliers

Royal Decree-Law 7/2012, of 9 March, creating the Fund for the Financing of Payments to Suppliers.

Head of State

"BOE" No. 60, of 10 March 2012 Reference: BOE-A-2012-3395

INDEX

Preamble................................................................ 3 PRELIMINARY TITLE. General provisions ..................................... 4 Article 1. Object and scope of application.......................................... 4 TITLE I. Fund for the Financing of Payments to Suppliers............................... 5 CHAPTER I. Establishment and legal regime........................................... 5 Articles 2 and 3.......................................................... 5 CHAPTER II. Financing, governing bodies and control of the Fund for the Financing of Payments to Suppliers.............................................................. 5 Articles 4 to 6.......................................................... 5 TITLE II. Credit operations with Local Entities and Autonomous Communities.................. 5 Article 7. Agreement of credit operations.................................. 5 Article 8. Retention of the share of Local Entities in State taxes......... 5 Article 9. Payment Agent.................................................. 6 TITLE III. Monitoring of the Adjustment Plan.............................................. 6 Article 10. Information obligations of Local Entities........................... 6 Additional Provisions...................................................... 6 First Additional Provision. Extension of the State Debt regime................. 6 Second Additional Provision. Extension of the Public Debt tax regime................ 6 Third Additional Provision. Application of the financing mechanism for the payment to suppliers of local entities..................................................... 6 Fourth Additional Provision. Advance of the final settlement of the share of Local Entities in State taxes for the year 2010...................................... 7 Fifth Additional Provision. Extraordinary financing mechanisms for the payment to suppliers of the Autonomous Communities.................................... 8 Sixth Additional Provision. Extinction of the Fund for the Financing of Payments to Suppliers.... 8 Repealing Provisions..................................................... 8 Single Repealing Provision. Repeal of legislation.................................. 8 Final Provisions......................................................... 8 First Final Provision. Modification of Annex III of Law 39/2010, of 22 December, of the General State Budgets for the year 2011............................... 8 Second Final Provision. Regulatory authorization................................... 8 Third Final Provision. Entry into force......................................... 8 OFFICIAL STATE GAZETTE CONSOLIDATED LEGISLATION Page 1

Third Additional Provision. Application of the financing mechanism for the payment to suppliers of local entities..................................................... 6 Fourth Additional Provision. Advance of the final settlement of the share of Local Entities in State taxes for the year 2010...................................... 7 Fifth Additional Provision. Extraordinary financing mechanisms for the payment to suppliers of the Autonomous Communities.................................... 8 Sixth Additional Provision. Extinction of the Fund for the Financing of Payments to Suppliers.... 8 Repealing Provisions..................................................... 8 Single Repealing Provision. Repeal of legislation.................................. 8 Final Provisions......................................................... 8 First Final Provision. Modification of Annex III of Law 39/2010, of 22 December, of the General State Budgets for the year 2011............................... 8 Second Final Provision. Regulatory authorization................................... 8 Third Final Provision. Entry into force......................................... 8 OFFICIAL STATE GAZETTE CONSOLIDATED LEGISLATION Page 2

CONSOLIDATED TEXT Last modification: 15 July 2014

In recent years, there has been a progressive worsening of the problem of non-payment by territorial administrations to their suppliers of goods and services, with a special impact on small and medium-sized enterprises. This situation, which affects both Local Entities and Autonomous Communities, must be addressed in its entirety and, therefore, requires a global approach through instruments tailored to its magnitude. Royal Decree-Law 4/2012, of 24 February, determining information obligations and procedures necessary to establish a financing mechanism for the payment to suppliers of local entities, constitutes the starting point of this action.

It is therefore necessary to create the instrument required to execute a supplier payment plan that guarantees the proper outcome of the mechanism created in Royal Decree-Law 4/2012, of 24 February, which is also extended to the Autonomous Communities in accordance with the agreement reached in the Council for Fiscal and Financial Policy held on 6 March 2012.

The ultimate objective of said plan is the recovery of economic activity, which requires that the operations through which it is implemented are born with the maximum guarantee of effectiveness and efficiency.

This royal decree-law establishes the conditions that allow for the obtaining of sufficient financial resources for the financing of the borrowing operations that may be agreed upon for the payment of pending obligations.

The magnitude of the required amount, around 35,000 million euros, requires the participation of as many credit entities operating in Spain as possible.

This participation must take place under market conditions that take into account the special characteristics of the operations proposed.

Regarding the territorial administrations, first, the attention to the commitments they assume is aligned with the reality of their financial situation, setting a term of 10 years with a 2-year grace period, which is necessary for the operation to be sustainable.

Secondly, and from an operational point of view, it allows for the payment of installments to be made in an aggregated manner, simplifying all the operational procedures derived from the unprecedented multiplicity of operations to be carried out in extremely short time periods.

As a result of the above considerations, it is necessary to create the public law entity named the Fund for the Financing of Payments to Suppliers. This entity constitutes a vehicle capable of providing an effective response to all the aforementioned issues and, thereby, guaranteeing the effectiveness of the mechanisms adopted.

The Fund for the Financing of Payments to Suppliers is constituted as a public law entity, with legal personality and full capacity to act; authorized to agree in the capital markets all kinds of borrowing operations, which will be guaranteed by the State, as well as to agree with Local Entities and Autonomous Communities the credit operations necessary for the payment of their obligations.

Likewise, it is foreseen that the Fund will directly satisfy pending payment obligations, subrogating itself in the credit right against the debtor territorial Administration.

However, the effectiveness of all these measures essentially rests on the sustainability of the mechanism articulated. This requires a rigorous commitment by the territorial administrations to comply with the obligations they assume, in turn guaranteed by the possibility of retaining their share in State revenues, as provided for in Royal Decree-Law 4/2012, of 24 February.

Therefore, the measures adopted are accompanied by the requirement of strong fiscal discipline for the territorial administrations, developing the obligations established in Royal Decree-Law 4/2012, of 24 February, for Local Entities and which may be extended to the Autonomous Communities that choose to join this mechanism.

The foregoing is reflected in the provisions contained in this royal decree-law regarding, both the possibility of retaining the share in State revenues corresponding to Local Entities, and the monitoring of their adjustment plans, which are the keystone of the sustainability of the system as a whole and the guarantee that the solution now devised becomes definitive.

The Fund does not imply an increase in existing public entities in that it is based on another entity in the process of extinction, the Fund for the Acquisition of Financial Assets, whose economic results allow for the establishment of this entity without any increase in public spending, thereby meeting the priorities of austerity and simplification of the public administration structure for the Government.

As for its structure, the royal decree-law consists of four Titles and 10 Articles.

The Preliminary Title contains general provisions, specifying its object and scope of application.

Title I, dedicated entirely to the Fund, consists of two Chapters. Chapter I regulates its establishment and legal regime; Chapter II contains the articles establishing the financial and control regime and the governing body, a Board of Directors integrated by representatives of the Ministries of Economy and Competitiveness and of Finance and Public Administrations.

Title II establishes the conditions for agreeing credit operations between the Fund and the territorial administrations as well as, regarding Local Entities, the retention regime of their share in State revenues that is necessary to meet the obligations assumed by the Fund.

Title III, with a single article, is dedicated to the monitoring of the adjustment plans, providing for a periodic report that must be presented to the Ministry of Finance and Public Administrations, which may evaluate it and submit the result to the Ministry of Economy and Competitiveness.

Finally, the royal decree-law contains six additional provisions, one repealing provision and three final provisions.

Finally, in the whole and in each of the measures adopted, the circumstances of extraordinary and urgent necessity required by Article 86 of the Spanish Constitution concur, by their nature and purpose, as enabling prerequisites for the approval of a royal decree-law.

In virtue thereof, making use of the authorization contained in Article 86 of the Spanish Constitution, upon proposal of the Ministers of Finance and Public Administrations and of Economy and Competitiveness, after deliberation of the Council of Ministers, in its meeting on 9 March 2012,

I HEREBY ORDER:

PRELIMINARY TITLE General Provisions

Article 1. Object and scope of application. The object of this royal decree-law is the regulation of the conditions for the execution of operations destined for the payment of pending obligations of Local Entities and Autonomous Communities that have joined the extraordinary financing mechanism for payment to suppliers.

To this effect, the Fund for the Financing of Payments to Suppliers is established and its legal regime is established.

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TITLE I Fund for the Financing of Payments to Suppliers

CHAPTER I Establishment and legal regime

Articles 2 and 3. (Repealed).

CHAPTER II Financing, governing bodies and control of the Fund for the Financing of Payments to Suppliers

Articles 4 to 6. (Repealed).

TITLE II Credit operations with Local Entities and Autonomous Communities

Article 7. Agreement of credit operations.

1. The Fund will agree credit operations with the Autonomous Communities that join the extraordinary financing mechanism for payment to suppliers and with Local Entities for the payment of pending obligations of Local Entities and Autonomous Communities.

2. If applicable, the Fund may carry out operations for the cancellation of pending payment obligations of said territorial administrations upon instruction of the Ministry of Finance and Public Administrations.

3. In any case, the disbursement of the financing granted to the territorial administrations will be made through direct payment to the suppliers, with the Fund subrogating itself in the rights corresponding to said supplier against said territorial administrations for the amount effectively paid in accordance with Royal Decree-Law 4/2012, of 24 February, determining information obligations and procedures necessary to establish a financing mechanism for the payment to suppliers of local entities.

Article 8. Retention of the share of Local Entities in State taxes.

1. The credit operations provided for in this Title that Local Entities agree will be guaranteed by the retentions provided for in Article 11 of Royal Decree-Law 4/2012, of 24 February.

2. The State will transfer to the Fund for the Financing of Payments to Suppliers the shares in State revenues retained from Local Entities for the satisfaction of obligations derived from the operation, with the provisions of the Fourth Additional Provision of the consolidated text of the Law Regulating Local Treasuries approved by Royal Legislative Decree 2/2004, of 5 March, being applicable, in the terms that, if applicable, the General State Budgets Law for each fiscal year establishes.

3. If the Local Entity had not agreed the borrowing operation, the retention provided for in Article 11 of Royal Decree-Law 4/2012, of 24 February, will compensate for the expenses and financial costs incurred.

4. The aforementioned rules will also apply to those Local Entities that had not agreed the credit operation.

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Article 9. Payment Agent. The Official Credit Institute will be responsible for the administration and management of the operations agreed under this Royal Decree-Law, the keeping of the Fund's accounting, as well as other ordinary financial management services that the Fund's Board of Directors decides to attribute to it, all of this through the payment of the corresponding economic compensation.

TITLE III Monitoring of the Adjustment Plan

Article 10. Information obligations of Local Entities. In general, Local Entities that agree the borrowing operations provided for in this royal decree-law must annually present to the Ministry of Finance and Public Administrations a report by the comptroller on the execution of the adjustment plans contemplated in Article 7 of Royal Decree-Law 4/2012, of 24 February.

In the case of Local Entities included in the subjective scope defined in Articles 111 and 135 of the consolidated text of the Law Regulating Local Treasuries, the aforementioned report must be presented quarterly.

The comptroller's report will be reported to the Plenary of the Local Corporation.

Said report, the content of which will be determined by regulation, will be subject to request by the Ministry of Finance and Public Administrations, to the valuation by the competent organs thereof, which will inform the Ministry of Economy and Competitiveness of the result of said valuation.

Likewise, in order to guarantee the reimbursement of amounts derived from the borrowing operations agreed, Local Entities that have agreed them may be subject to control actions by the General Comptroller of the State Administration. The General Comptroller will specify the controls to be carried out and their scope, based on the risk derived from the result of the valuation of the monitoring reports.

For the execution of said control actions, the General Comptroller may request the collaboration of other public bodies and private auditing companies, which must comply with the rules and instructions determined by the former. The necessary financing for this will be charged to the resources of the Fund.

First Additional Provision. Extension of the State Debt regime. The regime of State Debt provided for in Royal Decree 505/1987, of 3 April, establishing a Book Entry System for State Debt, is extended to fixed income values represented by book entries issued by the Fund established by virtue of this royal decree-law.

Second Additional Provision. Extension of the Public Debt tax regime. The debt issuances that the Fund may carry out under the provisions of Article 4 of this royal decree-law will have the same tax regime as Public Debt.

Third Additional Provision. Application of the financing mechanism for the payment to suppliers of local entities. For the purposes of applying Royal Decree-Law 4/2012, of 24 February, determining information obligations and procedures necessary to establish a financing mechanism for the payment to suppliers of Local Entities:

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1. Pending payment obligations derived from public service management contracts in their concession modality will be understood to be included in its scope of application, provided they meet the requirements provided for in the aforementioned royal decree-law.

2. In cases of fractional cancellation, mentioned in Article 3.3 of Royal Decree-Law 4/2012, of 24 February, the exigibility of the pending payment obligation referred to in the same norm will be understood to refer to the total pending payment amount at the moment the certified list is issued by the debtor local entity.

3. Only Local Entities to which the models of participation in State taxes apply, referred to in Chapters III and IV, of Titles II and III of the consolidated text of the Law Regulating Local Treasuries, approved by Royal Legislative Decree 2/2004, of 5 March, may be considered included in the scope of application of the cited norm.

4. As a consequence of the special features of their foral regime, the aforementioned Royal Decree-Law 4/2012, of 24 February, will not apply to the local entities of the Basque Country and Navarre.

5. The adjustment plan regulated in Article 7 of Royal Decree-Law 4/2012, of 24 February, will be drawn up by the respective local corporations, in accordance with their power of self-organization, and will be presented, with the comptroller's report, for approval by the plenary of the local corporation.

Fourth Additional Provision. Advance of the final settlement of the share of Local Entities in State taxes for the year 2010.

1. The Ministry of Finance and Public Administrations will advance ex officio 50 percent of the estimated amount of the balances of the final settlements of the participation in State taxes that result in favor of Local Entities corresponding to the year 2010, for all financing concepts referred to in Chapters III and IV, both of Title II and Title III of the consolidated text of the Law Regulating Local Treasuries, approved by Royal Legislative Decree 2/2004, of 5 March.

2. Said advance will, if applicable, have the status of payment on account of the aforementioned settlement, the calculation of which will be carried out in the year 2012, and, until the General State Budgets Law for the year 2012 is approved, it will be transferred, in the part corresponding to the expenditure state, from the credit of the General State Budgets for the year 2011 extended, endowed in Section 36, Service 21, Program 942M, Concept 468, relating to the final settlement of previous years and compensations derived from the new financing system. If the aforementioned General State Budgets Law is approved, it will be transferred from the credit corresponding to the aforementioned section, service, program and concept of the corresponding expenditure state. The advance corresponding to the estimated settlement of the cession of state taxes will be processed as income refunds in the concept to which that cession refers.

3. The remaining amount of the final settlement calculated, once all necessary elements for it are known, will be transferred in the part corresponding to the expenditure state from the concept of the General State Budgets for the year 2012 endowed for that purpose and the part corresponding to the cession of state taxes will be processed as income refunds in the concept to which that cession refers.

4. Debts that Local Entities may have with the State Tax Administration Agency and with the General Treasury of Social Security will be compensated from said advance, in application of the Fourth Additional Provision of the consolidated text of the Law Regulating Local Treasuries, approved by Royal Legislative Decree 2/2004, of 5 March, in accordance with the criteria established in Article 125 of Law 39/2010, of 22 December, of the General State Budgets for the year 2011.

5. The advance referred to in this provision may not be recognized to those Local Entities to which, on the date of entry into force of this norm, the retention of advances on the participation in State taxes was being applied in compliance with Article 36 of Law 2/2011, of 4 March, on Sustainable Economy.

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6. Through the general state budgets law, advances of the final settlements of the participation of Local Entities in State taxes corresponding to exercises subsequent to 2010 may be established and regulated.

Fifth Additional Provision. Extraordinary financing mechanisms for the payment to suppliers of the Autonomous Communities. The Autonomous Communities that join the extraordinary financing mechanism for the payment to suppliers will approve an agreement of the Government Council or competent organ in which it is expressly stated that the Agreement of the Council for Fiscal and Financial Policy approved on 6 March 2012 is assumed.

Sixth Additional Provision. Extinction of the Fund for the Financing of Payments to Suppliers. The Council of Ministers may agree the extinction and liquidation of the Fund for the Financing of Payments to Suppliers.

Single Repealing Provision. Repeal of legislation. Upon the entry into force of this royal decree-law, all provisions of equal or lower rank that oppose what is provided for therein are repealed.

First Final Provision. Modification of Annex III of Law 39/2010, of 22 December, of the General State Budgets for the year 2011. The Fund for the Financing of Payments to Suppliers is added to Annex III of the General State Budgets Law for the year 2011 for an amount of 35,000,000 thousand euros, understanding that the authorized figure corresponds to the issuance of securities, the agreement of loans and the opening of credits, and any other borrowing operation, as well as the swap, purchase and conversion operations on the described operations.

Second Final Provision. Regulatory authorization. The Ministers of Economy and Competitiveness and of Finance and Public Administrations are authorized to p