The 13 April last Law 5/2021 of 12 April was published, amending the revised text of the Capital Companies Act, approved by Royal Legislative Decree 1/2010 of 2 July, and other financial regulations, with regard to the promotion of long-term shareholder involvement in listed companies.
As the aforementioned title of the Law indicates, it introduces a series of developments in corporate mattersIn addition, there are a number of other changes, which are discussed below:
1. Holding of Meetings exclusively by telematic means:
A new article is included in the Capital Companies Act, specifically, Article 182 bis, which allows for the holding of General Meetings exclusively by telematic means for all capital companies, including listed companies.
The possibility of including this form of holding will require the corresponding amendment of the company's Articles of Association, with a reinforced majority of two thirds of the share capital.
2. Reinforcement of the duty of care of directors:
The duty of diligence of directors is reinforced, who must they must subordinate their own interests to the interests of the company. (article 225.1 LSC).
3. Registration of the capital increase simultaneously with the implementation thereof:
Section 2 of article 315 LSC is eliminated, meaning that the resolution to increase share capital and its implementation must be registered simultaneously, eliminating the possibility of registering the resolution to increase share capital with the Companies Register prior to its implementation, in the case of the circumstances envisaged in the aforementioned article.
4. Prohibition on the appointment of legal persons as directors of listed companies:
The appointment of legal persons as directors of listed companies is prohibited in order to ensure greater transparency, in accordance with the requirements of good corporate governance.
5. The right to know the identity of the shareholders and ultimate beneficiaries of listed companies:
It regulates the right of listed companies to know the identity of its shareholdersThe purpose of the shareholders is to communicate directly with each other in order to facilitate the exercise of their rights and their involvement in the company (article 497 of the LSC).
Also, in line with the above, it introduces a new Article 497a under which, if the shareholder is an intermediary companythe right to know the shareholders shall comprisealso, the right to know the identity of the ultimate beneficiaries of such intermediary companies.
6. Loyalty shares with additional vote:
So-called "loyalty shares" with additional vote introducedThe Commission has also adopted a new regulation, allowing listed companies to provide for them in their articles of association.
In this way, the articles of association are allowed to grant additional voting rights to shares that have been held continuously for a period of at least two years..
In order to be included, it shall be necessary to amend the articles of association with the affirmative vote at a meeting of at least (i) 60% of the capital present in person or by proxy, if attended by shareholders representing 50% or more of the total subscribed voting capital, and (ii) 75% of the capital present in person or by proxy, if attended by shareholders representing 25% or more of the capital but not exceeding 50%.
7. Pre-emptive subscription rights:
- Deadline: In the listed companies the deadline for exercising the pre-emptive subscription right is reduced from fifteen to fourteen days (article 503 LSC).
- Streamlining capital increase processesIn the case of listed companies, the resolution to increase the capital may be entered in the Commercial Register prior to its execution, unless the possibility of incomplete subscription has been excluded.
- Incomplete subscription: on the other hand, it is included that, unless the agreement states otherwise, the increase of capital shall be effective, even if the subscription is incomplete.
- Exclusion of subscription rights: In order to be able to exclude pre-emptive subscription rights in connection with capital increases shall require an expert report independent provided that: (i) the emission is by amount exceeding 20% of the capitalor (ii) the 20% threshold is not reached, but the issue price is lower than fair value (quoted value and up to 10% less).
The issue of convertible bonds shall not require an independent expert's report when it does not reach 20% of the capital.
8. Special regime for related-party transactions:
In terms of taxation, certain changes are also introduced:
a) New chapter on related party transactions of listed companies:
A new Chapter VIIa in Title XIV concerning the related-party transactions of listed companies:
The following are considered related transactions the carried out by the company or its subsidiaries with:
- Councillors.
- Shareholders holding 10% or more of the voting rights.
- Represented on the Board of Directors.
- Any other persons who are to be considered related parties under IAS1 .
The following are not considered to be related party transactions:
- Those between the company and its wholly-owned subsidiaries
- Approval of the contracts of executive directors and senior management.
- Those concluded by credit institutions on the basis of measures designed to safeguard their stability, adopted by the competent authority responsible for prudential supervision within the meaning of European Union law.
- Those entered into by a company with its subsidiaries or investees, provided that no other party related to the company has an interest in such subsidiaries or investees.
Approval: The competence to approve related-party transactions shall be the responsibility of the general meeting when its amount is equal to or greater than 10% of the assetsand, by board of directors in all other caseswhich may not delegate it, except in the case of (a) intra-group transactions carried out in the ordinary course of business and on an arm's length basis, or (b) standardised contracts applied en masse to a large number of customers and the amount of which does not exceed 0,5% of net turnover.
The approval by the board or by the council of a related party transaction shall be subject of a prior report by the audit committee. In its report, the committee shall assess whether the transaction is fair and reasonable from the point of view of the company and, where appropriate, of the shareholders other than the related party, and shall give an account of the assumptions on which the assessment is based and the methods used. The directors concerned may not participate in the preparation of the report.
b) Intra-group transactions for capital companies
It also includes a new Article 231a on intra-group transactions applicable to all capital companies:
Approval: The approval of the transactions entered into by the company with its parent company or other group companies subject to conflict of interest shall be the responsibility of the general meeting when the business or transaction in question consists of, by its very natureis legally reserved to the competence of this body and, in any case, when the amount or value of the transaction or the total amount of the set of operations envisaged in a framework agreement or contract is more than 10 % of the company's total assets.
The other operations entered into by the company with its parent company or other companies in the group subject to conflict of interest will correspond to at administrative bodywhich may delegate it in the case of transactions entered into in the ordinary course of business.
Persons related to the administrators: se broadens on spectrum of persons linked to administratorsincluding:
- The companies or entities in which the administrator owns directly or indirectlyeven through an intermediary, a participation that gives it significant influence or holds a position on the board of directors or in senior management of that company or its parent company.
For this purpose, the following shall apply presumed to confer significant influence any 10% or more of the share capital or voting rights or by virtue of which it has been able to obtain, de jure or de facto, a representation on the company's administrative body.
- The shareholders represented by the director on the management body.
Entry into force of the new regulations:
The law shall enter into force 20 days after its publication in the BOE.i.e. on 3 May 2021, with a few exceptionsAmong them, we can highlight the following:
- The new related-party transactions regime shall enter into force on two months after the entry into force of the Law.
- The requirement that the directors of listed companies are natural persons which shall be applicable to the appointments and renewals carried out from the month following publication of the Law in the BOE.
