The Spanish Companies Act faces amendment on issues relating to the Annual General Meeting (AGM), directors, and the payment of counsellors. Among other amendments, the Shareholders’ Meeting shall approve the legally binding payment policy at least every three years. The share capital to exercise the rights of minorities decreases from five to three percent, and a director can hold his or her position for no more than four years as opposed to the current six.
The last Cabinet Council on December 13 received a report from the Economy and Competitiveness Minister about a draft Bill that amends the Spanish Companies Act. The aim of this Act is to improve the corporate governance of Spanish companies. The Act regulates the payment of directors, the length of their terms, their appointments, and the conflicts of interests and the duties of loyalty and diligence of the directors among other aspects. The Draft Bill will be subject to a public hearing procedure and later return to the Cabinet and the start of the parliamentary process.
The amendments include the following topics:
Powers of the Annual General Meeting
- Intervention in management issues: the AGM can give management instructions unless otherwise provided in bylaws.
- Voting: the agreement proposals for materially independent matters should have separate voting times.
- Conflicts of interest among shareholders: there exists a suggestion to extend to all companies the prohibition to vote applied to the shareholder who benefits in certain cases where there is clearly a conflict of interest.
- Challenge of corporate agreements:
- The distinction between void and merely null agreements disappears.
- The term to challenge agreements extends from 40 days to a year.
- Regarding legitimizing, at least one per 100 of the share capital is required for challenging an agreement.
- Obligations and liability of directors:
- The duties of diligence and loyalty and the procedures followed in case of conflict of interests are categorized in a more precise way.
- The scope of the penalty increases beyond compensation for damages to include reimbursement of the illicit gain. Bringing the social responsibility action is easier because the necessary participation decreases from five to three percent in listed companies. A social responsibility action can also be brought directly without waiting for the Shareholders’ Meeting in case of potential duty of loyalty breaches.
- Powers of the Board of Directors: a new section involves the powers of the Board of Directors and specifies that these powers cannot be delegated. This section makes exclusive to the aforementioned Board all the decisions that deal with the essential core of management and supervision duties of the company.
- Programmatic references: the remuneration of the directors shall be reasonable according to the economic situation of the company and the functions and responsibilities assigned to directors. The remuneration system will promote the profitability and sustainability of the company over time.
- CEOs: the remuneration system on the exercise of directors’ executive powers is clearer. In those cases, an agreement shall be signed with the director, which must include the different retribution items. At least a qualified majority of the Board must vote to approve this agreement while interested parties abstain from voting.
This article is not considered as legal advice