The particular aim of the reform of the Spanish Corporations Law was the improvement and modernization of corporate governance.
Modernization of corporate governance in Spain
Among the most important steps to the modernization and improvement of corporate governance include:
- The award of a greater role to the shareholders’ meeting in Spanish capital companies;
- The establishment of stricter control over the remuneration of board members.
The role of the shareholders’ meeting in Spanish corporations
For the shareholders’ meeting, some drastic changes have occurred.
Individual agreements of shareholders
The reform of the Corporation Law entails that shareholders can speak, with regards to appointments, re-elections and amendments to bylaws, increasingly more as individuals in the future.
Conflicts of interest
In the event of serious conflicts of interest, polls can no longer be conducted in the future. For cases in which the decisive votes were cast by shareholders who had a conflict of interest, an interest violation is suspected.
The necessary capital decreases from 5% to 3% for the exercise of minority rights in listed companies.
The liability of management
Regarding the responsibility of the management, due diligence and loyalty obligations and the process for the resolution of conflicts of interest are determined in more detail.
The liability of directors is extended. The management is liable for damages caused and for reimbursement for unjust enrichment.
Before management duties in Spain are carried out, it is therefore advisable to seek legal advice by lawyers that specialize in Spanish corporation law.
The Board of Directors
The Board of Directors must meet at least once per quarter to sufficiently maintain presence in the company. Members of the Council must, in principle, appear in person.
Non-transferable responsibilities of the Board
A new article in the Law determines powers of management that are transferable to other individuals. This is to ensure the decision-making capacity of the Board of Directors on important aspects of the organization and the supervision of the company.
The tax responsibilities are part of the non-transferable duties of the Board. This includes approval of tax-risk investments and the establishment of a control strategy for the company.
Remuneration of the management shareholders
The remuneration must be appropriate and adapted to the economic situation of the company, taking into account the degree of responsibility of the management shareholder.
The remuneration of the Managing Director
The remuneration of the CEO is determined by the functions performed. The managing director has to sign a contract with the company, in which the various types of compensation calculations are set out. It must then be decided by a qualified majority of the Board under the abstention of the shareholder.
Features of listed companies
In listed companies, the duties of the Chairman and the Managing Board chairman must be performed by the same person, if two thirds of the board members vote for the appointment of the President.
The annual general meeting approves the remuneration of the members of its Board of Directors at least once every three years. The decision includes the total amount of compensation, the compensation process for managing members and must be adopted if any change in the compensation provisions of the shareholders’ meeting occurs.
Josephine Hanschke & Karl H. Lincke
This article is not considered as legal advice