Amendments to the Spanish Companies Law and the Securities Markets Law
Law to encourage long-term shareholder engagement in listed companiesMarch 30, 2021
The Spanish Senate, sitting in full session (pleno), approved on 24 March 2021 the Draft Law (Proyecto de Ley) to amend the revised text of the Spanish Companies Law, approved by Royal Legislative Decree 1/2010 of 2 July, and other financial regulations, to encourage long-term shareholder engagement in listed companies (the "Law") without amending the text submitted by the House of Deputies (Congreso de los Diputados). The Law, further to transposing the so-called SRD II Directive, includes other important amendments. We highlight the following:
- Remote-only shareholders’ meetings: the Law introduces the possibility of holding shareholders’ meetings only remotely.
- Related-party transactions: the Law eases the regime for related-party transactions within a group of companies, and removes the mandatory abstention of proprietary directors who have a conflict of interest. Additional procedural and transparency duties are set out for listed companies and, under certain conditions, related-party transactions need not be approved by the board of directors.
- Loyalty shares: the Law introduces double voting shares for listed companies that decide to do so (opt-in), allowing significant shareholders who commit to the long term (two years) to strengthen their shareholding position (e.g. a shareholder with a 17% stake could have voting rights representing up to 29%, if no other shareholders request double voting shares). In addition, double voting may be retained if the shares are transferred through a structural modification (merger, spin-off, etc.). Companies going public can have loyalty shares upon listing.
- Easing the regime for share capital increases and issue of convertible notes in listed companies: the period for exercising pre-emptive subscription rights is reduced to 14 days and, where pre-emptive subscription rights are excluded and the amount issued does not exceed 20% of the share capital (and, in the case of share capital increases, if the discount is less than 10% of the trading price), an independent expert's report will no longer be required.
- Encouraging shareholder engagement: asset managers and other institutional investors are required to disclose their shareholder engagement policies and the manner in which they are implemented. The Law also develops the right of issuers and certain shareholders to know the identity of shareholders and ultimate beneficial owners.
- Remuneration: a greater level of detail in remuneration policies and the annual report on directors’ remuneration is required. Reference is also made to the fact that remuneration for executive functions in listed companies should, not only be in accordance with the remuneration policy, but also with the articles of association. It cannot be ruled out that this unnecessary addition – given that the policy is already approved by the shareholders’ meeting – could potentially end up being used to demand that the articles of association more precisely regulate the directors’ remuneration for executive functions and that this lack of precision could be used to question its tax deductibility.
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