Proyecto Ley accionitas

This post is also available in: Español

Yesterday, the Official Journal of the Congress of Deputies published a draft bill to incorporate Directive (EU) 2017/828, introducing developments of great interest for listed companies.

The drat bill incorporates Directive (EU) 2017/828 (“SRD II”) in Spanish law, relaxes the processes allowing companies to raise financing in the markets, and introduces regulatory improvements on corporate governance and functioning of the capital markets.

The draft bill now begins its parliamentary processing and could be approved in the last quarter of the year. It may be modified by approving amendments that the different parliamentary groups may introduce.

We briefly describe the most relevant issues for listed companies below, although we may elaborate on some of the most significant matters in future blog posts.

The draft bill introduces a new special related-party transactions regime for listed companies to make their system clearer and more systematic. A definition of “related-party transactions” is established by referring to International Accounting Standards, and the list of “persons related to the director” is broadened. The substantive regime is structured in two distinct parts: publicity and approval regime, with different exceptions for each one. The approval of intra-group, related-party transactions is regulated separately.

The special regime for capital increases and convertible obligations is relaxed to make raising funds in the market easier and more flexible, particularly in view of the situation caused by the COVID-19 pandemic. Thus, for example, the minimum period to exercise the pre-emptive right is reduced, and the obligation to provide the independent expert’s report to exclude that right is removed in some cases. However, the maximum amount of the increase that the board may approve as “authorized capital” is reduced (article 297.1.b) of the Spanish Companies Act) from 50% to 25% of the share capital when the pre-emptive right is excluded.

The draft bill introduces other regulatory improvements on corporate governance and functioning of the capital markets, notably loyalty shares, which allow granting double voting rights under the bylaws to shares held for a minimum, in general, of two years.

Other practical issues for listed companies are addressed, including the prohibition on appointing legal-person directors, the elimination of the regime of reporting significant holdings of directors, which, in practice, is no longer required by the Spanish Securities and Exchange Commission, CNMV) and the removal of the obligation to submit quarterly financial information.

On directors remuneration, most of the provisions of SRD II have been part of the Companies Act since 2014. However, the draft bill includes some relevant developments in practice. For example, the content of the remuneration policy is detailed and developed, and the Companies Act is amended to avoid the interpretation that the executive directors remuneration system must be included in the bylaws. The content of the Annual Remuneration Report for the year-ends from December 1, 2020 is amended.

Also, the listed company’s right to identify the ultimate beneficiary of the investment not formally recorded as a shareholder is recognized when the party registered in the accounting record is a financial intermediary acting as a trustee on its own behalf or that of a third party.

Greater transparency is promoted in transactions of institutional investors, asset managers and voting advisors. The draft bill goes beyond SRD II and requires some market agents to prepare and publish an engagement policy and report how it has been applied, as well as publishing the way they vote in general meetings and adopting measures to detect, prevent and manage conflicts of interest.

A new feature is that some of the special points envisaged for listed companies will apply to unlisted companies whose shares are traded in regulated markets outside Spain or in multilateral trading systems such as the BME Growth (previously MAB).

Finally, the Spanish Securities Market Act is adapted to the reform on prospectus regulations applied by Regulation (EU) 2017/1129, applicable since July 21, 2019.

The Act is expected to come into effect 20 days after it is published in the Official Gazette of the Spanish State.

This post is also available in: Español

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