BME Growth

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Act 5/2021, of April 12, (the “Act”) includes significant modifications for companies admitted to BME Growth and for those requesting to be included in this multilateral trading system. We expect the Act to be effective from May 3.

The Act modifies various provisions, including the Corporate Enterprises Act (“LSC”), with the aim of (i) transposing into Spanish law Directive (EU) 2017/828 on the encouragement of long-term shareholder engagement; and (ii) improving capital markets’ corporate governance and operations.

The modifications provided in the Act largely cover companies listed in Spanish regulated markets (mostly stock markets). However, these modifications are also significant for companies admitted to trading in BME Growth, because they will be(i) subject to some of the specificities provided for listed companies; and (ii) affected by some of the modifications covering non-listed companies.

The modifications include: (i) allowing for exclusively online meetings in corporate bylaws; (ii) extending the list of persons related to the director; (iii) an amended regime for related-party transactions; (iv) a new maximum limit on stock repurchases (10%); (v) the right to identify shareholders and indirect holders of investments; and (vi) new mechanisms to engage employees in corporate management. These mechanisms will not enter into force until April 13, 2022, and in most cases companies will be required to report them in the non-financial statements at December 31, 2022, which will be subject to approval in 2023.

Due to their practical implications, below we highlight the specificities regarding share subscription in capital increases, allowing to streamline the financing processes for companies in BME Growth:

  • The minimum period for shareholders to exercise the pre-emptive right is reduced from one month to 14 calendar days.
  • Excluding the pre-emptive right will not require an independent expert’s report (but it may be obtained voluntarily) if the issuance does not exceed 20% of the share capital.
  • If the pre-emptive right is excluded, the general meeting may approve the issuance of new shares at any price as long as it exceeds their net asset value. If the price is below fair value, companies must submit an independent expert’s report to justify (i) the exclusion of the pre-emptive right; and (ii) the proposed issuance.
  • If the general meeting decides on a capital increase excluding pre-emptive rights and delegates the pricing decision to the board, the board may (i) set the price; or (ii) provide a procedure to determine it, as long as the procedure ensures that the price is in line with fair value.
  • The power delegated by the general meeting to the board to perform capital increases excluding pre-emptive rights will not cover more than 20% of the company’s share capital at the time of the delegation.
  • Having recorded the general meeting’s capital increase resolution and executed the deed of capital increase, the new shares may be delivered and transfered inmediately (with no need to wait for the deed’s registration), unless the incomplete share subscription has been excluded.

Finally, any companies performing a capital increase to extend their scope prior to being included in BME Growth will also benefit from this special regime. Any references to fair value will be construed as the price set in the share offer, unless it is unreasonable to assume that the issue price is in line with market value.

This post is also available in: Español

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roger.freixes@cuatrecasas.com