Blog

Warrants

A. Introductory

Warrants are a modern financial instrument, known to those who teach economics, but also to those involved with stock markets around the world. Warrants, little known to the general public, may be a means of attracting financing but also of supporting business development. Their operation is twofold: On the one hand, they align the expected future positive course of the company with the individual interests of third parties directly or indirectly involved. On the other hand, they broaden the framework of those who “struggle” for the success of the corporate venture – which is now becoming a common goal for more. Warrants may prove to be more attractive than issuing preference shares or convertible bonds.

But let’s get to know them better.

B. Getting acquainted with warrants, national and international experience

What are the warrants

Under the Law on Sociétés Anonymes (Article 56 par.1), warrants are the securities issued by a société anonyme and confer the right to the of the beneficiaries (: option) to acquire (more precisely: to buy) shares of its (of the issuer-in this case we are talking about corporate warrants).

Reasonably, though, one could support that lawyers are not the most competent ones to talk about what warrants really are. This is because, in a wider (and correct) view, it is a stock derivative that creates the right (but not the obligation) to buy (or sell) a share at a specific price (: “exercise price”), before its expiration (an indicative definition can be found here: https://www.investopedia.com/terms/w/warrant.asp ). Thus, the institutional framework that governs the operation of warrants affects, on a multi-level basis, not only the operation of a société anonyme, but also the relationships formed around it. The relevant regulations could not therefore be missing from the new law on Sociétés Anonymes (Articles 56 to 58). It could also be impossible not to be of the concern of the legal community of the country. [The most complete, at present, work in our country is: “Warrants corporate and covered”, John Linaritis, Nomiki Bibliothiki, 2018)].

The use of warrants in the context of the recapitalization of Greek banks (2012-2013)

The experience of the recapitalization of Greek banks is the one that first brought us into contact with warrants (precisely with covered warrants – in contrast to the aforementioned corporate warrants). The relevant legislative framework was already in place in 2010 (from article 7a par. 1 and 2 of law 3864/2010, as it was in force with subsequent amendments of the years 2012-2013), before being replaced by Article 2 of law 4254/2014. It was further specified by the relevant Ministerial Council Acts No. 38/2012, 6/2013 and 43/2015.

The attempts to attract private investors to recapitalize systemic banks have been achieved (even partly) through the use of warrants as “sweeteners” (as per the international terminology).

Thus, those who decided to participate in the recapitalization of Greek banks during the period 2012-2013 were found to have warrants in their hands. Accordingly, on the basis of the MCA 38/2012, the holders of the warrants received from the Financial Stability Fund (FSF) free of charge, one Warrant for each common share of the Credit Institution they acquired. There was provision in this MCA for the readjustment of the number of shares attributable to each warrant “in the case of corporate actions”. The relative provision was further specified,by the MCA 43/2015.

The beneficiaries of the warrants, thus, acquired the right to exercise them fifty-four (54) months from the date of issue of the securities – half – yearly. The exercise price of the warrants was set at the acquisition price of the respective shares by the FSF, plus an interest rate of 3% and a margin (proportional to time when the exercise of the relevant right) on the number of shares that the holder of the warrant was entitled to acquire while exercising the right.

The valuation of warrants

Since 1973, the “Black-Scholes” model has been adopted (with various supplementary interventions and adjustments) in the international literature on the valuation of warrants. This model takes into account: (a) three basic parameters for determining their value: the exercise price, the remaining time to the maturity date and the stock price of the share; and (b) at least three additional financial parameters: the expected dividend yield, the risk-free interest rate, and the expected volatility of the underlying share.

In practice, however, for all of us non-economists: When the share price at the time of the exercise of the relevant right (i.e. that acquired by the warrant at the time of its acquisition) falls short of the amount to be paid (per share) for its exercise, it makes no sense to put any other parameter in the equation. This was done in the aforementioned case of bank recapitalization: The share price of systemic banks was downgraded, in contrast to the warrant exercise price, which was initially agreed on a constant basis over the individual periods of potential exercise.

Thus, individuals who participated in the recapitalization of systemic banks received warrants, but they never exercised their right because the share price to which they were quoted was clearly lower than their warrants.

This particular project was not to be successful.

Exercising rights from warrants and related questions

Regarding listed companies (as referred to above “systemic” banks), the aforementioned reasoning seems as self-evident and simplistic: Why exercise my warrant right when it is financially advantageous to buy the corresponding stock from the stock market with a smaller cost?

But does the same also happens with non-listed companies? In those that their shares are not traded on a regulated market, so they are not freely available? And what happens when they can only be available in the context of a free transaction where the vendor’s and buyer’s “declarations of will” are identical?

And, ultimately, the key question: Are warrants a failed and non-functional institution? Or can it be used multilevel in the context of boosting entrepreneurship? The answer to the specific, nodal questions is attempted below.

The potential use and utilization of warrants

The range of potential exploitation of warrants seems almost inexhaustible.

Warrants can be an instrument (but most of all: a motivation) for business financing – it is not accidental that the term “sweetener” already mentioned and internationally used: I am currently participating in a share capital increase and I am excited that in the (near or far) future I will have, IF I choose, on favorable terms (in relation to the then data), an additional number of shares.

This logic may prove attractive not only to attract equity start-ups but also to correspondingly growing and / or simply healthy businesses. On the other hand, it may prove to be appealing in the attempt to provide capital support to companies with liquidity & solvency problems and the inability or difficulty of drawing external financing or (joint) capital support. It is a strategy tool for venture capital, for individual investors, but also a tool for individual shareholders’ personal strategies.

Moreover, it is not possible to disregard the potential use of warrants as a motivation for those who run the company, executives, associates, suppliers or creditors. And with regard to the latter (suppliers or creditors) – in addition as a means of partial or total repayment or favorable settlement of financial obligations.

In all the above cases, warrants can have a dual function: (a) To align the (prospective) future positive course and prosperity of the company with the individual interests of third parties directly or indirectly involved (and not only shareholders) but also (b) To broaden the framework of those who (for tangible reasons of immediate interest) “struggle” for the success of the corporate venture that is now becoming a common goal.

In all these cases, warrants may prove, multi-level, to be (and are) more attractive and preferable to the issue of preferred shares or convertible bonds.

C. The approach (and regulation) of warrants by the law on the SAs

Bearing in mind the above mentioned (under A) introduction, the choice of the relevant Legislative Committee (and of course of the Greek legislator) for integrating warrants into the regulatory field of the new Law on Sociétés Anonymes can be more clearly understood.

Option to issue warrants

By the provision of Article 56 par. 1 of the new law, the General Assembly shall be the competent body for the issue of the warrants, which shall decide with increased quorum and majority. A simple quorum and a majority of the General Assembly or a decision of the Board of Directors is sufficient if there is a relevant statutory provision (paragraph 2 applying mutatis mutandis the provisions for the extraordinary increase of the share capital – according to article 24).

Individual decision parameters of the competent body

The relevant competent body of Société Anonyme in its decision to issue warrants (which is subject to the publication of the law on the increase of the share capital) includes the following:

(a) the time, the manner, the price for the issue of the warrants and the method of payment
(b) the time limit and other conditions governing the exercise of the right which the warrants incorporate
(c) the category and number of shares to be issued after any exercise
(d) the value or method of calculating the value of shares to be paid when exercising the right
(e) the number of shares to which each warrant is entitled to acquire
(f) adjusting the terms of the warrants and of their rights in the case of corporate actions; and
(g) any other relevant detail

Other issues related to the issue of warrants

Existing shareholders at the time of the issue of the warrants retain a relevant pre-emption right at the time of their issuance (Article 56 par.6) and reasonably as their future exercise would disrupt any equity balances. At the same time, it is possible to recognize (Article 56 par.7) the option of partial coverage of the warrants for which the issuance will be decided (in proportion to the application of Article 28 for the partial coverage of the share capital increase). Finally, it is stipulated (Article 56 par. 8) that the relevant warrants are nominal – reasonably also in this case as the shares of the Sociétés Anonymes can only be nominal.

Acquisition of own warrants by the company (Article 57)

The Société Anonyme cannot cover its warrants or take warrants of its own or its parent company.

However, the Company may acquire warrants of its own (except in the case of a successor or a gratuitous cause) following a decision by the Board of Directors to: (a) justify the company’s interest; (b) record the purpose and (c) determine the maximum number of warrants to be acquired; (d) the duration of the approval (max 12 months); and (e) the minimum and maximum value of the acquisition.

For the particular decision of the Board of Directors, a certified auditor’s report is required on the reasonable value of the acquisition. This specific value may not result in a reduction in the share capital to lower levels than those specified in the provision of Art. 159 §1.

In the event that the issuer decides to acquire (and ultimately acquires) its own warrants in order to amortize them, it is obliged to immediately cancel it. Also, when the issuer acquires its own warrants either due to a succession or by a gratuitous cause, it is obliged to take a decision, within one month, either to cancel or to resell them. In any case, however, of an acquisition by the company of its own warrants (in contravention of the specific provisions) is obliged to transfer them not later than one year after their acquisition.

Exercise of warrant rights (Article 58)

The right resulting from warrants is, as already mentioned, a right of option. This means that the exercise of the right by the beneficiary is unilateral. The sole condition for its exercise is the payment to the company (in advance) of a given price.

The nominal value of the shares to be issued may not, however, exceed the sum of the amount paid on the acquisition of the warrants and that paid in the exercise of the right in question.

However, when the relevant right arising from the warrants be exercised, there is an increase in the share capital. In this increase, the old shareholders have no right of preference. The Board of the Directors is obliged to adjust, within two months, the share capital of the company.

Finally, it is noted that the provision of a reserve to the issuing company is mandatory as long as the warrants remain valid. This reserve cannot be distributed and is at least equal to the value paid when the warrants were issued.

D. Epilogue

From the above, I do not think there is any doubt that the incorporation of warrants into national law provides an important (multi) tool for Sociétés Anonymes. An important tool for financing and for facilitating their financing, for creating incentives to help their productive, efficient and ultimately optimal operation and development. Above all, however, it is a tool that widens decisively the circle of natural persons and legal entities directly and indirectly (more or less) associated with it while, at the same time, with many interests in achieving the corporate objectives.

It is up to businesses, entrepreneurs, financial (but especially our legal) advisors to optimize their use.

Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (January 27th, 2019).

January 27, 2019
Presentation of the New Law on SAs to ZIA Insurance
[vc_row][vc_column][vc_column_text] Presentation of the New Law on SAs to ZIA Insurance – Business and Board members insurance coverage

It is a fact that the new Law on Societes Anonymes is an important opportunity for enterprises that should not be lost.

It is also a fact that the new law extends the responsibility and report of the members of the Board of Directors in terms of civil, criminal and administrative sanctions. This may be a potentially serious problem if there are no corresponding provisions and insurance coverage. The presentation of Mr. Stavros Koumentakis on the specific law to ZIA Insurance was an opportunity for a broad exchange of views on the specific, extremely important (for enterprises, businessmen and board members) aspects. An exchange of views also took place on the level of potential insurance coverage for individual complex products created on the basis of the new law.

In his speech, Mr. Koumentakis presented the general framework of the new Law on Sociétés Anonymes, the differences that exist in relation to the older ones and was extensively mentioned:
- deepening into individual regulations of the new law
- making use of the law’s options on behalf of the businesses on its own aspects, such as:
  - reducing their operating costs
  - attracting investors and investment funds
  - exploiting technology
  - attracting and retaining competent, senior-level, executives
- protecting the clients of the Law Firm against their “internal and external enemies”.
- the potential, necessary and beneficial regulations of the SAs’ articles of association, where applicable, the provisions of which must, individually and directly, be adapted
The presentation was attended by the senior management of ZIA Insurance. [/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_text_separator title=”Gallery” border_width=”3″][/vc_column][/vc_row][vc_row][vc_column][vc_images_carousel images=”36807,36805,36803,36801″ img_size=”” speed=”6000″ slides_per_view=”6″ hide_pagination_control=”yes”][/vc_column][/vc_row]
January 24, 2019
The new law on SAs: Issuing restricted stocks

Is it an option of the law or a minimum guarantee of the (founding and other) shareholders and of the smooth operation and continuity of the société anonyme?

Past experience

It is well known that the Société Anonyme has always been (and remains by law) a capital company. In our country, however, it continues to have, in general, strong personal attributes.

Founding (and non) shareholders always have a lot of concerns. One such is the possibility that one of the other shareholders (with whom they shared the “common dream”) would transfer its shares to a third party irrelevant to the original group. Possibly malignant and / or competitor. Where data permitted, we proceeded with statutory provisions based (primarily) on the needs of the main shareholder or, better, of the shareholder who had chosen us as his lawyers.

These provisions were aimed at protecting the remaining shareholders from the potential surprise of the emergence of a new “partner”. An associate with whom the old shareholders owed (regardless of their personality and intentions) to coexist and co-create.

These provisions usually referred to the recognition of the preference rights of the remaining shareholders when a shareholder externalized his intention to transfer his shares. Even more so: when the shareholder had already pre – arranged, with a proposed acquirer, the transfer of his shares. Sometimes even the architectonic proceedings that were chosen were intended to make a potential transfer of shares de facto impossible. Especially in the event that a specific shareholder would not approve it.

The possibility of denying the requested authorization and the “red line” to the restrictions that can be set.

The law on sociétés anonymes accepts, in the provision of Article 43, that the competent body of the company (Board of Directors or General Assembly) may refuse to approve the requested transfer. Hence, not arbitrarily but under a respective statutory provision (paragraph 1).

The same provision (paragraph 2) introduces a systematic (but indicative) list of some restrictions that are possible but also tolerable on the basis of the Articles of Association to be borne by the company’s shares. For these restrictions, however, there is a significant, twofold, “red line” as it is not acceptable: (a) to make the requested transfer impossible; (b) for a quarter to expire without the company responding to a request of this respect, from the shareholder.

In the event of a violation of the aforementioned “red” line, the company is obliged to buy the shares for which the request itself, in accordance with the procedure provided by the law. The relevant provision (Article 45) provides for the mediation of a court decision, the determination of the redemption price through this court decision, the possibility of the mediation of an expertise. Also, the threat of a company’s dissolution in the event of non-compliance with what said (court decision) orders.

Restrictions and bodies of approval

The respective provision of the law on Sociétés Anonymes refers to some more common restrictions that may be set in the Articles of Association with regard to the transfer of shares. This reference is indicative, as there is no restriction other than the pre-mentioned “red line”.

The involvement of a company’s statutory body has always been (and still remains) already) given and necessary when there is a statutory provision on the future transfer of shares (based on a predetermined procedure). The General Assembly or the Board of the Directors (most commonly the last) was chosen as the body that would give the necessary approvals. Thus, the shareholder who had the majority of the votes in the General Assembly or of the members of the Board of Directors was the regulator of the relevant issue. The absolute, more or less, archon!

Certainly, with the new law, things are not different. And this is reasonable.

Potential restrictions

The provision of art. 45 par. 2 provides for, indicatively, certain restrictions that may be imposed on a possible transfer of shares.

In this context, the obligation of the shareholder requesting the transfer to offer the shares to the other shareholders or to some of them (paragraph 2, case a -recognizing their right of preference) is accepted. It is also defined as tolerable, the mandatory transfer of said shares, ONLY, to the one who will be indicated by the company (paragraph 2, case b).

More interesting, at a legal and practical level, are the other two restrictions. The ones met in international terminology as Tag Along Right (par. 2, case 3), and Drag Along Right (par. 2, case d) as potential and tolerable constitutional provisions. Those which, we, with some originality and sometimes moving hand over hand, incorporated as statutory provisions or arrangements for an extraterrestrial shareholders’ agreement.

In the first case (: Tag Along Right), the third-party potential share buyer is obliged to acquire a corresponding number of shares of other shareholders (and not only of the one with whom he initially “agreed with”).

In the second case (: Drag Along Right) the remaining shareholders undertake the obligation to co-transfer to the third-party corresponding number of shares with the transferor.

Experience has shown that these alternatives have often successfully tackled and resolved complex problems in respect with the relationship between shareholders.

Statutory regulations

The Company’s Articles of Association may (or not) provide for the existence of restrictions, such as above, in respect of share transfers. In the affirmative, it must regulate “the procedure, the conditions and the time limit within which the company approves the transfer or indicates a buyer”. In the event that such a period has elapsed, the requested transfer is free. Hence, if there is a transfer of shares in breach of the statutory provisions, the transfer is declared null and void.

Abolition of transfer restrictions.

Possible existing statutory restrictions on the transfer of shares do not apply unconditionally. Like, e.g. in the event of a shareholder’s death. Also, in case of attachment of his property, bankruptcy or other collective proceedings of transfer of his property. In such cases, it is possible to be statutorily provided: (a) the designation of a purchaser within one month starting from the company being informed of the respective event – the price is determined by the court or, alternatively, (b) the preference right of the other shareholders.

The reasons for the abolition of the statutory restrictions as well as the statutory provisions for the respective management of such events are assessed as perfectly reasonable. The latter even ensure the company’s continuity within what the founding (or the subsequent) shareholders had envisaged.

Corresponding (potential) restrictions also on bonds

Respective restrictions with those mentioned above may be made by the decision of the competent body when a convertible bond is issued.

In conclusion

The statutory restrictions regarding the transfer of the shares of a société anonyme contribute effectively to the smooth operation of the company when one of the shareholders expresses the wish to transfer its shares.

The relevant statutory provisions should, however, be reasonable and not lead to dead ends (since they will be self-defeating). Additionally: not to create the background of extortionate behavior by any of the shareholders.

The new law provides us with the right tools.

It is up to us to use them appropriately, along with the past experiences.

Stavros Koumentakis
Senior Partner

Υ.Γ. A brief version of this article has been published in MAKEDONIA Newspaper on Sunday, 20th of January 2019.

January 20, 2019
Presentation of Law 4548/2018 to ARTION Group
[vc_row][vc_column][vc_column_text] The new law on Sociétés Anonymes is a new opportunity for businesses and not yet another headache. This was the conclusion of the presentation by Mr. Stavros Koumentakis, Senior Partner of KOUMENTAKIS & ASSOCIATES Law Firm, titled: “Enlightening the New Law on Sociétés Anonymes (L.4548 / 2018)”, which took place at the headquarters of ARTION Group.

Law 4548/2018 For Businesses

In his speech, Mr. Koumentakis presented the general framework of the new Law on Sociétés Anonymes, the differences that exist in relation to the older ones and had the opportunity to make a detailed presentation of all the law and not only of its basic regulations. Through the interactive and creative exchange of views, it was possible to enlighten individual aspects of the entire law. There was also highlighted the need for the immediate adaptation of the articles of association of the sociétés anonymes to the provisions of the new law as well as the “tailor made” exploitation, for each one, of the law’s particular options and regulations.

Mr. Koumentakis’ suggestion’s objectives were among other:
- reporting and, where appropriate, deepening into individual regulations of the new law
- making use of the law’s options on behalf of the businesses on its own aspects, such as:
- reducing their operating costs
- attracting investors and investment funds
- exploiting technology
- attracting and retaining competent, senior-level, executives
- protecting the clients of the Law Firm against their “internal and external enemies”.
- the potential, necessary and beneficial regulations of the SAs’ articles of association, where applicable, the provisions of which must, individually and directly, be adapted
- small, non- publicly releasable secrets on individual critical issues
The presentation was attended by the main shareholders, the senior management and executive staff of ARTION Group.

ARTION Group

ARTION group of companies with more than 30 years of experience in the field of supporting businesses and business activities, has gradually evolved into one of the most important units in accounting, tax consulting, specialized consulting services and computerization services.

ARTION Group has more than 100 personnel, providing a safe, stylish and modern work environment characterized by stability, parity and opportunities for continuing education and professional development.

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January 19, 2019
Two-day conference on the new law on Sociétés Anonymes
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On the occasion of the new Law on Sociétés Anonymes (in the final form of which the firm was actively involved), the Senior Partner of the Law Firm Mr. Stavros Koumentakis, held an internal informative seminar on “Enlightening the New Law on Sociétés Anonymes (L.4548 / 2018)”.

Law 4548/2018

At the two-day conference, of 12 hours duration, the Senior Partner of the Law Firm Mr. Stavros Koumentakis had the opportunity to make a detailed presentation of all the legislative text and not just of its basic regulations. Through the interactive and creative exchange of views between the partners and associates of the Law Firm, it was possible to enlighten individual aspects of the entire law. There was also highlighted the need for the immediate adaptation of the articles of association of the sociétés anonymes (in particular of the Law Firm’s clients) to the provisions of the new law as well as the “tailor made” exploitation, for each one, of the law’s particular options and regulations.

Mr. Koumentakis’ suggestion’s objective was, among other topics:
- reporting and, where appropriate, deepening into individual regulations of the new law
- making use of the law’s options on behalf of the businesses on its own aspects, such as:
  - reducing their operating costs
  - attracting investors and investment funds
  - exploiting technology
  - attracting and retaining competent, senior-level, executives
- protecting the clients of the Law Firm against their “internal and external enemies”.
- the potential, necessary and beneficial regulations of the SAs’ articles of association, where applicable, the provisions of which must, individually and directly, be adapted
- Significant “secrets” on issues such as the management and the power of the minority
The Law 4548 presentations

With this particular two-day conference, KOUMENTAKIS & ASSOCIATES Law Firm has launched a series of similar presentations, which is on track to take place in Businesses, Business Associations, Auditors Companies, significant Tax and Accounting Services Companies and so on.

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January 17, 2019
Slitting of Vasilopita (Greek New Year’s cake with a coin)

[vc_row][vc_column][vc_column_text] The New Year was inaugurated at KOUMENTAKIS & ASSOCIATES Law Firm with the traditional ceremony of slitting Vasilopita (the Greek New Year’s cake with a coin).

Despite the wish of Mr. Stavros Koumentakis (see the video below) that the coin – a Schweizer Goldfranken of twenty francs – be found in the slices of the younger associates, the lucky slice was that of the office. By joint decision, the equivalent of the coin was given to a soup kitchen.

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The management and the associates of the firm exchanged heartfelt wishes for the new year, made the 2018 review and laid the foundations for an even brighter 2019.

As Mr. Koumentakis said, 2019 starts dynamically with extroversion moves on many levels, starting with a series of informative presentations on the new Société Anonyme Law, for the reconfiguration and improvement of specific problematic provisions of which, the law firm has actively and dynamically participated. [/vc_column_text][/vc_column][/vc_row]

January 15, 2019
Technology at the service of the Société Anonyme
At the risk of “betraying” my age, I have to quote that I learned to typewrite in the early 1980s. One, newer then, Olivetti was the one which tolerated me (the younger ones and the eager may navigate to the internet for the relevant pictures).

At that time, if anyone was talking about technology, perhaps we would have thought, if we thought, the (electric) typewriters (with the “ball”) that were to follow.

At that time, we would notthing of internet, of the e-mail or of the teleconference.

At that time, it was not possible to imagine how technology could be used by a société anonyme or by a law firm (there were not even law firms then).

But there have been almost forty years since then.

The changes, since then, sweeping.

Also in the law of Societes Anonymes!

(refer to The new law on Sociétés Anonymes and Sociétés Anonyme: The new law).

The recent law

The recent law (4548/2018) for sociétés anonymes provides a wealth of opportunities related to the exploitation of technology. Which, without a doubt, make our lives (entrepreneurs, accountants, lawyers) easier. Helping to the more efficient and effective operation of the société anonyme.

It is noteworthy, however, that the use of technology is not required by law. In a number of provisions, the law regulates the option of statutory provisions for technology’s exploitation.

The ability to exploit technology

Solely indicatively, may one refer to the provisions of the new law that refer (provided of course that there are corresponding statutory provisions) to:

In the operation of the Board of Directors
- The possibility of the Board of the Directors having meetings by teleconference (Article 90).
- The possibility of decision making by the Board of Directors by means of email exchange (Article 94).
In exercising shareholder rights
- The ability of the shareholders: (a) to request information by email for the forthcoming General Meetings of the companies (article 122) but also (b) to be sent to them the subject to a vote by the ordinary General Assembly financial statements of the company (Article 123).
- The obligation for companies to comply with such requests.
In the procedures of the General Assembly
- The ability of shareholders to participate in a General Meeting (Article 125) on-line (real-time) by audiovisual or electronic means.
- The ability of shareholders to participate in a vote of a General Assembly from a distance that is preceded by a “letter” vote (Article 126). This particular ability is exploited: (a) by the availability of issues and ballot papers via the Internet and (b) by filling in the ballot papers electronically. It is noted that when a distance voting takes place, it is compulsory that the vote be (reasonably) an open one (Article 131) but also that the company ensures the identity of the participant in the process as well as the electronic or other connection.
- The ability of non-shareholder-members of the Board of the Directors, auditors or third parties to participate in a General Meeting by electronic means (Article 127)
- The ability of shareholders to appoint, recall and replace (by electronic means) their representatives (Article 128)
- The ability to hold General Meetings without a meeting (Article 135) when all shareholders have communicated to the company their e-mail addresses. In such cases, the proposal of the Board of Directors is sent electronically to the shareholders along with: (a) a draft decision, (b) the relevant suggestion of the Board of Directors, (c) the way of declaring acceptance or refusal but also the deadline for shareholders’ reply / vote (7-30 days). [In such a case, shareholders are also entitled to submit information requests electronically within three days of receipt of the Board’s proposal. These requests are required to be answered within two days of receipt].
- The ability of countersigning General Meeting minutes without a meeting (Article 136), together with the ability to replace shareholders’ signatures by e-mail.
In the Shareholders’ Unions
- The ability to provide information from Shareholders’ Unions (Article 144) via the internet on the rights of shareholders, investors, and the ways of, among others, namely conciliation.
The (necessary but also rational) use of technology and its capabilities.

Almost one hundred years since the first law on sociétés anonymes (2190/1920) and almost forty years since I learned to type, are so many.

So (I think) I have the right to “strongly qualify” to encourage (also) the exploitation of the latest law on the use of technology.

The legal background exists.

What remains is the (evaluated but also rational) incorporation of the respective options in the articles of association of the sociétés anonymes – which in any case must be aligned with the new data and the requirements of the law.

Stavros Koumentakis
Senior Partner

P.S. A short version of this article has been published in MAKEDONIA Newspaper (13 January 2019).
January 13, 2019
Sociétés Anonymes: The new law

The agreements of an SA with its main shareholders, the members of its BoD and with related parties: The correction of the “wrongly raised” issues

The seriousness of the matter and how the new law on SAs deals with it

The issue of the agreements signed between a Société Anonyme and its main shareholders, members of its Board of Directors and related parties is one of the most important issues that the new Law (Law 4548/2018) was required to deal with for Sociétés Anonyme.

Our work with this particular issue

This particular issue has already been addressed in the recent past (in the column “Business: Law and Practice” in the Sunday edition of the newspaper Makedonia on 18.11.2018), but also in a previous article on the blog of our law firm.

In summary, in the above-mentioned article on the blog, among other things, we mentioned: “Based on the options of the new law it is NOT entitled to participate in the decision-making process in the Board of Directors and the General Assembly the member of the BoD or any shareholder, who derives interest (directly or indirectly) from the particular transaction. It is noteworthy that the final decision belongs to the General Assembly, which is convened on this issue at the request of 5% (only) of the share capital. Only the remaining shareholders – in practice, i.e. ONLY the (usually one) minority shareholder – can vote in this particular General Assembly”.

This choice … is expected to lead to exactly the opposite effects to those that the Legislative Committee was looking at: The privilege of 5% minority shareholders to decide unilaterally on the matters relating to the company’s relations, for example, with the shareholder of the majority is expected to lead to abusive (and / or extortionist) behaviors.

…Therefore, there is no doubt that there is a strong need to find a different solution. For example, to return to the former (safer and fairer) “regime” (article 23a of Law 2190/1920): Shareholders who derive interest from a contract are entitled to participate in the General Assembly that will provide the final approval, but the authorization to conclude it will be provided only if the 1/3 of the share capital represented in it does not oppose.

The activation

This issue was a matter of particular concern for a Body of our city (which, for reasons of modesty, has asked for its involvement not to be mentioned). We worked together to achieve the best solution. With our law firm’s letter dated 6.11.2018, we recommended the amendment of the critical provision (Article 100 (5)) of the new law.

In the Body’s letter dated 13 November 2018, addressed to the competent ministers, there was asked for the pre-existing legislative provisions on non-listed companies to be reintroduced. It mentioned, among others:

“It is therefore necessary to return to the previous regime (article 23a of Law 2190/1920) according to which the shareholders affected by the decision may take part in the General Meeting in question, but the authorization to conclude the contract will only be given if the 1/3 of the share capital represented in the General Assembly does not oppose…

In the context of the above, there is no doubt that there is an urgent need to restrict the provision for the application of Article 100 (5) of Law 4548/2018 to listed companies and to amend it as soon as possible as the new law comes into effect on 1.1.2019”.

The response of the political authorities

We are accustomed to addressing to the “ears of those who will not listen” when we rush to the competent authorities for any issues – sometimes critical. In this case, however, the prementioned activation seems to have been completely effective. Through an amendment that has already been submitted to Parliament for voting, it is expected that paragraph 5 of article 100 4548/2018 be amended in the proposed direction.

The Explanatory Memorandum for the amendment of article 100 of Law 4548/2018

This explanatory memorandum verbatim states:

“7. With paragraph 7, paragraph 5 of Article 100 of Law 4548/2018 is amended in order to alleviate the consequences of the full ban to vote for the shareholder who will participate in the General Assembly that will provide the authorization in order for the company to conclude a transaction with a related party, should (this shareholder) be this related party. While Directive 2017/828 provides that in this case the shareholder does not have the right to vote, thus, it allows the provision of interim solutions if the interests of the minority are protected. Given that the abstraction of the vote applies, in accordance with the Directive, only to listed companies, it is appropriate not to apply the prohibition to non-listed companies, while for those listed there is an intermediate system where voting rights are preserved in the assembly provided that the independent members of the BoD have reached a majority agreement on the granting of the authorization. It is added that in every case (both listed and non-listed companies), the minority of 1/3 of the capital represented in the meeting has the right of veto to the granting of the authorization, as provided for in Article 23a (3) of Law 2190/1920. It should be kept in mind that according to par. 4 of article 100 of law 4548/2018, if, prior to the general assembly’s decision, the transaction has already been concluded, a minority of 1/20 has the right of a veto”.

The introduced amendment and the amendment to the disputed (problematic) provision

The introduced amendment verbatim states:

“7. At the end of paragraph 5 of Article 100, paragraphs are added as follows:

“This does not apply (a) to companies with shares not listed on a regulated market and (b) to listed companies if the authorization of the Board of Directors pursuant to paragraph 1 was granted with the agreement of the majority of its non-listed members. In any event, the authorization by the general meeting is canceled if shareholders representing one third (1/3) of the capital represented in the meeting object to it”.

The problem “with the potentially dramatic consequences”: NO longer exists

The aforementioned activation (with the assistance of our Law Firm) proves to have had the desired effect: The problem “with the potentially dramatic consequences” (i.e. the 5% minority being a regulatory factor for critical decisions with the assumption that the company and shareholders will be involved in long-standing litigation) will not exist since the very beginning of the implementation of the new law.

We can be both happy and proud.

Congratulations, however, must be given to those who have decided to activate while refusing to submit to (the usual) practices of introversion.

Stavros Koumentakis
Senior Partner

Υ.Γ. A short version of this article has been published in MAKEDONIA Newspaper (December 30, 2018).

December 30, 2018
GDPR: The Next Day. The Regulation in the context of employment
[vc_row][vc_column][vc_column_text] The European Regulation “on the protection of natural persons with regard to the processing of personal data”, adopted on 27 April 2016, is directly and across the board applicable (throughout Europe) since 25.5.2018.

Basic declarations

It is a “convenient” myth that we (should) expect for the Greek legislation to decide on how we adapt. There is a draft law (its consultation was completed in March 2018), but it has not yet been adopted nor is necessary to be. The Regulation applies as is.

It is accurate and not a (malicious) exaggeration that all businesses process personal data. Sometimes even “sensitive”: Like those of their employees. Thus, businesses need to adapt according to their strengths and (in particular) depending on the potential impact of the data leakage they process, that is, depending on the number and degree of “sensitivity” of the data.

It is also accurate that the Regulation is not entirely clear on all points. However, we have been armed with the relevant interpretative tools. Such as, for example, the views of the Working Party of the 29-member Group of Member States’ Data Protection Authorities.

The role of GDPR in employment relationships

What is the role that GDPR plays in the relationship between the Employer and the Employee and which are the main obligations of a business?
1. To train the Employees on the processing of third-party data it processes in the context of the provision of its services, in the wide sense of awareness and cultivation of new habits.
2. To re-approach the employment contracts with the addition of the employee’s obligations with regard to the development of a new corporate culture. (Which is) The adaptation of a new modus operandi, as such is required as mandatory by the Regulation.
3. First of all, to inform employees on the processing of their data. In particular: for the categories of their data to be collected, their retention time, the purpose and the legitimate basis for their processing, their possible transmission to other organizations (or other countries), and above all for their rights as identified in Articles 15 to 22 of the General Regulation.
The consent

It is thus very important to be noted that the employers are obligated to inform their employees on the processing of their personal data which are necessary, thus, not to obtain their consent. Such consent would be contrary to the spirit (objective) of the Regulation for the following two reasons:

(a) Consent must be the “last resort” of a legitimate base for processing as it presupposes true freedom of choice and is revocable. It would be misleading make an employee think that if he/she does not give or withdraw his/her consent, it is possible for the employer not to ask for or delete the necessary personal data of his/hers: In fact, the labor and insurance legislation as well as the performance of the employment contract impose the processing of specific personal data of the employee.

(b) Consent must be given freely. The relationship between the employee with the business is characterized by a certain imbalance of powers, leading to a “forced” and therefore to an illegal consent.

GDPR is a cumbersome Regulation which, however, carries a significant gift: Extrusion into a change of mentality.

Petrini Naidou
Senior Associate

P.S. This article has been published in Greek in MAKEDONIA Newspaper (December 23, 2018)
December 23, 2018
Corporate Governance: Competitiveness and Growth

[vc_row][vc_column][vc_column_text] Corporate Governance is, in general, a set of principles and rules that must govern certain areas of the organization, operation and management of a Société Anonyme. But how are they related to Competitiveness and Growth?

The Regulations of Corporate Governance Codes

In the Greek Corporate Governance Code, these rules refer to the Board of Directors, internal control, fees and shareholders.

The Corporate Governance Codes are not mandatory unless some of their provisions (or all of them) have the form of the law (e.g. some of the provisions of Law 3016/2002 on listed companies, of the recent Law 4548/2018 concerning the reform of the law of Sociétés Anonymes, the commonly known law 2190/1920).

Objective and Purpose of Corporate Governance: The Component of Competitiveness

The purpose of Corporate Governance under the Greek Code is “to promote good governance in the conviction that it will enhance the long-term success and competitiveness of Greek companies”.

The reference to enhancing competitiveness is not accidental: We can be sure that there would be no investor to invest in a company that operates with the well-known methodology of most (family) businesses in Greece. A methodology in which the entrepreneur identifies the fund of the company with his “pocket”. The company, with his home.

To what extent is the entrepreneur willing to retreat from unwavering practice and habits of years?

Necessity and value of Corporate Governance. From theory…

Regarding the necessity and value of Corporate Governance, a great deal has been written. In the preface to the Greek Code of Corporate Governance, Iakovos Georganas (then President of HELEX – for the older the “Patriarch of the Hellenic Capital Market”) states: “… Strengthening corporate governance is a prerequisite for creating an attractive investment climate in Greece, as in every country and the adoption of the Code by the companies, helps restore investors’ and lenders’ trust, attract domestic and foreign capital, and enhancing business competitiveness …”.

…to practice. Indicatively: Roots Programme

Helping businesses to grow but also boosting their competitiveness requires, among other things, access to low-cost investment funds. The Athens Stock Exchange is pursuing an important step in this direction, through the Roots programme, which, with a modern methodology, attempts to facilitate the access of small and medium-sized companies to investment funds. Already, on 13.5.2018, the first event took place at the Thessaloniki Stock Exchange Center, with recipients, innovative startups and promising small and medium-sized companies in Northern Greece. Companies that think they have an interesting investment proposal and are looking for investors. “The success of the companies that will join this program will be judged by their ability to raise the funds needed to implement their investment proposal, meeting the requirements of organization, transparency and good corporate governance under the conditions demanded by investors”, says the President of HELEX Mr. Socrates Lazaridis.

Once again, corporate governance!

Is (quite) clear?

Without good corporate governance, there is no access to finance!

Without funding, there is no way for growth!

Stavros Koumentakis
Senior Partner

Υ.Γ. The article has been published in MAKEDONIA Newspaper (December 16, 2018)

December 16, 2018

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