Tag: νομικοί σύμβουλοι

New instruments for resolving tax disputes within the EU

New instruments for resolving tax disputes within the EU

Ι. Preamble

Even Socrates forced Thrasimahos (as per Plato’s Republic, see 346e–348b), strong supporter of the view of the “law of the most powerful”, aka “might makes right”, to admit that justice is a virtue of the soul that can ensure one’s happiness, we always want to think of justice as the vehicle to ensure our rights, but also as a the way to restore the rule of law.

The delay in the administration of justice is a blight (one of many) for businesses -and, of course, for natural persons as well.

Taking legal actions before Greek courts in order to make administrational claims is, in its very core, very problematic: One must not only be surrounded by the proper legal, financial and tax advisors and have sufficient funds, but also be equipped with the patience of Job. The amount of time it takes for a tax dispute to be resolved (although already improved) can approach or even exceed a decade(!).

The amount of time it takes to resolve a legal dispute before the courts (especially those disputes with an administrational – tax nature) seems to devoid of seriousness.

The possibility that someone may have to go through multiple legal systems of countries between which, for example, there are Double Taxation Agreements in place, is truly horrific: a lifetime does not seem enough…

The EU legal systems in place have not, until recently, neither protected the taxpayer’s rights, nor promoted the acceleration of the procedures in place that needed to be followed in order for a tax dispute to be resolved -a dispute that resulted from a wrong application, or no application at all, of Double Taxation Agreements.

Their improvement has been sought.

II. COUNCIL DIRECTIVE (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union

About three years ago (on 25.10.2016), the European Commission announced its plan for the taxation of businesses in the Union market, “delivering a growth-friendly and fair corporate tax system”.

Vice president Valdis Dombrovskis said, at that time, that: “Tax policy should support the EU’s goals of economic growth and social justice…”.

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs said: “With the rebooted CCCTB proposal, we’re addressing the concerns of both businesses and citizens in one fell swoop. The many conversations I’ve had as Taxation Commissioner have made it crystal-clear to me that companies need simpler tax rules within the EU. At the same time, we need to drive forward our fight against tax avoidance, which is delivering real change. Finance Ministers should look at this ambitious and timely package with a fresh pair of eyes because it will create a robust tax system fit for the 21st century.”

What made these men make such statements?

At that time (October 2016) there were about 900 unresolved disputes in the EU, estimated at 10.5 billion euros. These numbers were extremely high and the problem had to be resolved: The intention was to set clear deadlines so that the Member States commit to resolve the problems created by the double taxation and the agreements to avoid it.

One of the most important actions took was the Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union.

III. Substantial assumptions of Directive (EU) 2017/1852 of 10.10.2017

In the preamble of the Directive (which followed the above statements), there are some extremely interesting references. The most interesting of them can be found, in their original form, below:

“Whereas:

(1) Situations in which different Member States differently interpret or apply the provisions of bilateral tax agreements and conventions or the Convention on the elimination of double taxation in connection with the adjustments of profits of associated enterprises …can create serious tax obstacles for businesses operating across borders. They create an excessive tax burden for businesses, and are likely to cause economic distortions and inefficiencies and to have a negative impact on cross-border investment and growth.

(2) For this reason, it is necessary that there are mechanisms in the Union that ensure the effective resolution of disputes concerning the interpretation and application of such bilateral tax treaties and the Union Arbitration Convention, in particular disputes leading to double taxation.

…

(4) … At the same time, in the spirit of a fair taxation system, it is necessary to ensure that mechanisms for dispute resolution are comprehensive, effective and sustainable. Improvements to dispute resolution mechanisms are also necessary to respond to the risk that the number of double or multiple taxation disputes will increase, with potentially high amounts being at stake, because tax administrations have established more regular and focused audit practices.

(5) It is crucial to introduce an effective and efficient framework for the resolution of tax disputes which ensures legal certainty and a business-friendly environment for investments in order to achieve fair and efficient tax systems in the Union. The dispute resolution mechanisms should also create a harmonised and transparent framework for solving disputes and thereby provide benefits to all taxpayers.

(6) The resolution of disputes should apply to different interpretation and application of bilateral tax treaties…

IV. The core provisions of Directive (EU) 2017/1852 of 10.10.2017

The object of this Directive

This Directive sets the rules for a mechanism used in resolving disputes between member states that emerge for interpreting and applying agreements and conventions aiming to eliminate double taxation. It defines the rights and obligations of the persons concerned (article 1) and it regards both natural and legal persons (article 2).

Complaint and amicable settlement

The legal and natural persons concerned can submit a complaint, containing specific data and information regarding the contested issue, with which objection they will request for the resolution of the issue from the relevant authorities of each Member State concerned. The complaint shall be submitted within three years from the receiving of the first notification of the measure that raised the contested issue. The Member States that received the objection can unilaterally resolve the issue within six months after the objection was submitted or after they received additional information they had requested. In this case, the procedure provided for by this Directive is concluded (article 3).

Alternatively, the competent authorities of the Member States concerned (and assuming they have accepted the submitted complaint) seek to resolve the contested issue by reaching an amicable settlement within two years. If they fail to do so, they inform the affected person for the reasons an amicable settlement was not reached (article 4).

Advisory Commission and Alternative Dispute Resolution Commission

In case an objection submitted is overruled or the Member States cannot reach an agreement, the affected party can request the formation of an Advisory Commission from the competed authorities of said Member States. The Advisory Commission delivers an opinion regarding the contested issue (article 6) and has the composition of one chair, one representative (or two) of each competent authority concerned and one intendent person (or two) of standing, appointed by each competent authority concerned (article 8)

The competent authorities of the Member States concerned may agree to set up an alternative dispute resolution commission instead of an Advisory Commission to deliver an opinion on how to resolve the question in dispute. The competent authorities of the Member States may also agree to set up an Alternative Dispute Resolution Commission in the form of a committee that is of a permanent nature (article 10).

The fees of the members of the abovementioned committees are not borne by the affected natural or legal person but are shared equally among the Member States. The same goes for the fairly substantial fees of the independent persons (1000€ per person per day) (article 12).

The Advisory Commission or the Alternative Dispute Resolution Commission shall deliver its opinion to the competent authorities of the Member States concerned no later than 6 months after the date on which it was set up, period which can be extended by three months. Where the Advisory Commission or Alternative Dispute Resolution Commission considers that the question in dispute is such that it would need more than 6 months to deliver an opinion, this period may be extended by three months. The Advisory Commission or Alternative Dispute Resolution Commission shall inform the competent authorities of the Member States concerned and the affected persons of any such extension.

Dispute Settlement

The competent authorities concerned shall agree on how to resolve the question in dispute within six months of the notification of the opinion of the Advisory Commission or Alternative Dispute Resolution Commission. The competent authorities may take a decision which deviates from the opinion of the Advisory Commission or Alternative Dispute Resolution Commission. However, if they fail to reach an agreement as to how to resolve the question in dispute, they shall be bound by that opinion. Where the final decision has not been implemented, the affected person may apply to the competent court of the Member State that failed to implement the final decision, in order to enforce implementation thereof. (article 15)

The possibility of turning to and implementing this Directive

It is possible that the action of a Member State that gave rise to a question in dispute has become final under national law. It is noteworthy that in this case the affected persons are not prevented from having recourse to the procedures provided for in this Directive. The submission of the question in dispute to the mutual agreement procedure or to the dispute resolution procedure shall not prevent a Member State from initiating or continuing judicial proceedings or proceedings for administrative and criminal penalties in relation to the same matters.

Provisions for natural persons and smaller undertakings

Where the affected person is either: an individual or not a large undertaking and does not form part of a large group (both as defined in Directive 2013/34/EU of the European parliament and of the Council) the procedure the affected person has to follow becomes much simpler. The complaints, requests, withdrawals etc. do not have to be submitted to all competent authorities of all Member States concerned, but only to those where the affected party resides. (Article 17)

V. The consequences of a (non) transposition of this Directive to our national law

The Member States of the European Union where obligated to “bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 30 June 2019 at the latest” (article 22).

Our country did not.

This raises an interesting issue, since the Directive does not apply where a Member State has not taken national measures.

Nevertheless, the Court of Justice of the European Union has ruled that some provisions of a Directive can, as an exception, be implemented directly in a Member State, even if said State has not yet taken national measures for its implementation, under the following conditions: a) the Directive has not yet been transposed to the national law or it has been transposed incorrectly; b) the provisions of the Directive are obligatory and are adequately clear and accurate; and c) the provisions of the Directive recognize rights to specific persons.

Since these conditions are met, specific persons can invoke the provisions of this Directive before all public authorities. Even when a provision of this Directive does not recognize a specific right to an individual, resulting in the first and third condition not being met, the authorities of the Member State are legally obligated to take the non incorporated Directive under consideration. The aforementioned precedent is mainly based on the principles of efficiency, prevention of infringement of the Treaty and effective protection. Contrariwise, an individual cannot invoke a non incorporated Directive before another individual (the “horizontal direct effect”; Case C-91/92 Faccini Dori, ECR I-3325 et seq, point 25).

Entry into force and application of the Directive

According to the above, this Directive (although not yet incorporated into the national law) is applied in every appeal submitted since the 1^st of July, 2019 and on in debated issues, that have to do with income or capital that was acquired in a fiscal year starting the 1^st January 2018 or after this date (article 23).

According to the precedents of the Court (joined cases Francovich, Collection 6/90 and 9/90), a citizen can claim compensation from a member state that does not apply EU legislation. In the case of a Directive that has not been incorporated or it has been incorporated in a non-comprehensible manner in the national law, similar appeal is possible when: a) the directive aims to give rights to individuals, b) the content of the rights can be determined based on the provisions of the directive, and c) there is a causal link between the violation of incorporating the directive into the national law and the damage the individual suffered. To substantiate responsibility of the member state, there is no need for liability to be proven.

Therefore: possible denial of applying the provisions of this Directive by our country (by not incorporating it in our national legislation) arises claims for compensation against it.

Conclusion

The delay in the administration of justice is one of the hundreds of issues that concern the business community – and not only them.

It was something the Institutions tried to improve by the support programs. Unsuccessfully in my opinion.

The delay in resolving administrational – tax disputes, can only cause desperation (even without taking into consideration the delays of the recent, even, past).

The problem was more severe when more than one states were involved (i.e. when trying to avoid double taxation agreements): reaching deadlocks was not so rare or manageable.

Council Directive (EU) 2017/1852 of 10 October 2017 looks towards facilitating persons and businesses facing situations (for which they have no responsibility) in the context of resolving tax disputes where persons and more than one states are involved. The time frame expected for these procedures is not so short. It is, though, for sure a very important step to the right direction, but still far from the objective: delivering right and justice.

Because (according to the British suffragette Emmeline Pankhusrt): “Justice and judgment lie often a world apart”…

Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (August, 4th, 2019).

August 4, 2019
The new law on SAs: Preferred shares

Preferred shares (as a means of attracting investment funds)

The notion of heroism is connected to our thinking, on a first level, with battlefields and national struggles – it is well known what Winston Churchill said to this respect for the heroes and the Greeks. But true heroes are also those of everyday life-those of the next door. Not only today but always. It has been written that “in the Odyssey, heroism is not that of battlefields but the endless struggle of the survival and success of post-war peaceful purposes such as development, trade …”.

It is, therefore, a rule for companies to have the need (and, sometimes, a lust) to obtain liquidity. Other times the basic one and sometimes the necessary for investments. As the banking system does not tend to “prosper” to such demands, entrepreneurs (smaller or bigger heroes of everyday life) seek to create the necessary conditions and incentives to attract capital. Such incentives, taking advantage of the law’s options, can be given, as already stated in our previous articles, through warrantsand/or redeemable shares.

The “privileges” of investors and the benefits for the business

Why, however, preferred shares are seen as an instrument or form of financing and, moreover, more attractive than others (e.g. a bond loan or common stock)?

The investor (whether a retail investor or not) is looking for alternatives other than to date to place his savings. Most of it and its participation in the share capital of the company-as owner of preferred shares.

The privileges that can be given to the shares in question can be moved in a very broad context. In some cases, however, more interesting for the investor (and probably also for the business) would be: (a) the provision of a fixed dividend, (b) the drawing of interest and (c) the participation, in priority, to the company’s profits from particular business activity.

The ability to liquidate them could also be a special “privilege”: As we can redeem preferred shares, the time and manner of liquidation of the investment will be predetermined. As well as the overall-final benefit of the investor.

And in terms of business? It is important to stress that preferred shares broaden their capital base and improve its financial ratios and creditworthiness. Voting rights may not be a problem as preferred shares may be issued without voting rights.

In conclusion

The institution of the issue of preferred shares is, to a considerable extent, unknown in terms of its potential exploitation at the business level. However, the options and flexibility of the law and the possibility of combining it with similar institutions (e.g. redeemable shares) can make preferred shares an important tool in trying to attract investment funds. Finally, the potential claim of investors to place their funds in a company through the acquisition of shares with privileges focused on their desires, needs and requirements, and with a predetermined time and price for their disintegration, can make their respective investment more attractive and safer.

Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (April 7th, 2019).

April 7, 2019
The new law on SAs: Redeemable shares

Redeemable shares as a business financing tool

It is clear that companies lacking the necessary liquidity are looking for sources of external financing. The banking system has always chosen to attract (and lend) companies that have little or no funding needed – especially in times of recession.

Alternatively, a solution for companies is their capital enhancement either by the shareholders or by third parties – non-shareholders. In this case, however, it is reasonable for the candidates to participate in to consider: (a) the return on their investment; (b) to ensure their ability to withdraw from the investment; and (c) to ensure that the benefit which, at least initially, they were looking forward to, can be reaped.

The basic function of redeemable shares

Businesses that face liquidity or solvency problems or that simply seek to finance the business plans they have drawn up may have recourse to the issue of redeemable shares. These shares may be issued by the company either as common or as privileged with (or without) voting rights. The important thing, in this case, is that these shares are required to be redeemed by the issuing company either through a statement from the latter or from the shareholder to participate. Regardless of the obligation, the redemption is likely to be the (appropriate) strategic choice of the majority shareholder.

The treatment of redeemable shares by the new law

The new law on Sociétés Anonymes includes a set of arrangements for redeemable shares. The most important of them is the requirement of the takeover statement: when the relevant terms of the statutes are met and, at the same time, there are amounts available for the redemption available for distribution. This latter condition proves to be very important, since otherwise (lack of available funds) the relevant statement of the shareholder’s acquisition does NOT take effect. The provision of guarantees or other collateral to the holder of redeemable shares is worthless: Collateral, as an ancillary contract, can only work when funds are available for redemption. Otherwise, it proves to be irrelevant.

Another important provision is that the General Meeting with an increased quorum and majority may decide to convert some of the existing shares into redeemable-always respecting the principle of equal treatment (pari passu) of the shareholders.

In conclusion

The capitalization of redeemable shares is also an arrow in the quotient of the company so as to make it attractive to increase its share capital in the effort to implement its business goals (with the point of note, of course, that the acquisition of redeemable shares presupposes the existence of corresponding available funds to the company).

Further, leveraging the ability of the law to convert shares into redeemable may also be a means of return to the shareholders of a part of their share in the share capital.

The potential (optimal and/or multilevel) utilization of the particular institution is (and must be) related to the data and needs of the business. But, like any other business decision, it is (and indeed even more) dependent on the strategy and interests of majority shareholders.

The latter and their consultants are responsible for optimal planning and its effective implementation.

Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (March 31st, 2019).

March 31, 2019
The insurance of the liability of the Members of the BoD and of the Executives of the S.A.

1.Introductory

The liability insurance of the members of the board of directors of the Société Anonyme and of its executives is referred to in the international practice as “Directors’ and Officers’ liability insurance” or “D & Os liability insurance”. This insurance covers the damages of such persons:

(a) arising from claims against them raised by third parties (lenders, employees, shareholders) or by the company itself for injurious and negligent acts or omissions in the performance of their duties,

(b) for the risks incurred by the insurer.

In Greek legal terminology, as well as in the context of private insurance law, it is commonly referred to as insurance of the civil liability of members of the board of directors of Société Anonyme. However, the scope of the relevant insurance contract goes beyond civil liability, since its coverage extends to both the criminal and the pecuniary costs incurred in administrative courts or authorities, as will be set out below. Moreover, the relevant insurance cover is not limited to the persons who form the board of directors of the Société Anonyme but also extends to the members of the executive committee, to the substitute members as well as to the executives who carry out management duties. In fact, it is often agreed also the insurance cover of the external directors, even of the spouses, heirs or administrators of inheritance, in respect of the claims against them concerning breaches of the duties of the insured persons.

Consequently, legally more correct and more compatible with the content of the relevant insurance contract is to refer to liability insurance of the members of the management of the Sociétés Anonymes.

2.The robust growth of this insurance product

The cover of the liability of the members of the management of the Société Anonyme is a relatively new insurance product, which has strong growth in the international business community. This growth is, among other things, due to:

(a) the judicial and legislative strengthening of the liability of the members of the management over the company itself but also vis-à-vis third parties,

(b) the adoption of international corporate governance rules and the gradual imposition of a single corporate regulatory framework through Union law of the European Union,

(c) the increase in corporate insolvency as caused by the international financial crisis of 2007-2008, which has grown into an international corporate financial crisis as well as,

(d) the tendency of corporate creditors to turn against either the managers of the corporate entity or solely against them.

3.The economic and business benefits of the relevant insurance

Insuring the liability of management members of the Société Anonyme has a number of advantages that make it an attractive insurance product. It would not be an exaggeration if we described it as a necessary action and expense for individual legal entities. Indicatively, some of the reasons for confirming the need to conclude the relevant insurance contract are mentioned:

(a) such insurance cover constitutes an alternative form of financing both of the company and of the third parties in respect of the damages they have suffered under the liability of those who manage the entity,

(b) the terms and sizes of the relevant insurance contract make it easier for third parties and, in particular, for the shareholders of the recipient company to assess the risk profile of the latter,

(c) the conclusion of this insurance contract ensures control and oversight (monitoring) of the company and contributes to prudent risk management,

(d) offering this insurance cover is a fairly important reason to attract competent management executives, while

(e) the conclusion of the specific insurance contract protects the company’s reputation and credibility.

4.The nature of this insurance contract

4.1. In the context of private insurance law, liability insurance for members of the Société Anonyme is part of third party liability insurance, although, as mentioned above, it has a broader scope. This insurance is in principle general in character and is not legally required. It is included in the non-life insurance and not in the insurance of persons, as the particular damage caused to the insured’s property is restored from the realization of the insured risk. In addition, it is classified as liability insurance, as it safeguards the risk of the creation or increase of liabilities in the assets of the insured.

4.2. The liability insurance of the members of the management of the Société Anonyme usually takes the form of a genuine third-party contract, as three (3) different persons are involved:

(a) the Société Anonyme in its capacity as recipient, which concludes the relevant contract as the policyholder of the insurer and, at the same time, on behalf of third parties (that is to say, members of its management),

(b) an insurance company in its capacity as an insurer, which assumes the above-mentioned obligation to recover the damage to property not from the policyholder company but from third parties (ie members of its management) from the realization of the insured risk; and

(c) the members of the company’s management in their capacity as insured persons as well as the beneficiaries of the insurance, as their right to expect the insurance indemnity is born directly and directly incurred .

4.3. The aforementioned legal construction has the legal consequence that the Société Anonyme becomes liable for the fulfillment of the obligations arising from the relevant insurance contract due to its bearing capacity as a recipient of the insurance. In addition, the Société Anonyme is also the entity in which the rights to terminate and amend the insurance contract, as well as the right to withdraw or oppose it, are granted. On the contrary, the main obligation of the members of the management of the Société Anonyme is the non-infringement of the insurance obligations, i.e. compliance with the rules of conduct laid down by the law or the relevant insurance contract, in order to fulfill the insurer’s performance and, in particular, the payment of the insurance by the latter.

5.The insurance cover

5.1. In accordance with the aforementioned, the scope of the relevant insurance contract exceeds the civil liability of the members of the management of the Société Anonyme. However, as the basic scope of the relevant insurance cover refers to civil claims, its main basis is the damaging act which includes any actual or presumed breach of the duties of the members of the management over the company. Also, this insurance cover includes any unjust and injurious third party act or omission, error or negligence in the performance of the duties of the members of the management of the entity. That is, any individual responsibility of a director of a corporate body is enforced, whether he issued severally or jointly or independently. In this context, it is clear that the relevant insurance cover extends to the breach of substantive rules of private law which entail liability for the directors of the company. However, damages claims based on special agreements or conditions introduced by provisions of a subordinate law that exacerbate the liability of the legal entity beyond the legal provision are not covered.

5.2. In any case, however, the cover of the relevant insurance contract does not extend to activities which are contrary to public policy, which is unfair and immoral and directly oppose prohibitive legislation. For this reason, criminal penalties, fines, and other financial penalties are also excluded from cover. The fines include those imposed by the competent supervisory authorities. Nevertheless, the legal costs of prosecuting the insured person are valid. In some insurance policies, it is agreed that the costs of the criminal proceedings should be covered only if the managing director is found innocent.

5.3. Furthermore, apart from breaches of private law rules, the relevant insurance cover may extend to infringements of public law rules. Criterion for the relevant insurance cover is the nature of the compensation resulting from compensation under public law provisions. That is, if the indemnity is reparable, it falls within the liability of the members of the management of the Société Anonyme. On the other hand, if the nature of the compensation is valid, it is not covered by the relevant insurance contract. Consequently, subject to compliance with the relevant criterion, it is possible to cover pecuniary claims filed before administrative courts or administrative supervisors and the costs of the investigation by any competent authority.

5.4. Finally, the exemptions introduced in the relevant insurance contracts fall into multiple categories, depending on the practice of the insurance companies and the criteria adopted by them. In order to avoid long and unnecessary developments in the present analysis, the following clarifications are considered appropriate:

(a) the relevant insurance cover excludes claims covered by other policies, including but not limited to claims covered by professional liability insurance policies,

(b) in addition, such acts are excluded from such cover, which involve a high risk for the insurer, which usually includes the liability of the members of the management of a Société Anonyme for defamation and personal injury, the claims related to the bankruptcy of the company and damages associated with transformations of companies,

(c) furthermore, claims arising out of the liability insurance of members of the management of a Société Anonyme are excluded from claims arising in courts outside the European Union or from breach of legislation of States outside the European Union,

(d) finally, the cases of fraudulent provocation of the insurance case are reasonably excluded from this insurance cover. In particular, the claims for third-party claims or the insurance of a Société Anonyme arising out of a fraudulent breach of the management duties or the provisions of the law by the management of the corporate entity are excluded.

6.Insurance Clauses

Apart from the above-mentioned exceptions, the relevant insurance contract applies special clauses, which refer only to the specific insurance contract or have been formulated on the basis of the development of the relevant insurance and which substantially restrict the liability of the insurer. In particular, the insurance policy may include:

(a) the group clause, which allows for the uniform identification and treatment of the insurance risk and, moreover, charges the group with less expense by covering, with a group insurance policy, all the corporate entities of a group,

(b) the own contribution clause of the insured, which entails the taking over by the insured member of the management of the Société Anonyme of a part of it and, in particular, of a certain amount or percentage of the indemnity in general or per insurance case,

(c) the clause of the serial damage (otherwise chain damage) which limits more claims arising from the same unlawful act to the same amount of insurance and the same insurance period as they are treated as a single claim,

(d) the dismissal clause of the particular member of the management of the Société Anonyme, which requires the entity to have previously denounced the relationship with that person as a necessary condition for the activation of the insurance cover,

(e) the policyholder’s insured clause, which does not allow the claims of an insured member of the management of the entity to be covered by another insured person either directly or by way of redemption. This clause appears in a variant of the clause as a non-coverage clause, which limits or prevents the relevant insurance cover. This limitation takes place according to the degree and extent of the involvement of the insured persons involved in the management of the recipient’s insurance and includes claims by persons directly or indirectly linked to one of the insured persons. Because of its introduction, it is recommended not to create situations of conflict of interest, collusion and abusive behavior, but also to avoid enrichment.

7.Epilogue

7.1. The adoption of Law 4548/2018 on the reform of the law of Sociétés Anonymes has brought about a number of changes, sometimes sweeping, in the operation of corporate entities. Regarding the responsibility of the members of their management, a previous article from the blog of this web site has provided a detailed explanation of their intra-company and criminal liabilities, as they are now formed under the new legislative status (read the first part of the article for the liability of the Members of the Board). It is easy to see the intensification of the criminalization of entrepreneurship and it is equally easy to distinguish the discretion of the corporate managers in achieving the corporate purpose.

7.2. Furthermore, in another article of the same blog, the administrative and criminal responsibilities of corporate managers vis-à-vis the State and the Insurance Organizations, as derived from the tax, insurance and customs legislation, as well as the liabilities attributed to them by specific provisions of the Civil, the Bankruptcy and Penal Code (read the second part of the article for the liability of the Members of the Board). It is clear that the exposure of the members of the Société Anonyme’s management to extremely serious risks.

7.3. It is obvious, therefore, that the liability insurance of corporate managing directors is an effective means of defending and safeguarding them against the risks stemming from corporate governance and the tightening of the legislative environment. The conclusion of the relevant insurance contract, according to the above mentioned, is characterized by strong economic and business advantages: better corporate organization, higher status and corporate solvency, clearer business image and the ability to attract competent executives. Let us not close our eyes on international business practices and international corporate governance rules: the dissemination and establishment of these policies also into the Greek business community is the only appropriate choice.

7.4. Finally, the role of the legal counsel of the company proves to be decisive in the management of the issues related to the liability insurance of the members of the management of the Société Anonyme. In this context, the legal adviser is responsible for working closely with the insurance broker, with whom the corporate entity works, to evaluate the (more) insurance options and products offered and to assist in choosing the best solution. Additionally, the duty of the legal counsel is to ensure maximum insurance of the insurance of a Société Anonyme and the insured corporate managing directors by checking the legality of the conclusion and the valid content of the relevant insurance contract. Finally, in the event of the insured risk occurring, the legal counsel must make a substantiated claim for the fulfillment of the insurer’s obligations and, in particular, for the payment of the insurance.

It should be perfectly clear:

At any stage (out of the above mentioned) the appropriate legal advice is not received, it is highly probable that the potential cost of the business will prove to be infrequently high.

Petros Tarnatoros
Senior Associate

P.S.: The article has been published in Greek in MAKEDONIA Newspaper (March 17, 2019).

March 17, 2019
Day meeting for the New Law on SAs to Foroepilysis
[vc_row][vc_column][vc_column_text] One more presentation, within the framework of the day meetings which are organized by KOUMENTAKIS & ASSOCIATES on the New Law on on Sociétés Anonymes, was successfully held in Heraklion, Crete. Specifically, a presentation was recently held at Foroepilysis, a rapidly growing company of Mr. Vassilakis that provides accounting, financial and tax services.

Stavros Koumentakis, Senior Partner, has highlighted the business opportunity that is emerged by the changes brought by the new Law on on Sociétés Anonymes. He presented the general framework of the New Law and made an extensive reference on individual regulations of the new law and the use of the law’s options for businesses on 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”.
Mr. Stavros Koumentakis mentioned in particular that “the New Law on Sociétés Anonymes is an important opportunity for enterprises which cannot be missed. Law 4548/2018 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”. He has also mentioned that “there is a immediate need for the necessary and beneficial regulations to be adapted in the SAs’ articles of association”.

The presentation of Mr. Koumentakis at Foroepilysis, was attended by the top management, executives and employees and it was an opportunity for a broad exchange of views on the specific, extremely important (for enterprises, businessmen and board members) aspects.

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February 18, 2019
The employment of employees in more companies of the same Group
The employment of employees in more companies of the same Group: a problem without solution?

The “headache” of the heads of HR: Is it possible for a “Group” to be the employer?

It has always been a problem, and not an insignificant one, for the heads of the HR Departments of Groups of companies operating in our country (and of course for the heads of the Group themselves) the employment of employees in more than one company in the same group.

This is because, although they are recruited and paid by one of the companies that form the single Group, they are nevertheless required to work on objects that concern other “sister” companies (subsidiaries).

Under Greek law, however, the Group cannot be considered as a single employer, so that for certain rights of the employee (salaries, compensations, etc.), all companies be responsible regardless of which company employs the employee at a given time (SC 650/82 and SC 10/18-NOMOS).

Important definitions: Employer and Group of companies

The meaning of Employer

Under the employment contract, an employer is considered to be any natural person or legal entity in whose service another natural person is employed who provides him or it with that specific service and not necessarily the person who has recruited him (the employee). Usually, but not always, the employer is the owner of the business the interest of which the employment contract serves. (SC 1290/2010, SC 873/2009 and SC 10/18-NOMOS).

The meaning of Group of companies, of parent company and of the subsidiary

It is acceptable (in the light of the definitions in Law 4308/2014-Annex A and Article 2 of Law 4172/2013) that the group of companies is characterized by joint management, common economic policy, joint financing, i.e. common financial interests. While it is composed of many independent legal entities, it is an economic unit (SC 10/18-NOMOS)

Furthermore, according to the definitions in Annex A of Law 4308/2014:

(a) Group of companies is “the parent company and all its subsidiaries”,

(b) Parent company is “the entity that controls one or more subsidiaries” ) and

(γ) Subsidiary is that “entity which is, directly or indirectly, controlled by a parent company”.

The provision, centrally, of individual services to the Group’s companies.

For the sake of ease of administration and because of the economies of scale, most of the companies in the same Group often share the same headquarters and facilities. So, the accounting department, the HR department, the procurement department, the secretariat, the reception, the quality department, and so on. can only provide their services to all, at the same time, the (co-owned or not) companies of the same group. The same stands for the employees employed in them. The CEO, the CFO, the COO is not (in general) more than one in each Group of Companies. The accountants account for the transactions of most of the Group’s companies and the reception does not welcome only the visitors of their employer’s company.

Often, the companies of the Group are in different locations – even in different cities. In this case, executives and employees are often required to move to the headquarters of the other companies of the same Group in order to provide (also) to those (and not only to the employer company) their valuable services.

The “thesis” of the individual involved and the corresponding one of the legal advisors: HR managers in despair!

This particular problem could be classified as old, classic, but at the same time very serious with multilevel effects. However, it becomes more complex if viewed from the point of view of individual stakeholders. (Among other:)

CEOs are demanding (and reasonably) the maximum possible group-level utilization of the human resources.

CFOs require (budgeted and outturn -also reasonably) the allocation of employment costs per legal entity.

Employees sometimes dislike such obligations (formal or informal) imposed on them, and sometimes they “take notes” in order to seek for legal redress against most of the companies in the same group. It is unlikely that they have not wondered about this “ataxia”: “Is it possible for another company to have recruited me and for me to be employed in more?”

Legal advisers often propose solutions that are inapplicable, poorly practicable or, at a practical level, problematic (e.g. recruitment by one and lending to the others, more recruitment-reduced-time employment, for the same employee, to each of the most companies of the group – with specific hours and days of employment for each of the involved companies, and so on). However, all solutions have a common problem: The inability to determine in advance (sometimes even afterwards) the exact time that the employee will need to work (or, respectively, has already worked) for each company in the Group. And then: the cost! Any of these solutions creates, in addition to the disruption to the organization and to the employees, increased costs for the Group.

HR managers, sometimes in despair, are called upon to reconcile incompatibilities …

The case law

The (relatively recent) decision 10/2018 of the Supreme Court confirms its earlier decision (: SC 1222/2003), which provides the solution: “Thus, for a group of companies having common financial interests, even in the case of where the employee’s employment contract was drawn up with one of the group companies and his work is also used by other companies in the same group, the employer remains the employee’s counterparty, who manages his work and is responsible for all payments of any salary nature)

In simple words it is accepted by virtue of the specific decision that:
- It is possible for an a-SA to recruit an employee and for this employee to provide his services not only to the specific SA (the a-SA) but also to b-SA and c-SA companies in the same group.
- In this example, as the employee’s employer remains the company with which the employee has contracted his / her contract of employment (the a-SA) even though the employee provides his / her services also to other companies (b-SA and c-SA) of the same group.
Untying the “Gordian” knot

As it is clear from the case law of the Supreme Court, it is acceptable for the employee to provide his / her services to other companies in the same group and not only to the one from which he was recruited.

This assumption proves to be extremely important for groups of companies. Subject (of course) to appropriate contractual arrangements:

(a) the employee is not entitled to oppose to the provision of his services to other companies in the same group

(b) the other companies, other than the one which hired him, are not exposed to legal risks to the employee and / or the state

(c) the individual companies constituting the group are entitled to use the services of an employee in one of them.

A recurrent problem proves to have its (simple) solution!

Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (February 10th, 2019).
February 10, 2019
Presentation of the New Law on SAs to B. Karaoglou SA
[vc_row][vc_column][vc_column_text] The series of presentations of KOUMENTAKIS and ASSOCIATES Law Firm on Law 4548/2018 are continued with great success. The presentations are addressed to Enterprises, Business Associations, Auditors Companies, significant Tax and Accounting Services Companies and so on.

At a recent workshop held at B. Karaoglou SA – Accounting and Taxation Support, Mr. Stavros Koumentakis, Senior Partner, presented the general framework of the new Law on Societes Anonymes and extensively referred to its individual arrangements for protection of customers against “internal and external risks” as well as the utilization of the opportunities provided by Law 4548/2018 on behalf of businesses in aspects such as:
- reduce their costs
- attract and retain skilful executives
- attract investors
- exploit technology.
As Mr. Koumentakis states, “the new Law on Societes Anonymes is an important opportunity for businesses that should not be lost. Law 4548/2018 extends the responsibility and report of the members of the Board of Directors in terms of civil, criminal and administrative sanctions, which can be a potentially serious problem if there are no corresponding provisions and insurance coverage”. He also points out that “there is a direct need of regulations of the SAs’ articles of association”.

The presentation of Mr. Stavros Koumentakis on the new Law to B. Karaoglou SA – – which was attended by senior management and executives – gave the opportunity for a broad exchange of views on the specific, extremely important (for businesses, entrepreneurs and members of the Board of Directors ) units.

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February 7, 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

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