Koumentakis

Tag: investments

  • Joint Investment Accounts

    Joint Investment Accounts

    We all know the Joint Banking Account. By utilizing its capabilities, more than one depositor can bypass the inheritance procedure and avoid paying inheritance and donation tax. At first -at least. But what if the common asset of more than one person is intangibles, rather than cash deposits? We can look for the solution in the Joint Investment Accounts, which provide us with corresponding facilities, as they are reflected in the Regulation of the Hellenic Capital Market – which was recently approved by a decision of the Hellenic Capital Market Commission [: 6/904 / 26.2.2021 (Government Gazette B1007 /16.03.2021)]. But let’s start with the regulations of the Joint Bank Account that we will encounter in the Joint Investment Accounts.

    The Joint Bank Account

    The Joint Bank Account is under the provisions of the law (Law 5638/1932 “on deposit in a joint account”). The inflow of capital from abroad and, in particular, the inflow of capital of Greeks living abroad was the purpose of its introduction into the Greek reality. This goal, moreover, is explicitly stated in the Explanatory Memorandum of the relevant legislation.

    The Greek legislator aimed, in particular, to make Greek banks competitive with their counterparts abroad. It sought to achieve this by introducing a deposit instrument, which would offer a number of favorable arrangements for depositors. Among them, the exemption from inheritance tax and the possibility of bypassing the inheritance.

    As regards, in particular, the case of succession, the possibility of an agreement is provided for, according to which “… upon the death of any of the beneficiaries, the deposit and the account thereof automatically pass to the survivors, until the last one”. This term, in fact, is accompanied by a highly advantageous arrangement for the survivors. It is provided, in particular, that in the event of the death of one of the beneficiaries “… the deposit is owned by them (: the other survivors) free of any inheritance tax or other fee. On the contrary, this exemption does not extend to the heirs of the last remaining beneficiary “(article 2 of law 5638/1932).

    The wording of the law provides, as we also mentioned in the introductory remarks, that the object of the joint account can be, exclusively, money (article 1 of law 5638/1932).

    It is obvious that, based on the above data, non-monetary assets ​​are not covered by this legislation. Securities and debt instruments-e.g. In some cases, however, the legislature opted for the proportionate application of the favorable provisions of the law on the joint account. Indicative: the securities of the State in accounting form. In the case of the Joint Investment Account as well. The latter concerns the possession of intangible securities-shares, ie, among others, that are listed on the Greek stock exchange.

    The co-ownership of intangible securities

    The possession of intangible securities and the development of investment activity in the Greek Capital Market through the opening of a Securities Account, presupposes for each investor to be legalized-to have a Share, ie in their name. The latter contains their identification data and receives from ATHEXCSD, when it opens, a Registry Serial Code Number (RSCN) which is unique to DSS and does not change (: Section III, Part 4, 4.1 and 4.3. Regulation of the Hellenic Central Securities Depository SA-ATHEXCSD, the content of which was approved by a recent decision of the Hellenic Capital Market Commission: 6/904 / 26.2 .2021 (Government Gazette B1007 / 16.03.2021), based on the provision of article 4 of law 4569/2018 and Regulation (EU) 909/2014 (CSDR)

    It is possible that sometimes two or more investors are co-owners of some shares. In this case, it is presupposed, according to those that apply to the listed shares, the participation of all, without exception, the co-owners for each related transaction.

    In case there is co-ownership in intangible securities, the possibility of forming a Co-ownership Share is provided. It is assumed that each of the co-owners has an independent Customer Share. The Share of Conjunctures is determined on the one hand by the co-owners and on the other hand by their percentage of co-ownership in the securities ​​(Section III, Part 5, 5.2.2. Regulation of ATHEXCSD).

    For the common securities that are registered in a Co-ownership Share, it is provided that in case of any change of the co-owners or the percentage of co-ownership in the specific values, the creation of a new Co-ownership Share is required. This new Share is also determined by the new data of the current times and the new percentages of ownership.

    An exception is that it is not required to create a new Co-ownership Investment Share in the event of the death of one of the co-owners. In this case, ATHEXCSD changes the names of the co-beneficiaries by registering in the position of the co-owner who passed, their heirs. Obviously, it also changes, respectively, the percentages of co-ownership (: Section III, Part 5, 52.7. Regulation of ATHEXCSD).

    What is mentioned immediately above does not apply, however, in the event that the possibility of registration in a Joint Investment Account is opted for.

    The Joint Investment Accounts- In General

    The Joint Investment Accounts (: JIA) can be created at the request of two or more natural persons if they act as co-beneficiaries of a joint securities account according to the provisions of par. 6 of article 13 of law 4569/2018. A legal entity, therefore, cannot participate in the creation of a JIA (: Section III, Part 5, 5.1.1. Regulation of ATHEXCSD).

    The JIA is clearly identified by the co-beneficiaries, who -as provided- are joint owners of the values ​​registered in it (: 5.2. Regulation of ATHEXCSD).

    As we have already pointed out above, the peculiarity of JIA is the fact that this Share is governed by the provisions governing the Joint Bank Account (: Law 5638/1932).

    The characteristics of the JIA

    In General

    The contract of the JIA contains the individual terms for its operation. The creation of a JIA, however, is distinguished for its specific characteristics.

    Each Participant in a Joint Investment Account implements under their own responsibility any transaction related to the operation of the relevant Securities Account at DSS, acting (also) on behalf of the co-beneficiaries. Each co-beneficiary, therefore, can act individually, without the complicity of the others (: 5.1.6. Regulation of ATHEXCSD). Among the co-beneficiaries, however, their hierarchical order is determined, which indicates the one who is legitimized to act as a representative of all (: 5.1.5.b. Regulation of ATHEXCSD).

    The case of death of one of the co-beneficiaries

    The change of the co-beneficiaries of a JIA she is not possible. Specifically, in case of death of a co-beneficiary (and if the application of the condition of sub-paragraph a of article 2 of law 5638/1932 has not been implemented), the balance of Securities corresponding to the rights of the heirs or bequests is transferred to their own Securities Accounts (5.1.8. Regulation of ATHEXCSD).

    However, the case in which the provision of article 2 of law 5638/1932 is applied is different. In the latter case, the securities ​​are automatically transferred to the other co-beneficiaries. Specifically, ATHEXCSD modifies the details of the JIA, as it eliminates the deceased from the co-beneeficiaries. However, the hierarchical order of the co-beneficiaries, recorded from the beginning, is maintained (: 5.1.9. Regulation of ATHEXCSD).

    It is possible, of course, as a logical consequence, after the death of the other co-beneficiaries, that only one survivor remains. In this case, the registered in JIA assets ​​are owned by the beneficiary remaining. The latter is obliged, in this case, to proceed with the unification of the JIA with their unique Share (: 5.1.9. Regulation of ATHEXCSD).

    The provisions for the Joint Bank Accounts (: Law 5638/1932) are favorable for the co-beneficiaries. Their application in the Joint Investment Accounts aims to provide (and it provides) to the latter and their co-beneficiaries corresponding facilities with those of the Joint Bank Account.

    The possibilities presented by the creation of a JIA are clearly identified in matters of inheritance, as, in case of death of a beneficiary of a JIA, the assets ​​that are in the Joint Investment Account automatically belong to their co-beneficiaries.

    The advantages of the Joint Investment Account are multiple.

    They can be enjoyed, without a doubt, (also) in the context of a wider tax (within a family or not) planning and scheduling, which (also) concerns the management of shares of listed companies and dividends.

    But beware!

    Utilizing the benefits and facilities of both the Joint Bank Account and the Joint Investment Account is not always without pitfalls…

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (July 18, 2021).

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Corporate Governance: Competitiveness and Growth

    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!

     

    Koumentakis-and-Associates-Stavros-Koumentakis

    Stavros Koumentakis
    Senior Partner

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

  • Companies Vs Investors / Banks: Balance Of Interests

    Companies Vs Investors / Banks: Balance Of Interests

    [vc_row][vc_column][vc_column_text] The financial data of the companies, the current circumstances each time, as well as the business plans often create the need to look for funds: more often in the form of a company’s capital strengthening and / or its financing.

     

    The Expectations of The Parties

    Business interest leads to the search for “cheap” funds (in the sense of the least possible financial burden). What is important is, on the one hand for no significant commitments and collateral to be, while on the other side for the repayment period (when it comes to lending) to be long.

    Investors (most commonly individuals, funds, venture capital, etc.) and, just recently banks, are always looking for

    a) the maximum possible return,

    b) the earliest possible return of the investment,

    c) the maximum possible collateral.

     

    Collateral

    Contractual undertakings and securities (guaranties, liens on mortgage, mortgage, pledges) have lost a significant part in the value scale of investors and banks. It is no longer the basic, and certainly not the only, security they are looking for. They often require (and, as a rule, achieve) important commitments from the company – contrary to their own interests and needs. The threatened sanction in the case of breach of these commitments is a kind of penalty (in the case of investors) or the recognition of a relative reason for terminating financing and claiming immediate return (in the case of banks).

     

    Restrictions, Commitments and Obligations

    The restrictions, commitments and obligations imposed are, generally, diverse. They may concern the company, its business activities, its management and its shareholders. Access to books and close monitoring of the company’s financial data is the minimum. It is quite indicative that one may (in the view of recent experiences) refer to the need for the investor’s or, as the case may be, the (bank) creditor’s assent in cases such as the following:

    (a) Approval of the business plan.

    (b) The composition of the Board of Directors (with the ultimate objective of the involvement of investors’ representatives in it).

    (c) The major decisions making (e.g. merger, demerger, division, interim dividend and dividend distribution, return of capital, purchase, sale, lease, rental and leasing assets, entering into significant commitments, provision of securities, and so.).

    (d) Third party financing either directly (e.g. loans) or indirectly (e.g. guarantees).

    (e) Amendment of core provisions of the Articles of Association.

    (f) Change in equity [transfers of shares either between shareholders or to third parties, including the provision of shares to executives as incentives, for example stock option (!)].

    (g) Insurance of the assets of the company and ban on the transfer of the insurance indemnity, and so on.

     

    The Multi-functional nature of Commitments

    The undertaking of obligations and commitments such as those mentioned above, operate on three levels:

    (a) The investor (or the Bank, as the case may be) feels the (really necessary for them) security in order to proceed with the useful, and sometimes critical, investment or financing of the company.

    (b) The company, its management and its shareholders should be ready to accept control, limitations and / or (worst case) veto rights in their significant business decisions.

    (c) The company on the one hand and the investor (or, as the case may be, the Bank), on the other hand, are linked with extremely strong ties throughout their co-operation, which cannot be broken without dramatic or even extreme adverse effects.

     

    The Enforcement of Commitments

    The commitments undertaken by the company are likely to prove problematic in a dual way – especially when the terms are imposed by a bank that finances:

    (a) The ability to take business decisions is transferred by the company, even partially, to (middle or senior) bankers, who are neither entrepreneurs nor have significant knowledge of the subject. Most important: they never hold a real risk for their choices, they never compromise their own personal property.

    (b) The freedom of the company, its management and its shareholders are limited regarding the implementation of its plans. The company binds to the creditor bank. No significant business decision can be taken without the consent of the latter. The bank even has the (normally uncontrolled) option to block or endorse any business move and any other funding. It also has the option to finance the company’s business itself – thus gaining a dominant position among its funding sources.

     

    The Balance of Interests

    In the context of a free economy like our country’s economy, nobody is obligated to conclude a contract and / or to accept specific unfavorable contractual provisions.

    In the case of searching for funds, the strong party is not, normally, the company: It will be often “drawn” into concluding contracts and to undertaking extremely problematic commitments.

    It often seems, logically, utopian to talk about “balance of interests”.

    There is only one thing for sure: The company shall not be “heard” when it attempts , in the near or distant future, either to discuss on the “small print” or to reproduce the assurance of its creditor (bank, fund or venture capital): “Come on, do not pay attention: these are typical – we are here for you” …

    stavros-koumentakis

    Stavros Koumentakis
    Senior Partner

     

    P.S. This article has been published in MAKEDONIA Newspaper and makthes.gr (October 14, 2018)

     

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