Tag: legal advisors

The Articles of Association of the Société Anonyme…

The Articles of Association of the Société Anonyme…(…the scope, the content, the options of the new Act and the compulsory adjustments)

I. By way of introduction

The Articles of Association of the Société Anonyme are (known to be) its most important document. The Articles of Association record (and regulate) very important, identifying elements of its existence and operation. The name, the purpose, the duration, the capital, the shares, the company’s bodies, the rights of the shareholders, its financial statements, its dissolution and liquidation etc. are some of them.

Often, the founders of the Société Anonyme resorted to prefixed by the notaries texts, as it was always the privilege of those who had written them. As a rule, no lawyer expressed any view. Until the non-excellent relations between the shareholders occasionally emerged to the surface.

In the course of time, however, things began to change: Entrepreneurs were often faced with problems which they found that could have been avoided if they had made provisions in their Articles of Association. Further: Business managers understood, over time, the value of counseling. Thus, more and more people go to their legal advisors to draft (and / or reformate) their company’s Articles of Association.

II. The scope of the Articles of Association and of the statutory provisions

Since the fees of notaries depend (among others) on the extent of their contracts, we have been addicted to notarial acts – Articles of Association of Société Anonymes which are (to a large extent) a copy of the relevant law. However, the senior (former) Law 2190/1920 had dozens of interventions in his hundred-year history. What happened every time the law was changed? There was a need for a modification of the Articles of Association (in accordance with the law) and, of course, new fees for the professionals involved. There are, unfortunately, still Articles of Association that have nothing to do with the current institutional framework. Containing completely obsolete provisions.

One would have expected that this would mean that the Articles of Association would end up being brief. That they would end up containing what was absolutely necessary and, as for the rest, they would refer to the law (there was also a legislative provision in law 2190/1920 which was applicable until 31.12.2018). On the contrary: The Articles of Association are, almost indefinitely, large, even when we proposed (sometimes with pressure) to the founders the short version: That text, which contains only the minimum of what the law requires without copying all of its provisions. The choice of founders was, basically, the full version: A text that copies the law’s regulations and does not “take up” only the essential ones. The causes are varied: Basically, however, the need to refer to the Articles of Association for the issues they were interested in, and not to the law or even to their legal advisor.

III. The new law (4548/2018) for société anonymes with reference to the Articles of Association: Notarial deed vs private document (agreement).

The new law on société anonymes is innovating on various issues. One of the most interesting (and business-friendly) options is that a private document, not a notarial act, is sufficient for the establishment of a société anonyme. It is sufficient provided, on the one hand, that there shall not be transferred to it assets any element for the transfer of which a notarial deed is required (e.g. immovable property) and, on the other hand, that standard Articles of Association be adapted. In the latter case, the establishment of the Société Anonymes is completed in a Single Entry Point services. (essentially the General Commercial Registry (GEMI) where its seat is located).

IV. The essential elements of the Articles of Association

The provision of art. 5 § 1 L. 4548/2018 provides for the minimum provisions that must be contained into the articles of association of the société anonyme. These must at least include: (a) the name and purpose; (b) the seat; (c) the duration, if not indefinite; (d) the amount and method of payment of the share capital; (e) the type of shares, the number, the nominal value and the issuance; (f) the number of shares in each class, if there are more classes of shares; (g) the conditions and procedure for converting shares to the bearer into registered; (h) the convocation, establishment, operation and responsibilities of the Board of Directors; (i) the convocation, establishment, operation and responsibilities of the General Assemblies; (i) the auditors; (k) shareholder rights; (l) the annual financial statements and the appropriation of profits; (m) the dissolution of the company and the liquidation of its assets; (n) the amount of subscribed capital that is payable at the time of incorporation.

Nevertheless: The Articles of Association of the company are not required (Article 5 § 1 of Law 4548/2018) to contain even those of the abovementioned provisions which merely repeat the provisions of the law (unless allowed derogations from its content are entered into force).

Under the above, the Articles of Association of a Société Anonyme could be limited to the following provisions:

(a) the company name and purpose;

(b) the seat;

(c) the amount and the method of payment of the share capital;

(d) the type of shares, the number, the nominal value and the issuance;

(e) the number (or minimum-maximum number) of the members of the Board of Directors;

(f) the amount of the share capital payable at the time of its incorporation.

In other words: Where the Articles of Association of the Société Anonyme contain the above six (6) provisions they are a complete Statute. But are we (lawyers and businessmen) ready to go through such Articles of Association, even when we are talking about a single-member Société Anonyme(where there are no conflicting interests)?

V. The options that the new law offers

The new law provides businesses with a variety of options to regulate critical issues relating to their operation as Société Anonymes.

It takes advantage of technology as well as modern, international, tools of the law of Société Anonymes.

Some of them:

The elements of the company name of Société Anonymes and their duration.

The way to cover their share capital, contributions in kind, the possibility of partial coverage and payment, the types of its share capital increase.

The options of reduction and amortization (!) of the share capital.

The types of titles and their sub-themes and attributes (shares, bonds, warrants, extraordinary and common founders’ shares). In particular: the types of shares [common and preference (with many kinds of utilizable and functional privileges), redeemable, reserved (with also interesting potential commitments – including drag and tag along right), the option right.

The minority’s right to request the redemption of its shares by the majority and the right of the majority to request the redemption of the minority shares.

The management of the issues of the acquisition of treasury shares. Issues related to the election, operation, composition of the Board of Directors (or even to the option of having a single Consultant-Manager!). Managing conflicts of interest.

The management of remuneration-relating issues of the Board of Directors and of the Managing Directors.

Issues relating to the invitation (even by email!) and convening the General Assembly’s meeting (even remotely!), voting (even by e-mail or postal vote!), taking decisions without a meeting.

Minority rights and how to manage them.

The right to audit.

The shareholders’ associations. The distribution of profits. The minimum dividend. The provisional dividend. The dissolution, liquidation and revival of the company.

The topics vary. The opportunities are many. The choices may be tedious but, in any case, critical for businesses and entrepreneurs.

VI. The need of adaptation of the Articles of Association of ALL Sociétés Anonymes

The provision of art. 183 § 1 L. 4548/2018 can not be challenged: The Articles of Association of the existing sociétés anonymes must be adapted to the provisions of the new law as soon as possible.

It is clear that detailed information is required from (the proper) legal advisors, jointly assessing the data and the possibilities of the new law and (in particular) adapting to the needs of each business entity and activity.

Therefore, be alert!

Stavros Koumentakis
Senior Partner

Υ.Γ. Part of this article has been published in MAKEDONIA Newspaper (January 6th, 2019)

January 3, 2020
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
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
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
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

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