Tag: new law on societes anonymes

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

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

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

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

But there have been almost forty years since then.

The changes, since then, sweeping.

Also in the law of Societes Anonymes!

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

The recent law

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

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

The ability to exploit technology

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

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

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

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

The legal background exists.

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

Stavros Koumentakis
Senior Partner

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

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

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

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

Our work with this particular issue

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

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

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

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

The activation

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

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

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

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

The response of the political authorities

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

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

This explanatory memorandum verbatim states:

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

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

The introduced amendment verbatim states:

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

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

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

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

We can be both happy and proud.

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

Stavros Koumentakis
Senior Partner

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

December 30, 2018
The New Law On Societes Anonymes

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At Koumentakis & Associates Law Firm we have a deep faith in the values and benefits of preventive law practicing. We are not limited to just good conventional predictions and / or developing the right strategy in our clients’ affairs. We are proceeding with the evaluation of the adverse effects of existing legislation and, consequently, with proposals for legislative interventions to prevent them.

This includes the comments of Stavros Koumentakis, Senior Partner of our firm, on the (unfortunately poor) predictions while implementing the new Law on Sociétés Anonymes regarding its provisions for contracts between their shareholders and their directors.

The risk of abuse of existing legal options by shareholders of the minority acting in bad faith is (more) visible. Our proposed legislative intervention has already been adopted by FINF (Federation of Industries of North Greece) and has been properly processed.

The public debate has opened!

THE NEW LAW ON SOCIETE ANONYMES

The Contracts Of The S.A. With Main Shareholders, Members Of The Board Of The Directors And Related Parties: The Problem With The (Potential) Dramatic Consequences

A. INTRODUCTION: THE VIEW OF THE COMPANY

1. The New Law On Societes Anonymes

With the recent law (L. 4548/2018), a commendable effort to reform the law of Societes Anonymes as well as the replacement of a hundred-year (old) statute were concluded. Changes are, in some sections, sweeping. The (careful) adaptation of the articles of association of Societes Anonymes should take place in 2019. However, the effect of the provisions of this law begins immediately: from 1.1.2019.

2. The Contracts Of The S.A. With Main Shareholders, Members Of The Board Of The Directors And Related Parties

One of the most important issues that the new law is regulating is the conclusion of these contracts.

The matter has already been dealt with by the European Union legislator in Directive 2017/828: thus, this concerns exclusively companies listed on a regulated market. The new law adopts (Articles 97, 99 et seq.) the provisions of this Directive for all companies. Is this right for non-listed?

3. The Options Of The New Law And The (Dramatic) Risks For The Shareholders Of The Majority

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 (as it appears) is intended to protect the minority shareholders and the company itself from the unfair influence of the persons entitled to make decisions on its behalf.

Unfortunately, it 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.

The possibility, which tacitly is given to the majority shareholder (even if it owns 95% of the share capital of the SA) to defend himself with (multiannual and costly) legal actions, does not ensure his own interests nor the company’s.

4. The Solution of the “Gordian Knot”

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 it 1/3 of the share capital represented in it does not oppose.

This particular issue poses serious risks to the smooth operation of Sociétés Anonymes.

The solution should be simple and immediate!

Otherwise: The only ones to be happy shall be the malignant shareholders of the minority and their lawyers (and of course, the lawyers of the shareholders of the majority) ….

Β. THE DATA FROM A LEGAL POINT OF VIEW – THE PROPOSED SOLUTION

1. Preamble

1.1 According to the chairman of the legislative committee on the reform of the law of SA Prof. Evangelos Perakis (Evangelos Perrakis “The New Law of the Société Anonyme”, Nomiki Bibliothiki, 2018, p. 59) “two major issues of great difficulty were the subject of the new law … the question of the remuneration of the members of the board of directors … and the issue of related party transactions … of those transactions that are suspected of occurring through the unfair influence (and for the benefit of) persons controlling or managing the company …”

1.2 The Legislative Committee, which has been set up for this purpose, successfully completed the titanium project of the transition from hundred-year (old) statute (L.2190/1920) to a modern statute (Law 4548/2018) that will govern the operation of the Société Anonyme. However, in such a large project it would be impossible to avoid problems; some, indeed, serious.

2. Related Party Transactions Management – Selected Solutions

2.1 The way selected by the Legislative Committee for dealing with the above mentioned (under 1.1) significant problems and finally adopted by Law 4548/2018 is basically reflected in the provisions of Art. 97, 99 & 100 as well as to that of Art. 109.

2.2 The rule in Art. 99, par. 1, L. 4548/2018 provides for the prior authorization by the Board of Directors of the Société Anonyme for the purpose of concluding contracts with related parties (members of the BoD of the company, persons controlling the company, close members of their family, the legal entities controlled by them, General Directors and Managers of the company etc-99 par. 2)

2.3 The rule in Art. 97, par. 3, L. 4548/2018 provides that when there is a conflict of interest between the members of the Board of Directors (or the aforesaid, under 2.2, related persons) and the Société Anonyme, these members are NOT entitled to vote. As a matter of fact, if failure to vote concerns so many members so as not to have a quorum, the issue is referred to the General Assembly. However, even if the number of remaining members is adequate for the decision by the Board of Directors to be taken, a minority shareholder holding 1/20 (i.e. 5%) of the share capital may impose (in any event) the convening of a General Meeting with the subject of the provision of or not of the relevant approval (Article 100 (3)).

2.4 In the event that the person directly or indirectly involved in the conclusion of the contract happens to be a shareholder, the votes corresponding to his shares are not counted either in the quorum formation or in the majority (Article 100 (5)). Equally, however, neither the votes corresponding to the shares of the related parties are counted. Therefore: The minority shareholder of 5%, for example, (whether acting in good faith, or not), and he ALONE is the one who will take the decision concerning the shareholder of the majority – 95%, for example, after taking into consideration his personal view, and of course his personal interest, and not necessarily that of the company.

2.5 The choices of the new law (L. 4548/2018) and especially the abovementioned deprivation of the right to vote are based on the provision of Art. 9c (4) of Directive 2007/36 / EC (inserted by Directive 2017/828).

2.6 [As an aside, it is to be noted that the rule of Art. Article 99 (3) of Law 4548/2018 provides for a series of exceptions to the application of the above formal (and in our view problematic) procedure. From these exceptions, it is, in our view, to be proved more important in practice the exception provided in case (f): from the generally risky and problematic procedure are excluded the contracts of the company concluded with other directly or indirectly controlled ones, which are concluded with the objective of the interests of the company or from which the interests of the company and of the at shareholders of the minority are not jeopardized. This case is expected to be popular in practice, but it is quite vague as to its specific criteria while it concerns only part of the disputed transactions].

2.7 The above mentioned regarding the deprivation of the voting rights in the Board of Directors and the General Assembly, unfortunately also apply when remuneration is to be paid to the members of the Board of Directors in the framework of a special relationship (in the framework, for example, of the most commonly selected contracts of employment, management contracts or mandates – Article 109 (3)): In such cases, the SOLE member to decide is the shareholder of 5% and not the 95% shareholder (if the latter is also the member of the Board of Directors whom concerns the discussion of the fees to be paid).

2.8 Conclusion: In any of the above cases (: conclusion of a contract between the SA and related parties and / or members of the Board of Directors – the contracts for their remunerations included), and of course also in a number of others, is shown the absolute contradiction that the one to whom the power to take a potentially very important decision within a SA, is not the shareholder of 95% but the one of 5%.

3. The Scientific Approach

3.1 On the basis of what Prof. Evang. Perakis mentions (Evang. Perakis, “The New Law of Societe Anonyme”, Nomiki Bibliothiki, 2018, p. 63): “In any case, deprivation of the right to vote may be considered to be an excessive measure because of its possible consequences, as for example the ability of an obstructive minority of 1/20 of the share capital to seek for a General Assembly to convene in order to reject itself the transactions with shareholders – members of the management of the company with whom they have bad relations while the latter will be unable to vote. It must therefore be accepted that the refusal of the minority to grant the license to conclude the contract should also be reviewed under the provision of Article 281 of the Civil Code”.

3.2 The proposed by Professor Evang. Perakis solution (the judicial ascertainment of the abusive refusal of the shareholder holding the 5%) seems to refer the issue in the distant future and at considerable cost to the companies involved and, above all, to uncertainty as to the outcome. Business decisions, however, should not wait for long lasting legal procedures. It is widely known (to all, lawyers, entrepreneurs, “institutions”, etc.) what it means to wait for the issue of a final judgment (first instance proceedings, appeal) and / or an irrevocable decision on any matter; a fortiori, a judgement on the ascertainment (or not) of the abusive exercise of a right.

4. The Ratio of the Regulations of Directive 828/2017

4.1 The ratio of the regulations of Directive 828/2017 (beyond any doubt) is to ensure: (a) the smooth and unhindered operation of the companies whose shares are admitted to trading on a regulated market as well as the adequate management and performance of the company and (b) the encouragement of the long-term active participation of the shareholders and the improvement of the transparency between companies and investors; as it is already apparent from the recitals 2 and 3. The ultimate goal seems to be the smooth functioning of the “markets” in view of the participation of large sections of the population in Europe and of their general effect on the individual national economies. Particularly, in relation to the transactions of these companies with related parties, “adequate protection of the interests of the company and the shareholders who are not related, including minority shareholders” (recitals 42 and 43) is also sought.

4.2 These objectives and, more generally, the provisions of Directive 828/2017 refer explicitly to “listed” companies and do not extend to “non-listed” companies. This choice of the EU legislator is not accidental: If the reasons for the specific arrangements for “listed” companies were at the same or at a similar level as in the case of “unlisted”, it would be obvious that the latter would also be included (even with minor variations) in the regulatory scope of the Directive.

5. The Greek Reality

5.1 The rule of the Directive, as already mentioned, refers ONLY to the listed companies. However, it was consciously chosen by the relevant Legislative Committee to extend to the non-listed, ignoring the harsh Greek reality that has at least two strands:

(α) Until 2007, the creation of a single-member Société Anonyme was not allowed. Until then, we used to set up Sociétés Anonymes by providing a small percentage (for example 5%, and why not!) to a friend of the exclusive shareholder. Obviously, no one was aware that the percentage of 5% would be able to gain power in “life and death” …

(b) The shares of unlisted Sociétés Anonymes usually belong to a narrow circle of persons (members of the same family, close relatives or friends), whereas as a rule one person is the main shareholder and “runs” the company. Shareholders with small shares in the share capital either acquired them by transfer from the main shareholder or participated in the formation of the company (in both cases with or without payment of the corresponding “price”, having full knowledge of who is managing the company) or, finally, due to succession. Vesting them with the same heightened protection that the shareholders of the “listed” companies need due to the wide dispersion of their shares would not only be unjustified but would also turn these shareholders into potential blackmailers of the majority while it would undermine the proper operation of company and could even lead it to complete depreciation.

5.2 In view of this, the extension by Law 4548/2018 of the provisions of Article 9c (4) of the Directive (Articles 99-101 of Law 4548/2018) also to the “unlisted” companies not only is no self-evident but it is also lacking convincing justification. The legitimate weighting of the interests of the regulated entities in every legislation does not seem to justify the extension but, on the contrary, it fails to appreciate or, at the very least, does not adequately assess the reality of the “unlisted” companies mentioned above in 5.1 Thus, the reasons for the specific arrangements for “listed” companies do not apply neither in the same nor to a similar extent for “unlisted” companies”, which makes the Greek legislator’s choice for “expansion” to the latter problematic.

6. The Proposed Solution

The aforementioned leave no doubt that there is a major need to restrict the application of the provision of Art. 100 par. 5 of Law 4548/2018 to the listed companies and to amend it (before the beginning of the implementation of the new law-1.1.2019, with the additions in bold) as follows:

“Article 100 ….. Par.5.

(a) For a company with shares listed on a regulated market, in the case where the transaction concerns a shareholder of the company, that shareholder does not participate in the vote of the general assembly and is not counted for the formation of the quorum and the majority. Similarly, no other shareholders with whom the counterparty is linked by a relationship under Article 99 (2) shall participate in the vote.

(b) For a company with shares not listed on a regulated market, in the case where the transaction concerns a shareholder of the company, that shareholder participates in the vote of the general assembly and is calculated for the formation of the quorum and the majority. Similarly, other shareholders with whom the counterparty is linked by a relationship subject to paragraph 2 of Article 99 shall likewise participate in the vote. In that case, however, the provisions for the quorum and the majority of Articles 130 (3) and 132 (2) shall apply.”

7. Moral

This piece of legislation (Law 4548/2018) seems to be legally in order. It will be tested along the way. It is appreciated successfully.

The Legislative Committee seems to have done a great job. Its President continues to be, for us all, a teacher.

However, despite all these, it is a fact that the aforementioned provision of Art. 100 par. 5 seems (and is) problematic with regard to non-listed companies.

Its amendment is desirable, as above.

Stavros Koumentakis
Senior Partner

P.S. A shorter, Greek version of this article has been published in MAKEDONIA newspaper (November 18, 2018)

November 18, 2018

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