In our previous article, we looked into the distribution of shares (with or without consideration) to members of the SA’s Board of Directors, its executives and employees. As well as to those who provide their services to it. Subsequently, we examined the program for the distribution of shares in the form of an option to acquire them (: art. 113 law 4548/2018). Specifically, the beneficiaries and the competent bodies for its issuance. Also the content of the relevant decision. In the present article we will look into the option of the beneficiaries.
Contingencies and the relative right of the beneficiaries
In the context of the SA’s program for the distribution of its shares, there are two options: either the payment of consideration by the beneficiaries is foreseen or their disposal is made free of charge. In the first case (acquisition for a consideration), the beneficiaries have a right of option. Specifically, the power (because it is about the power) to create, unilaterally (without, that is, any actions of the SA, but with a declaration to it), the creation of a new contractual relationship: the acquisition, i.e. of its shares. That is why, after all, the option is characterized as a constructive right. The option may therefore be exercised or not exercised. It would, however, make sense not to exercise it in case it was a sale of SA shares, against a consideration not beneficial for the acquirer.
The cause and basis of establishment of the specific right
The cause and basis for the establishment of the specific right (as well as the more specific content and terms of its exercise) is sought in the contractually structured text of the “option agreement”. The agreement that is (that is considered to be) concluded between the beneficiaries and the liable – distributing SA. The exercise of the specific option right brings about direct consequences (: acquisition, primarily, of SA shares by the beneficiary). Precisely for this reason, the content of the future main contract for the original or derivative acquisition of shares should be clearly included in the said agreement.
The advantage and benefit of the beneficiaries
The most significant of the advantages offered to the beneficiaries of said option is found at a future time. And this, because they have the freedom to weigh the circumstances and choose to exercise this right in the most benefitial to them time, or to not excersize it at all. The beneficiaries are, after all, primarily interested in the difference in the price they buy the shares in relation to their market value at the same time.
The conditions for the acquisition of shares
The acquisition by the beneficiary of newly issued shares of the SA (which will come, i.e. from an increase in its share capital) also presupposes the receipt of their relevant declaration to the SA. However, in the case of acquisition of shares through the issuance of new shares, the acquisition itself is under a double suspensory condition: The first concerns the adoption of a decision to increase the share capital by the competent corporate body. The second is the payment by the beneficiary of the amount set for this purpose.
The non-transferability of the option; compensatory liability of the SA
A stock option is, by its nature, personal and, therefore, non-transferable prior to its exercise. However, after the beneficiary has become a shareholder, they are not prevented, in the first place, from transferring the shares they acquired with the expectation of receiving a premium. However, the right to their further transfer presupposes the absence of a condition in the relevant program for their mandatory retention for a specific time. It also presupposes the absence of relevant statutory restrictions (: restricted shares).
Finally, it should be noted that, theoretically at least, the emergence of compensatory liability of the SA, by virtue of the general provisions of the Civil Code. Such a liability would arise in favor of the entitled persons in the event that due to a culpable action (act or omission) of the administrators/representatives of the SA, the exercise of their above right becomes impossible or ineffective.
It is up to the discretion of the beneficiaries to acquire the shares offered free of charge, or for consideration, by an SA as part of a share distribution program. When the said shares are available for consideration, the beneficiaries will be asked to weigh the relative benefit on the basis of the amount they will be asked to pay in relation to the market value of the shares. This weighting results in the exercise (or not) by the beneficiaries of the relative right of option that the law recognizes. Their benefit presupposes the possibility of immediate or, at a later time, sale of their shares. This will be mentioned in the relevant provisions of the share allocation program. Also, especially for SAs with shares not listed on a regulated market, in their relevant statutory provisions. However, the most important thing is not, in any case, the legal part and the relevant regulations. What, in any case, is above all else is the business choices and achievement of the goals the SA pursues through the issuance of the program in question. Regarding the free distribution of shares: see our next article.
Stavros Koumentakis
Managing Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (August 27th, 2023).
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.