The Articles of Association of the Société Anonyme…the scope, the content, the options of the new law and its mandatory adaptation to the new law.
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.
The scope of the Articles of Association and of the statutory provisions
Since the fees of notaries are always combined (also) with the extent of their contracts, we have been addicted to notarial acts – Articles of Association of Sociétés Anonymes which are 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 notaries and, sometimes, lawyers of companies. Or even worse, there are still Articles of Association today that have nothing to do with what the existing institutional framework has set and that have completely obsolete regulations.
One would have expected that this would mean that the Articles of Association would, in the end, have limited scope to what is strictly necessary and, for the rest to 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.
The new law (4548/2018) for sociétés anonymes with reference to the Articles of Association: Notarial deed vs private document (agreement).
The new law on sociétés 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 Sociétés Anonymes is completed in a Single Entry Point services. (essentially the General Commercial Registry (GEMI) where its seat is located).
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.
Hence: 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). Thus, the Articles of Association of a Société Anonyme could be limited to the following provisions: (a) the 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)?
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 exploits technology as well as modern, international, tools of the law of Sociétés Anonymes. Some of them: The composition of the name of Sociétés Anonymes and their duration. The way to cover their share capital, the possibility of partial coverage and payment, the types of its share capital increase. The ability to reduce and depreciate (!) the share capital. The types of titles and their sub-themes and attributes (shares, bonds, warrants, profit (founders’) shares). In particular: the types of shares [common and privileged (with many kinds of exploitable 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 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 even one-member!) of the Board of Directors. Managing conflicts of interest. The management of remuneration issues of Board of Directors and Managing Directors. Issues related 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 their management. Auditing ability. The shareholders’ associations. The distribution of profits. The minimum dividend. The provisional dividend. The dissolution, liquidation and revival of the company.
The themes are varied. The capabilities extremely extensive. The option may be tedious but is certainly useful (if not critical) for businesses and entrepreneurs.
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 by the end of 2019. It seems to be much time very, but it may not be. 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!
Υ.Γ. Part of this article has been published in MAKEDONIA Newspaper (January 6th, 2019)