Sociétés Anonymes: The new law

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).

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