Act no. 31/2014, dated 3 December, amends the Spanish Companies Act to improve corporate governance (Official State Gazette, BOE no. 293, of 4 December, 2014) introduces substantial changes to Royal Legislative Decree 1/2010, dated 2 July enacting the Consolidated Companies Act, affecting shareholders and meetings, and Company Directors. The law reform shall come into force on 24 December 2014. There is a transitional period for the companies to introduce important changes in their Articles of Association and/or organization strutures. Changes shall come into force as from 1 January 2015, and the companies shall, on the first shareholders General meeting to be held after that date, adapt their internal regulations to the newly amended law.

1. New Amendment to Spanish Companies Act
Act no. 31/2014, dated 3 December, amends the Spanish Companies Act to improve
corporate governance (Official State Gazette, BOE no. 293, of 4 December, 2014)
introduces substantial changes to Royal Legislative Decree 1/2010, dated 2 July
enacting the Consolidated Companies Act, affecting shareholders and meetings,
and Company Directors.
(1) Instructions to the Management: The possibility of the Shareholders to give
management instructions that is contemplated in the regulations of private limited
companies (Sociedad Limitada, S.L.) is extended to other companies, including
public limited companies or corporations (Sociedad Anónima, S.A.) although in
this case the Company’s Articles of Incorporation can exclude or restrict it.
(2) Extension of the Shareholders’ Authority: The shareholders authority is extended to
(3) Listed companies – Minority shareholders rights: the threshold required for
shareholders to exercise rights is reduced from 5% down to 3%, and the possibility
to set a minimum stake of shares to attend the Shareholders General Meeting is
limited to 1,000 shares.
(4) Separate voting of different subjects: Shareholder resolutions shall be adopted
voting separately per each different subject matter, in any case when dealing
about amendments to the Articles of Association and the appointment, re-election
(5) Conflicts of interest: Legal regime of shareholders conflicts of interest in the
adoption of resolutions affecting them (e.g. exclusion of shareholders, approval of
restricted transfers of shares, exemption from obligations or grant or rights or
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SHAREHOLDERS GENERAL MEETING
Reinforcement of authority
New ways for shareholders participation
approve corporate transactions that are similar to restructuring operations.
and dismissal of Directors.
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2. financial facilities etc.) which shall be based on two pillars, applicable to all forms
of company though with some differences in Corporations:
o The shareholder in conflict of interest is prohibited to vote in extreme situations
and the current regime of Private limited companies is extended to the
Corporations.
o Presumption of damages to the Company interest: when resolutions are
o The new provisions clarify the information to include regarding proposals of
resolutions and the computation of the necessary votes requiring simple
majority (meaning more votes for than votes against).
Supplementary notice for meeting: The law reform reduces the
percentage of capital required to add matters of agenda for a
Shareholders General Meeting -from 5% down to 3%.
Conflicting voting instructions: The law reform clarifies some aspects
regarding this matter (e.g. investment funds representing a number of
different equity holders) and allows delegation of vote to the indirect
equity holders or third parties designated by the latter, without limitation.
Shareholder Associations: The law reform introduces more detailed
regulations, like for example: purpose, 100 members minimum where no
one can hold more than 0.5% of the share capital, obligation to keep
membership and proxies ledger, to be formed by deed before notary
public, and registration, and to draw up, approve and publish annual
accounts.
o The law reform establishes different legal effects to the different forms of
exercise of this right and introduces the good faith as base for reasonableness
of limits of exercise. Breach of information right shall entitle the shareholder to
damages, and in the case of Corporations it shall not be a valid cause to
challenge resolutions affected by this infringement.
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adopted with the decisive vote of a shareholder under conflict of interest.
(6) Call for meeting and adoption of resolutions:
o Listed Companies.
(7) Shareholder information rights:
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3. o Attendance rights: limits the minimum stock requirements to have the right to
o Listed companies: the term for shareholders to request information prior to a
Shareholders General Meeting is set to the 5th day immediately preceding to
the date of the Meeting (formerly, the 7th day). The law reform clarifies that the
Directors can comply with their obligation to give information by referring to
the Company’s website containing the information in a clear, direct and
express way, in “Question–“Answer” format.
(9) Challenging of Shareholder Resolutions: The new law introduces a principle of
balance between corporate efficiency and the protection of minority shareholder
rights and legal certainty in business.
o Sets limits to claims based solely on formalities and right of attendance-related
defects that are not relevant which shall not suffice as grounds for challenging
resolutions , to avoid abuses of the exercise.
o All the causes for challenging resolutions are grouped under one same
o Listed companies: The statute-barred term to challenge resolutions is reduced
o Term to file actions to challenge resolutions in breach of public order rules:
(undefined legal concept, to be construed by the courts) shall not expire shall
not be subject to any statutory limitation.
o Right to challenge: Shareholders gathering at least 1% stake in non-listed
companies, and 0.1% stake in listed companies. However, the Company’s
Articles of Association may reduce these thresholds. As an exception,
resolutions against public order may be challenged by any shareholder.
o Number of Challengeable resolutions is extended (up to now, those against
the Law, the Articles of Association or those damaging the corporate interest
in benefit of part of the shareholders or third parties), to those in breach of the
Shareholders Meeting Regulations or, as the case may be, BOD Regulations,
and extends the concept of corporate interest: when resolutions are passed
by abusive majority vote, to the interest of a majority group and without a
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(8) Listed Companies:
attend, to a maximum of 1,000 shares.
concept, of nullity and a statute-barred term of one (1) year.
down to three (3) months, to avoid excessive delays.
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4. reasonable need of the Company, corporate interest is also deemed to be
damaged.
o Duties of the Directors: More precise definition of the duties of diligence and
faithfulness, and the procedures to follow in case in case of conflicts of
interest.
o Non-delegable faculties: The new Act prohibits delegation of faculties
inherent to the essential part of management and supervision and
obligates them to seek the relevant information to fulfill their duties.
(2) Minimum Meetings of the Board of Directors: The Board of Directors of all form of
companies must hold a meeting at least 4 times each (at least quarterly) to
ensure a minimum regular follow-up of the Company affairs.
o The law reform includes some measures to improve the proper functioning
Obligation to attend personally to the Board meetings is remarked as
one of the essential duties and avoid weakening of the actual
fulfillment of duties and supervision over company management.
In case of justified absence, the Director can delegate in other Director,
always provided that non-executive Board members may delegate on
non-executive Board Member.
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CORPORATE MANAGEMENT
Equal Treatment of Shareholders
Risk Management
Independency of Directors
Professionalization
(1) Company Directors:
(3) Listed Companies:
of the Board of Directors:
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5. All Board members shall receive, sufficiently in advance, the agenda
and the necessary information for the deliberation and adoption of
resolutions. The law reform introduces a new requirement to encourage
gender diversity.
Information requirements prior to appointment: The Call for the
Shareholders Meeting to resolve on appointments must include
detailed information on identification details, curriculum vitae,
experience, achievements, of the proposed candidates.
President: The law reform regulates minimum specific duties of the
President (which may be extended by the Articles of Association and
the Board of Directors Regulations. If the President is also an executive
Director, then the Company must appoint one of the Independent
Board Members, as Coordinator.
Directors: The new act includes the definitions of the three classes of
Directors (up to now, contemplated at a Ministerial Order): (a)
Executive Directors (b) Non-Executive Directors, divided into (i)
Proprietary Directors and ii) Independent Directors.
Term of office: legal maximum term is reduced from 6 to 4 years.
However, Directors appointed before 1st January 2014 may complete
their mandate even beyond the new term of 4 years.
Minimum mandatory Committees to be formed solely by Non-executive
Directors Appointments and Remunerations Committee (it may
(4) Directors fees. The law reform in this subject reflects increasing concern that the
Directors remuneration are in line with the actual Company’s development
and corporate interest, and shareholders interest avoiding the conflicts of
agency theory.
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o Composition of the Board of Directors:
Secretary: The new Act defines its duties more in detail.
Directors and chaired by an Independent Director):
Audit Committee
be structured in two different committees)
The Board of Directors can create other specialized committees.
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6. o As the general rule for non-listed companies the office of Director as such is
not remunerated -but the Articles of Association can provide for a
remuneration, and in such case, the Articles shall the specific system of
remuneration of the Director for the Directors executive duties, and the
rules for distribution among the Board Members, according to their
respective dedication and responsibilities. (unless the Shareholders decide
to adopt the regulation of this matter. Directors remuneration may consist in
one or several of the following concepts:
Fix fee amount
Allowance for meeting attendance
Profit sharing
Variable remuneration according to general rates
Remuneration consisting in shares, or related to shares value variation
Compensation for termination (not applicable in termination due to
o Reasonableness of Directors remuneration: it must be consistent with the
Company’s financial position at all times, and the standard of comparable
companies. The remuneration system must be oriented to incentive
company’s long-term profitability and sustainability, limiting possibilities to
take excessive risks, and avoid schemes leading to paying for negative
results.
o Contract: Remuneration of Directors with executive powers (e.g. Managing
Directors) must be formalized in a written contract detailing all
remuneration concepts and fees, to be approved by the Board of
Directors, with a majority of 2/3 of Board Members, and the Directors may
not receive any remuneration not included in the Contract.
o Directors Liabilities: The law reform introduces numerous modifications both
substantial and formal. It is important to note that in addition to Directors,
and in the absence of Managing Directors, the Directors’ liability regime
shall also apply to the person with the highest level of management
authority in the Company, and this regime is also extended to the individual
acting as representative of a Company being a Director of another
Company.
o Listed Companies: Unlike the rest of forms of Company, in the case of listed
companies, the legal regime shall be that the office is remunerated. The
Directors Remuneration Policy shall be approved by the Shareholders
General Meeting on a specific item of the Agenda.
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Director’s breach of duties)
Pension schemes.
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7. Corporate Governance Report: The law reform incorporates into the
revised Act a new section, Section 540, setting out the legal obligation
to issue and publish a yearly Corporate Governance Report, with
minimum mandatory contents.
The Shareholders General Meeting shall control the Directors’
remuneration including the different concepts, the rules of calculation
and the principal bases of the relevant contracts, and the
remuneration policy at least every three (3) years and have it submitted
to the approval of the yearly Directors Remuneration Report.
The Board of directors shall distribute the Directors‘ remuneration
(1) Amendment to Act 24/1988, dated 28 July, of Stock Market, to give the CNMV
(Spanish Stock Exchange Commission) the authority necessary to supervise some
of the matters enacted in this law reform as are applicable to listed companies.
(2) Amendment to Addenda no. Three (regarding information rights) of Act 15/2010,
dated 5 July, that modifies Act no. 3/2004, dated 29 December, that establish
measures against late payment in commercial transactions, regarding disclosure
of average payment term to suppliers. As regards late-payment, listed companies
shall publish the average supplier payment in their website.
(2) Transitional period: The most significant modifications have a transitional period
though narrow, which will require the companies to introduce important changes
in their Articles of association and/or organization structures. The following
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among its Members.
OTHER AMENDMENTS
ENTRY INTO FORCE AND TRANSITION PERIOD
(1) Entry into force: The law reform shall come into force on 24 December 2014.
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8. changes shall come into force as from 1 January 2015 and the Companies shall,
on the first Shareholders General meeting to be held after that date, adapt their
internal regulations to the newly amended law, in the following matters:
Specialized committees, audit committee and appointments and
- If the first Shareholders General Meeting passes the Directors’
remuneration report, on a consultive basis, the remuneration policy shall
be deemed to have been approved and shall be enforceable then on.
- If the first Shareholders’ General Meeting does not pass such report on a
consultive basis, the Directors’ Remuneration policy shall have to be
submitted to a Shareholders General Meeting to be held on or before the
end of the following financial year being effective as from the ensuing
year.
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Directors remuneration.
Board of Directors’ Non-delegable faculties.
Yearly Directors performance evaluation and committees.
remuneration committees.
Directors remuneration for director office duties.
Executive Directors remuneration for their executive responsibilities.
Listed companies: Approval of directors remuneration policy.
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5 December 2014
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opinion.