After almost a hundred years on the books, Greek corporate law 2190/1920 is due for a shake up. Despite some improvements over the years, the current law is a remnant of a bygone era. In the context of modern law and business, some provisions appear misplaced, or don’t have internal logic and coherence; and others are no longer valid, or have only historical value.
To address these problems, earlier this year the Hellenic Parliament passed a new law, 4548/2018, which is intended to create a more business-friendly regime that harmonises with European legislation. To do so, it rationalizes the legal structure and clarifies a number of areas where disputes have arisen.
The new arrangements are comprehensive, affecting almost every aspect of corporate existence, from a company’s naming, to its duration and liquidation. Greek authorities hope that the changes will encourage companies to implement more efficient operations and take greater advantage of new technology, while promoting cost savings and improving the position of shareholders.
The most notable corporate governance changes include:
Say on Pay
The new law incorporates the provisions of Directive 2017/828/EU which regulates say-on-pay for listed companies. In particular, the law requires companies to implement a remuneration policy, and sets the minimum remuneration disclosure requirements in line with European legislation.
The remuneration policy shall be submitted for binding shareholder approval every four years, starting from 2019. In line with the corporate governance best practices widely adopted in Europe, shareholders of Greek companies will be also entitled to an annual advisory vote on the remuneration report.
Before the law was introduced, say on pay proposals were on the agendas of only few companies, while disclosure of executive remuneration was generally limited to gross annual amounts.
The new law limits the maximum number of board members at 15. The election process remains unchanged – directors are elected by the general meeting, while certain shareholder(s) defined in the company’s articles of association are authorised to directly appoint their representatives to the board. However, the percentage of shareholder representatives has been increased from one-third to two-fifths of board members.
Related Party Transactions
The rules on related party transactions (“RPTs”) are also significantly revised in order to improve transparency, give more influence to minority shareholders, and provide the board with flexibility. Whereas the prior regime classified various types of transactions differently, going forward all RPTs will be dealt with in a uniform manner, and companies will be required to publish the details of all RPTs to the commercial registry. In most cases, the board of directors will be responsible for approving the transactions – however, in cases where shareholders representing at least 5% of share capital object, a general meeting would be called, and approval of the transaction would shift from the board to a shareholder vote.
General Meeting Quorum
Quorum rules will change for general meetings that include special agenda items, which require super majority approval. Previously, special business could not be passed without having at least two-thirds of shareholders present; going forward, that quorum requirement will drop to one-half. Such special matters include changes to the company’s nationality and its corporate purpose, most changes to share capital, company reorganisation and dissolution, and any increase in shareholder obligations, amongst other topics. Further, the quorum thresholds for any second call meeting with these special matters will also be lowered, from one-half to one-third of shareholders.
Most provisions of Law 4548/2018 will come in force from January 1, 2019. As companies get familiar with the new law and its requirements, shareholders are looking forward to their first look at Greek remuneration structures, which for so many years have been a mystery, even to companies’ owners.
Yulia is an analyst covering the Greek market.