The General Courts have approved (BOE April 13, 2021) the Law amending the
Consolidated Text of the Law on Capital Companies
(Royal Legislative Decree 1/2010 of July 2) and other financial rules, as regards the promoting the long-term involvement of shareholders in listed companies.

This reform was completed after the text of the Bill was published on 7 September 2020, the main objective of which was to transpose the content of Directive (EU) 2017/828 of the European Parliamentand of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the promotion of long-term shareholder involvement.

In addition, the Law introduces other relevant amendments and developments in the Spanish legal system, especially in the area of corporate governance and for the promotion and improvement of the functioning of capital markets.

As a summary, as specialists
in commercial
advice, we inform that the new developments introduced revolve around two axes:

  • Improve the long-term financing that listed companies receive through capital markets.
  • Increase transparency in the actions of capital market players in relation to the remuneration of directors or the conduct of transactions between the company and its related parties.

What’s new in the Directive

Among the main developments of the Directive is expressly recognised the right of companies to identify their actual shareholders,with the aim of allowing direct communication with them to facilitate the exercise of their rights and their involvement in society. To this end, it establishes mechanisms to enable companies to identify the ultimate beneficiaries.

The text recognizes the right of listed companies to identify not only their formal shareholders, but also the actual beneficiaries of the shares at the end of the chain of intermediaries.

In this way, direct communication will facilitate the exercise of their rights and their involvement in society.

This strengthening of the shareholder identification regime entails, in addition to the corresponding modification of the LSC, that it be included within the reporting obligations to which natural or legal persons are obliged, a specific precision in this matter (LGT art.93).

In this sense, it is expressly incorporated into the LGT that persons and entities who, by application of current regulations, knew or were in a willingness to know the identification of the ultimate beneficiaries of the shares must comply with the tax authorities with the requirements or obligations for information that are regulatoryly established with respect to such identification.

It is clear that the effects of this new Directive to promote long-term shareholder engagement transcend the realm of corporate governance and business profitability, and can also have a positive impact on the economy and society as a whole.

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Subjects bound to the duty of information

The correct application of the tributes requires greater and more complex collaboration on the part of all.

Who is required to provide information? Once again, the law is clear about it:

“Natural or legal persons, public or private, yencent inheritances, communities of property and other entities which, devoid of legal personality, constitute a separate economic unit or heritage subject to taxation and are considered to be taxable persons under a law (LGT art.35.4), shall be required to provide the Administration with all kinds of data, reports, backgrounds and tax-related supporting documents relating to the performance of their own tax obligations or deducted from their economic, professional or financial relations with others.”

It is an autonomous obligation of those affected by the rule, and not an anecrian obligation of that of taxable persons (AN 15-10-96).

This generic obligation also reaches:

  • The authorities,whatever their nature.
  • Holders of State bodies, autonomous communities and local entities.
  • Autonomous bodies and public business entities.
  • Cameras and corporations, schools and professional associations.
  • Social security mutuals.
  • Other public entities, including Social Security managers and those who generally perform public functions.

In addition to providing the tax authorities with any data, reports and backgrounds of tax significance, they must also provide her and her agents with support, competition, assistance and protection for the performance of their duties.

On the other hand, paragraph 5 of Article 94 of the General Tax Law provides that the transfer of personal data to be carried out to the tax authorities shall not require the consent of the person concerned.

New corporate governance regulations

Apart from the Main Directive, it has been considered appropriate to take advantage of this Law to introduce other regulatory improvements in corporate governance and the functioning of capital markets.

Among the reforms to improve corporate governance, Article 225.1 LSC has been amended to reinforce the duty of diligence of administrators,in line with the demands of good corporate governance.

The first paragraph of Article 529a of the Consolidated Text of the Law on Capital Companies has also been amended to provide that directors of listed companies must necessarily be natural persons. This change is due to reasons for transparency and good corporate governance.

The information to be included in the Annual Corporate Governance Report (IAGC) is also expanded. In particular, the details of the positions of director/senior management of directors in other entities and information on other paid activities of directors should be provided.

It also eliminates the obligation to develop IAGC for issuers of securities other than listed companies,as a measure to attract fixed income issuers.

Finally, when it come to corporate governance, the Securities Market Act is adapted to Regulation (EU) No 2017/1129 of the EuropeanParliament and of the Council of 14 June 2017 on the prospectus to be published in the event of a public offering or admission to securities trading on a regulated market.

A number of changes are also added to the LSC itself with the main objective of making the processes of acquisition of capital in the market by listed companies and companies with shares admitted to trading in multilateral trading systems simpler and more agile.

The developments focus on changing the regime of capital increases and the issuance of convertible bonds into shares with the aim of making them more competitive.

Loyalty actions and exclusively telematics joints

The Law also introduces, with regard to corporate law, so-called‘loyalty shares’ with additional vote, allowing listed companies to contemplate them in their bylaws.

In this way, the statutes are allowed to grant additional voting rights to the shares held by their holder uninterrupted for a minimum period of time of two years.

This mechanism can help incentivize shareholders to keep their investment in society in the long run and reduce short-term pressures on business management.

Another novelty contained in this Law is that the the possibility of holding exclusively telematics meetings for all capital companies, including listed ones, in need of statutory forecasting: the amendment must be approved by the board with a reinforced two-thirds majority of the capital, present or represented.

Voting advisors or proxy advisors

As a highlight, the Directive also deals with proxy advisors, recognisedas professional advisory entities to investors to exercise their voting rights at general shareholder meetings.

The growing importance of voting advisers and potential conflicts of interest
which they may incur, recommends their regulation at European level, as set out in the text.

That’s why your regulation is now incorporated into the Securities Market Act,as the obligations imposed on them are transparency and do not innovate the company contract, and the basic information used to prepare its recommendations is the periodic information regulated in that Law.

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