Participation Rights of Shareholders in Spanish Listed Companies

by Alicia Sánchez

On 1 August 2011, Spain amended its companies law (Ley de Sociedades de Capital) to accord with European Union law. EU Directives aim to strengthen shareholder's rights in listed companies and to ensure cross border participation rights among EU countries. By transposing the Directive into Spanish law through Act 25/2011, Spain recognizes the same rights for European shareholders in Spanish listed companies.

Excerpt:

Harmonizing Spanish law with European Community law, on 1 August 2011, Spain amended its Spanish Companies Act (Ley de Sociedades de Capital) to accord with European Union Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 (the Directive). The Directive aims to strengthen shareholder's rights in listed companies and to ensure cross border participation rights among EU countries, particularly by extending the rules on transparency, proxy voting rights, and the possibility of participating in general meetings via electronic means. By transposing the Directive into Spanish law through Act 25/2011, Spain recognizes the same rights for European shareholders in Spanish listed companies.

Act 25/2011 and Other Legislative Changes

Although Act 25/2011 means a step forward in enhancing shareholder's rights at the general meeting, it follows the path already laid by the recommendations on transparency and corporate governance made by "Aldama" Report in 2003. Many of those recommendations were enacted as law, mainly by Act 26/2003, which amended the Joint Stock Companies Act (Ley de Sociedades Anonimas) and the Securities Exchange Act (Ley del Mercado de Valores). This might be why the Spanish legislature did not feel the urgency to implement the Directive until two years after the transposition date, which according to the Directive was 3 August 2009.

Nevertheless, based on data collected about shareholders' participation at general meetings of Spanish listed companies, it does seem that new legislative measures were needed to improve participation. According to the reports issued by the Spanish Securities Exchange Commission (Comision Nacional del Mercado de Valores, or CNMV), the average participation in the shareholders' meetings of the 35 main listed companies (IBEX 35) in 2010 was 71.5 per cent. Moreover, that percentage is decreasing over the years and there is an inverse proportion between the percentage of minority shareholders and participation in the meetings.

Given that 39.2 per cent of the shares listed by Spanish companies were held in 2010 by foreign investors and that that percentage is increasing, any measures adopted to enhance shareholders' rights must take into account the difficulties faced by non-resident investors in order to exercise their shareholders rights.

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Alicia Sánchez is an associate with Araoz & Rueda in its Corporate/Mergers and Acquisitions department. She regularly speaks at seminars and conferences on corporate and commercial law. Ms. Sanchez is co-author of a paper on the execution of a pledge over shares, published in the last edition of the Litigation Yearbook.