Important news for joint-stock companies after Law 5/2021 of April 12 in Spain

On April 13, in the Official State Gazette (BOE), Law 5/2021 of April 12 (the “Law”) was published. It introduces significant changes to the consolidated text of the law on share capital companies (“LSC”), both for listed and unlisted companies. The law entered into force on May 3, 2021.

By way of introduction, it should be noted that the law transposes Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 into the Spanish legal order. This directive, as stated in its reasons, was approved after nearly five years of negotiations between the European institutions, which suggests the importance of regulated matters.

Much of the reform of the LSC concerns listed companies, with a dual objective: (i) improvements in the area of ​​corporate governance and (ii) promoting greater long-term shareholder participation in companies in which they invest by introducing what have been called “loyalty actions”, trying to avoid short-term investments which generate a strong pressure for the governance bodies of the companies to obtain profits as soon as possible , thus harming the sustainability of businesses.

However, the reform also introduces other important changes that affect unlisted companies, which are in the majority. After a year during which, following the pandemic due to COVID-19, instruments have been planned to allow the participation or the holding of meetings of the various organs of society digitally also for limited liability companies ( sociedades limitadas), the law amends the LSC by increasing the possibility of attending general meetings of shareholders by digital means also for limited liability companies, whereas to date this type of participation was only foreseen for Spanish joint-stock companies (sociedades anónimas). In addition, the reform introduces an important new possibility: that of holding exclusively digital general meetings in a series of premises. It is important to note that participating in and / or holding general meetings digitally will only be possible if this is provided for in the company’s articles of association; thus, companies wishing to take advantage of this new possibility should consider amending their articles of association if they have not already done so.

Another important issue is the broadening of what must include the person related to the directors (persona vinculada a los administradores) and the regulation of the approval of the execution of intragroup operations and of the competent body for this. The new regulation promotes greater transparency of transactions between companies of the same group facing a conflict of interest.

In conclusion, this is a very significant reform which touches very diverse subjects for companies, whether they are listed or not, and which involves quite new changes which will undoubtedly be positively received.

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