Legislative reform on corporate governance

A legislative reform on corporate governance is set to introduce the following main changes in Spain:

  • GSM will be entitled to instruct the Board and resolve on certain material management matters
  • Minority rights will be exercisable by holders of 3 per cent of the share capital (vs. 5 per cent)
  • Minimum required to attend GSM set at 1,000 shares (vs. 1‰)
  • Overlap in terms of remuneration for executive directors (between corporate and employment relationships) to be contractually clarified
  • Registration duties for shareholder associations and forums
  • Fractioned votes now possible in listed companies
  • Appointment of executive Chairman of listed companies requires 2/3 Board majority and appointment of a lead independent director
  • New set of matters not to be delegated by the Board in listed companies (including tax related)
  • Remuneration Committee now mandatory for listed companies (vs. recommended only)
  • Maximum initial term in office for directors at listed companies set at 4 years (vs. 6)
  • Directors in listed companies no longer deemed independent after 12 years in office
  • Binding vote on remuneration policy of listed companies every 3 years (vs. consultation vote only)

A new draft bill on corporate governance is in the final phases of approval in the Spanish Parliament following the conclusions of the report issued by an Experts Committee in October 2013 as commissioned by the Spanish Government. This draft bill contains relevant legal amendments to the Spanish Companies Act (Ley de Sociedades de Capital), some of which will apply to all Spanish companies and some other to listed companies only.

The draft bill is currently with the Senate, after debate and amendment in Congress, and the expectation is that it will be enacted within the next few weeks.

The most relevant changes to the existing legal regime are summarised below:

Changes applicable to all Spanish companies

Powers of the General Shareholders Meeting

According to the draft bill, the GSM will be entitled to instruct the Board of Directors on certain management matters, unless otherwise provided in the by-laws (currently this is only the case for SLs, but not for SAs). Furthermore, the GSM will resolve on material transactions, defined as those for amounts exceeding 25 per cent of the total assets of the company.

Independent resolutions 

Matters that are to be deemed independent from one another (typically, two different amendments of the by-laws) shall be voted on separately. Furthermore, voting restrictions for shareholders in conflicts of interest, including those in relation to financial assistance matters, will now applicable to all types of companies (currently this is only the case for SLs, but not for SAs).

Null and void resolutions 

The distinction between null and void resolutions (when an infringement of law occurs) and voidable resolutions (when an infringement of the by-laws or the corporate benefit in favour of certain shareholder occurs) will disappear, and therefore: (i) the legal term for challenging GSM resolutions will always be of 1 year; and (ii) such challenge could be made by shareholders holding 1 per cent of the share capital (1‰ only in listed companies).

Directors’ duties 

Due diligence and loyalty duties will be regulated more precisely, as well as the procedures to be adopted in case a conflict of interest arises. Also, the minimum share capital required to file an action of corporate social liability will be reduced from 5 per cent to 3 per cent and such action may be brought directly by shareholders holding those shares (without the need to wait until the next GSM) in case of breach of the duty of loyalty.

Limitations to delegation  

It is set out that the Board will no longer be able to delegate certain material matters regarding the management and supervision of the company.


Directors’ remuneration shall be reasonable, in line with the economic situation of the company and the functions and responsibilities attributed to them. Accordingly, the remuneration system shall prioritise promoting the profitability and sustainability of the company in the long term. Also, the overlap in term of remuneration for executive directors will be clarified. Accordingly, the director and the Company shall enter into an agreement setting out the different remuneration items, which shall be approved by a qualified majority of the Board of Directors.

Annual report 

The annual report must include the average period for payment to suppliers. Listed companies will also need to publish this period on their website.  

Changes applicable only to Spanish listed companies

Minority rights 

In accordance with the draft bill, the general threshold to exercise minority rights will be lowered from 5 per cent to 3 per cent of the share capital, and the minimum amount of share capital required to participate in the GSM will be reduced from 1‰ of the shares to 1,000 shares (which, incidentally, in companies with a low number of shares can actually result in a higher threshold).

Fractioned voting rights 

Entities (ie funds, trustees, custodians) attending the GSM on behalf of several shareholders will now be entitled to cast fractioned votes and to delegate voting rights.

Information rights 

The deadline until which shareholders will be entitled to request information on the matters in the agenda will be reduced from seven to five days before the date of the GSM.

Associations and forums 

In relation to associations and shareholder forums, registration with a special registry created by the Spanish Stock Exchange and the fulfilment of certain information and accounting obligations will be required.

Executive Chairman 

Unless otherwise envisaged in the by-laws, if the roles of Chairman and first executive of the company are vested on the same individual: (i) the appointment of the Chairman will require the favourable vote of two thirds of the members of the Board (alike the current regime for appointment of a Managing Director), and (ii) it will be mandatory to appoint a lead independent director (currently this is only a recommendation to be complied or explained). The lead independent director will be entitled to request the Chairman to convene Board of Directors meetings, add matters to the agenda, coordinate the roles of independent directors and manage the appraisal of the Chairman.

Remuneration Committee 

The Board of Directors will be obliged to create a Remuneration and Appointments Committee. This Committee will set a representation goal for the least represented gender on the Board of Directors and will issue recommendations on how to reach this goal for gender equality.

Limits to the delegations of powers 

Certain matters concerning control and risk management policies can no longer be delegated by the Board of Directors, including: tax risk (namely, the approval of investment or transactions that may entail special tax risks) and the establishment of the tax strategy and policy of the company.

Term in office 

Directors cannot be initially appointed for a period exceeding four years (currently set at six), though members may be re-elected after this period of time for a further four year term. Furthermore, independent directors will no longer be considered as such if they remain in their positions for more than 12 years in aggregate.


Directors’ remuneration policy shall be voted at the GSM as a separate matter on the agenda every three years on a binding basis (currently the law only envisages a consultation vote). 

The draft bill states that the Report on Directors’ Remuneration shall still be subject to an annual consultation (non-binding) vote at the GSM. If it is rejected, the directors’ remuneration policy applicable for the next year shall be amended and re-submitted for approval at the immediately following GSM before its effective application.


The Board of Directors shall carry out an annual assessment of its own performance and of its delegated committees.