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Impact of reform on sale of corporate assets

The recently-enacted Law 31/2014 of 3rd December 2014, which reforms the Corporate Enterprises Act, reserves to the General Meeting of members or shareholders powers in relation to the acquisition, disposal or transfer to another company of “essential assets” (article 160, paragraph f). An asset is deemed to be essential when the amount of the transaction exceeds twenty five percent (25%) of the value of the assets appearing on the last balance sheet approved.

The transferee or transferor in relation to an asset (real estate, credit right, etc) of a certain value, property of a company with share capital, absolutely must request, from now on, information regarding compliance with the resolution of the General Meeting authorizing the transfer or the reasons for any exemption. Otherwise, said transferee or transferor might become embroiled in a subsequent legal dispute which could affect the validity of the legal transaction. This information is properly to be included in the sale agreement to satisfy the requirement of “good faith” on the part of the transferee which is essential for protection of the right to property.



Red Eléctrica Española, Acciona, FCC, CaixaBank, Inditex or Viscofan are the listed Spanish companies with the most gender-balanced boards of directors based on the gender profile of their members

Spain: new measures, but are these enough?

As we already mentioned in our previous post, the measures contained in the Draft Law relating to corporate governance of corporate enterprises refer exclusively to commercial undertakings listed on the Spanish secondary stock market and provides that a commission set the goal of representation for the underrepresented sex,  in addition to facilitating the appointment of women in the  selection processes for directors.

In 2013, 79.5% of women directors of IBEX-35 companies were independent directors, another 16.4% were consejeras dominicales (directors representing shareholders with substantial shareholdings) and only 4.1% were executive directors, in companies such as Banco Santander, Telefónica, Arcelor and Bankinter. There were also two Chairwomen of the Board: in Dia and FCC.

We cannot deny that in Spain gender quotas on corporate boards are an example of the catalyst effect that the adoption of legislative measures can have. We have to recall that  Organic Law 3/2007 of 22 March 2007 for Effective Equality of Women and Men included a recommendation  that companies (and not just listed ones)  include in  their  boards of directors a number of women that would  permit balanced representation of gender,  leading to a sharp increase  in the presence of female directors in Spanish listed companies (from 3.30%  in 2005  to 17.23% in 2013).

On the other hand, the Unified Good Governance Code, published in 2006 by the National Securities Market Commission (in Spanish “CNMV”) contains other recommendations: in the event that there are no directors or that a limited number are appointed, the Board shall state the reasons for, as well as the initiatives adopted to correct this situation. In addition, the appointments committee must ensure that when filling new vacancies, selection policies involving positive discrimination in favor of women are adhered to.

But what lies behind these equality policies? Do they only seek social justice between genders? Many studies conclude that greater gender parity undoubtedly leads to improved performance by businesses: not only because more women in the corporate governance of companies implies the proper management of diversity, but also because of better quality in decision making, the existence of more innovation, a better knowledge of the market or identification with customers, as well as greater use of European talent (let us not forget that 60% of European students are women).

We therefore welcome the fact that with  the Draft Law this matter will be  incorporated directly into the Spanish Corporate Enterprises Act, and subsequently integrated into the Commercial Code, although it is likely that it  may remain a mere statement of good political intentions. This will certainly help, but it will be insufficient   if the threshold of 40% female presence on boards of directors by 2020 – the target earmarked by proposed European legislation – is to be reached.  Clearer mandatory rules, including deadlines and administrative or financial penalties, would have been preferable.  As things are, the fate of female board directors is sealed… though perhaps it can still be modified in the parliamentary debate.

Much Ado But Very Few Yuans

Almost a year has passed since the entry into force of the Spanish Entrepreneurial Support Act, Law 14/2013, of 27th September 2013, which was approved with the hope that it would attract foreign investors to our weak post-crisis economy thanks to its “promise” of visas and residence permits for investors, entrepreneurs and highly skilled professionals through a streamlined and simplified procedure. Undoubtedly, the most widely known measure introduced by this law was the granting of a residence permit to the foreign investor who makes a real estate investment of at least €500,000.

However, after this implementation period the results are not what were expected. Based on an initial assessment of 8th May 2014 the figures are clearly much less than those expected: only 81 non-EU citizens have benefitted from the new Law in Spain. Of this number, 72 made a real estate investment (of a minimum of €500,000 in real estate), while 6 made a capital investment (of a minimum of two million euros or one million in Spanish public debt securities, in shares or in company shares in Spanish business entities, respectively) and 3 presented a project to be developed in Spain and of general interest. Almost half of the investors were Chinese or Russian.

But, why has the Law not yielded the expected results? Among other reasons, one could argue, the fact that in other neighbouring countries the benefits of the “Golden visa” are much greater. One example of this is Portugal, where 1,340 visas have been granted since the Portuguese Law entered into force in October 2012, and some 900 from January 1st 2014 to August this year.

The main difference between the Spanish and Portuguese systems which explains this difference in result is that in Portugal one can expect Portuguese/EU nationality to be granted if the foreign investor maintains the initial terms of investment during a minimum period of residence of six years in Portugal (this being understood to mean a minimum stay of two weeks in the territory every two years).

Once again, the Spanish legislator has legislated, yes, but has clearly done so inadequately and with little reflection. Once again, it has put on a show for the gallery.

photo credit: Javier Prieto ( via photopin cc

Legislative Reform of the Spanish Consumer Protection Act

On Friday, June 13th (not a good date for the superstitious amongst us), Act 3/2014 of March 27th, 2014, yet another amendment to the Spanish Consumer Protection Act and supplementary legislation come into force.  The new regulatory regime is therefore applicable to agreements concluded with consumers from that date onwards.

The purpose of this legislation is to introduce into the Spanish Consumer Protection Act the amendments necessary in order to implement Directive 2011/83/EU of the European Parliament and  the Council, on consumer rights.

The Directive established the new legal framework for distance and off-premises contracts and amended the European rules regarding unfair terms in consumer contracts and certain aspects of sales and guarantee of consumer goods.  Its aims include:  consumer protection  at the European level, in particular,  in relation to sales made on the Internet; the consolidation of the Internal Market; and  strengthening  legal certainty for  consumers and  traders, as the previous  regulatory regime  exposed  important gaps in the European rules.

Consequently, the most relevant legislative amendments introduced by  Act 3/2014 are:

  • New definitions of consumers and traders;
  • Joint regulation of distance and off-premises contracts;
  • Standardized and broader pre-contractual information obligations regarding, in particular: a) deposits or other financial guarantees (i.e. blocked amount on the consumer’s credit card); b) legal guarantees; conditions of after sales services and commercial guarantees; and c) supply contracts on digital content, where the consumer has to be informed about the use of this content and its technical limits, protection mechanisms and regional codification, as well as the interoperability of digital products with hardware and software;
  • Modification of the rights of withdrawal of consumers, with a new regulation that introduces a standard form which the consumer may use and an extension of the time-limit for withdrawal   to 14 days. If the trader does not provide information concerning the consumer’s rights of withdrawal, the time-limit is extended to two months from the beginning of the initial period.
  • Implementation of the TJEU ruling regarding unfair terms, which enables the national court to rule on the nullity of such terms in consumer contracts and to integrate different provisions according to the principles of good faith to the contract.

It is clear that the purpose of the new Spanish Consumer Protection Act is to achieve coherent regulation by virtue of the entire Spanish legislative system, especially in relation to the sector-specific regulation of consumer protection. The Consumer Protection Act guarantees the application of each sector-specific rule which gives significant protection to the consumers subject to the rules of harmonization in the terms established by European Union law. We will see whether the 13th will be a bad omen for consumer protection in the harmonized market or whether we can hope for a reasonable and Internal-Market-related interpretation by the administrative authorities and courts in Spain. In any event, consumer contracts used until today should be fundamentally revised.