Published and draft legislation - Spain

Detailed good practice guidelines for applying the “comply or explain” principle

Spain’s National Securities Commission

Spain’s National Securities Commission (CNMV: Comisión Nacional del Mercado de Valores) published these technical guidelines in July with the aim of making it easier for listed companies to comply with section G “Degree of compliance with corporate governance recommendations” in their ACGRs (Annual Corporate Governance Reports).

The document is based on the European Commission’s 9th April 2014 recommendation about the quality of corporate governance reporting (“comply or explain”) and presents additional provisions to deal with the weaknesses detected in explanations given by companies for their non-compliance pursuant to recommendations in the Code of Good Governance (“the Code”). Specifically, it stipulates that companies and their boards:

  • Should assess ex ante whether the decision they are going to approve meets the Code’s standards and, if not, analyse why not and provide the necessary explanations;
  • Will have to justify each time a particular recommendation is not followed, providing reasons and specific information on concrete and particular situations in the company;
  • Will make express mention of the procedure followed by the company; if applicable, on their decision to not follow these recommendations.

The guidelines also publish real examples of explanations in ACGRs which have already been submitted that do not satisfy the criteria in the document for an explanation to be considered suitable and sufficient. The idea is that these examples should prevent others making the same mistakes.

By publishing these guidelines, the CNMV hopes to change the way in which listed companies report on their compliance with principles of good governance.