Published and draft legislation - Spain

Improving Corporate Governance

Corporate Enterprises Act Reform Bill

The origin of the Bill that reforms the current Corporate Enterprises Act can be found in the 2013 National Reform Plan. The Council of Ministers set up a Committee of Experts tasked with assessing the governance of Spanish corporations and proposing measures for improving effectiveness and accountability in their management. This Bill is the result of its recommendations.

 The Bill contains one sole article that regulates the amendments relating to the Corporate Enterprises Act in three key areas:

     I.       Powers of the General Meeting and shareholder rights, giving special prominence to the rights of minority groups by reducing the capital requirements to entitle them to such rights from the current 5% to 3%.

    II.       Company directors. Focusing primarily on the duties of loyalty and diligence of its directors, protecting discretionary business judgment in the area of strategy and in business decisions. The scope of penalties in the event of non-compliance with the duty of loyalty is extended beyond retribution for damages caused, so that it now includes the clawback of unfair gains.

 Moreover, an obligation has been established for companies to set up, at least, an Audit Committee, and an Appointments & Remuneration Committee.

   III.       Remuneration of board members. In order to redeem past excesses, directors’ remuneration must be fair and in keeping with the economic situation of their companies, and with the duties conferred on them. The remuneration must seek to promote the profitability and sustainability of the company in the long term.

The aim is thus to bring about a major overhaul which will change the traditional operation of the companies’ principal governance bodies, moving away from the model based on recommending standards of good governance and towards incorporating them into Spanish statutory law.