I.    INTRODUCTION

The amendments introduced by the Senate, as proposed by the People’s Party (Partido Popular – PP), to the Draft Bill for the Simplification of Documentary and Information Obligations for the Merger and Demerger of Capital Companies were finally approved by Parliament on 6th June. Pursuant to these amendments, shareholder voting limitations shall be allowed to be introduced into company bylaws for the protection of companies which may have suffered expropriation in the face of possible takeover bids.

II.    MODIFICATIONS TO THE LAW AS A RESULT OF A NEW SCENARIO

The amendments presented by the PP to the draft Bill, which have nothing in common with the original contents, mean a complete reversal of the so-called “Florentino Amendment”. Said Amendment, approved in April 2010, eliminated the voting limitations of one single shareholder as demanded by some investors in the midst of a shareholder dispute in two of the flagship companies of Spain, Repsol and Iberdrola. The Florentino Amendment meant the modification to article 527 of the Capital Companies Act, which as from April 2010 is drafted as follows:

Article 527. Nullity of the limitation clauses on voting rights.
“In listed Joint stock companies, bylaws which either directly or indirectly generally fix the maximum number of votes issued by one single shareholder or companies belonging to the same group shall be deemed completely null” [–]

The intention at the time was for prominent company shareholders, the real owners of the companies, to be able to exercise their voting rights in accordance with the true percentage of shares effectively held, in detriment to the administration organs who thus saw their independence limited.

The new uncertain economic climate, which has only worsened since 2010, has left many listed companies, amongst which are the most strategic companies in Spain, in a possible takeover bid situation, since they are being quoted at historic minimums. Therefore, articles 188 and 527 of the Capital Companies Act as well as articles 60 and 61 of the Securities Market Act shall be modified, allowing maximum shareholder voting rights to be limited, except where a percentage equal or greater than 70% of share capital is reached. This posture is interesting because takeover bids may be conditioned to the elimination of certain restrictions.

Likewise, the expropriations suffered by some Spanish companies, regardless of their legality, have also meant a significant decline in their value, leaving them at the mercy of unwanted corporate operations. This new situation has forced political parties to take measures in order to protect these companies from speculative attacks. In this way, through the modification of article 61 of the Securities Market Act it has become obligatory to include an independent expert’s report in order to assess the real value of the company in line with the expropriation suffered. This proposal is nothing more than an empty gesture, given that in any market and more so in the stock markets, the rules of supply and demand prevail, and if an offer is made at an appropriate price, it should be the shareholders who decide whether they are interested in selling or not.

III. CONCLUSION

As already mentioned above, these mechanisms shall allow the managers of listed companies to act as owners thereof, without the real owners, that is to say the majority shareholders, being able to positively influence the management of the company, giving rise to implausible situations, which have already arisen in our market, in which a shareholder with a participation greater than that of the entire board of directors is unable to appoint board members nor intervene in the management of the company.

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