Publication of Law 11/2018 amending the Commercial Code, the Capital Companies Law and the Audit Law as regards non-financial

This Law stems from Royal Decree-Law 18/2017 of November 24, 2017 and brings into Spanish law Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information.

The new provisions regarding disclosure of non-financial and diversity information are discussed in a Commentary available on the Garrigues website.

Law 11/2018 also introduces other notable amendments to the Capital Companies Law, not directly related to the non-financial information statement:

• Article 62 on evidencing monetary contributions has been amended to state that no evidence will be necessary in the formation processes of limited liability companies if the founders state in the deed that they will be jointly and severally liable for them vis-à-vis the company and vis-à-vis the company’s creditors.
• Article 276 on the time and method of payment of dividends has been amended to determine that the maximum time period for complete payment of the dividends is twelve months running from the date of the shareholders’ resolution on their distribution.
• New wording has been given to article 348 bis on the right of withdrawal in the absence of distribution of dividends, which has now become a default provision applicable unless the bylaws provide otherwise. This new wording of article 348 bis of the Capital Companies Law has brought the following main changes:
  • The technical drafting of the law has been improved by specifying that the members with rights of withdrawal will be those that have had entered on record in the minutes their protests at the insufficiency of the recognized dividends.
  • The controversial and questioned term “income belonging to operation of the corporate purpose” has been replaced with “legally distributable income obtained in the previous year”.
  • The minimum percentage of income to be distributed has been reduced from a third to twenty-five percent of the previous year’s income, and it has been allowed for that percentage to be met in aggregate terms over a period of five fiscal years (i.e., there will be no right of withdrawal if the total amount distributed as dividends over the previous five years amounts to twenty-five percent or more of the legally distributable income recorded in that period).
  • The right of withdrawal has been made conditional on income being obtained in the previous three years.
  • Specific rules have been laid down for the parent companies of corporate groups, concerning the consolidated income attributed to the parent company.
  • To remove or amend this ground for withdrawal, the consent of all the members will be needed, unless the right to withdraw from the company is recognized for a member who had not voted for that resolution.
  • Alongside listed companies, companies with shares listed on a multilateral trading facility (such as Spanish alternative equity market MAB), companies in certain insolvency scenarios and sports corporations have also been excluded from their application.

• A new paragraph has been added to article 514 in relation to equal treatment at listed companies to specify that they must cater for the accessibility requirements of people with disabilities and the elderly to ensure their right to obtain prior information and the necessary supports to cast their vote.
• Subarticle 6 of article 540.4.c) on the content of the annual corporate governance report of listed companies has been amended in relation to the applied diversity policy, which must refer to the leadership team and to special committees as well as the board of directors, with regard to matters such as the ages, genders, disabilities or training and experience of their members, and mention in particular the procedures implemented to seek to include on boards of directors a number of female directors that will strike a balance between male and female members. Moreover, it must be reported whether information was furnished to shareholders on the criteria and diversity goals sought in the election and renewal of the members of the board, of the leadership team and of the special committees.

The final provisions of Law 11/2018 also affect other areas, by introducing amendments to the legislation on collective investment vehicles, payment services and support services for entrepreneurs (in this last case, seeking to reduce the administrative burden in companies’ formation processes).

Law 11/2018 entered into force the day after the date of its publication in the Official State Gazette.