Publication of the organic law on equal representation and a balanced presence of women and men

Organic Law 2/2024, of August 1, 2024, on equal representation and a balanced presence of women and men, among other aspects, transposes Directive (EU) 2022/2381 of the European Parliament and of the Council of 23 November 2022 on improving the gender balance among directors of listed companies and related measures.

It also includes the obligation to ensure balanced representation on electoral lists, on constitutional bodies and bodies with constitutional significance, on the council of ministers, in the central government public sector and in professional associations. In the final stage of the legislative process, it has also added similar measures with respect to the election of members of the Boards of State-run radio and television information services, of the representative, governmental and administrative bodies of the labor unions and business associations, of the Board of State University Students, of the governmental and representative bodies of foundations and of the organizations regulated by the Social Action Third Sector and by the Social Economy Law that exceed certain thresholds of employees and budget volume.

For the purposes of this law, equal representation and a balanced presence of women and men is considered to be a situation in which persons of each gender do not exceed 60%, and are not lower than 40% in a particular area. In accordance with the affirmative action principle, this criterion is not applicable where the number of women exceed 60%, which must be justified in each case.

In the corporate field, as we discussed in earlier publications (see here), the law is more demanding in its scope than the Directive’s provisions.

The law is applicable to:

• listed companies
• public interest entities; for these, starting in the fiscal year following the year the following requirements are met: a) average number of workers higher than 250, and b) net revenues above €50 million or total assets above €43 million.

And the main obligations will consist of:

• Ensuring that the board of directors has at least 40% of the underrepresented gender. A new feature of the Law as opposed to the Bill, is that where the public interest entities are companies controlled directly or indirectly by a family, if they wish, they may exclude executive directors and nominee directors.
• If the objectives are not met, selection processes must be adjusted to ensure their achievement. Exceptional cases are determined for not giving priority to candidates of the underrepresented gender.
• Informing, at their request, candidates who were considered during selection processes on certain elements of the process (criteria, comparative assessment, reasons for choosing an individual who is not of the underrepresented gender).
• Providing the shareholders’ meeting with information on the measures required regarding the balance between women and men on the board of directors, as well as information on the potential penalties for breaching them which could affect the company.
• In the event of court proceedings brought by non-selected candidates of the underrepresented gender, justifying the selection made in exceptional cases.
• Overseeing that senior management has at least 40% individuals of the underrepresented gender. If that percentage is not met, an explanation must be provided of the reasons and of the measures adopted to achieve that minimum percentage in the immediately following and subsequent years.
• Preparing and publishing every year, as part of the sustainability report, information on the representation of the underrepresented gender on the board of directors (and sending it to the CNMV, in the case of listed companies).

A breach of these obligations by listed companies in relation to the board of directors is defined as a serious breach of article 292 of the Securities Market and Investment Services Law.

Finally, the Law is scheduled to come into force on the following dates (which delays the time periods initially envisaged in the bill):

• June 30, 2026 for the 35 listed companies with the largest market capitalization, determined using the share price at the close of business on the date the law comes into force.
• June 30, 2027 for other listed companies.
• For public interest entities, the obligations will be phased in with respect to their boards of directors and senior management, and they must reach 33% by June 30, 2026 and 40% by June 30, 2029.

In addition, modifications have been included in the labor law measures applicable to the protection of victims of sexual violence (such as, for example, reduction in working hours, reorganization of working time and remote working, geographic mobility, declaring dismissals null and void, the right to termination of the employment contract and suspension at the worker’s request), by putting them on a par with the victims of gender violence, and in connection with the work-life balance of the special employment relationship of professional sportspersons.