Corporate Governance and Corporate Responsibility Commentary 2-2014

Law 31/2014, of December 3, amending the Corporate Enterprises Law (“LSC”) in order to enhance corporate governance was published in the Official State Gazette on December 4, 2014.

This Law stems directly from a decision issued by the Spanish Cabinet on May 10, 2013, whereby a committee of experts on corporate governance matters (the “Committee of Experts”) was set up to propose the legislative initiatives and reforms needed to guarantee good corporate governance at companies, and to provide support and advice to the Spanish National Securities Market Commission on changes to be made to the Unified Code of Good Governance for listed companies.

On October 14, 2013, the National Securities Market Commission published the result of the first part of the Committee of Experts’ work: a study on proposed legislative amendments in the area of corporate governance (the “Report”).

The changes introduced by this new law amending the LSC are based on the Report and respect practically all of its recommendations. They can be grouped under two main heads:

• Shareholders’ meetings: reforms geared towards expanding the powers of the shareholders’ meeting, strengthening minority shareholders’ rights and ensuring transparency in the information received by shareholders.
• Boards of directors: reforms aimed at tightening the legal rules on directors’ duties and liability, promoting diversity on boards in terms of gender, experience and expertise, introducing the role of ‘coordinating director’–where one person holds office as chairman and as chief executive officer–, shortening the term of office of directors to 4 years, clarifying the rules on compensation and its approval by the shareholders’ meeting, or making the nominations and remuneration committee legally mandatory, like the audit committee, for listed companies.