Greek S.A. company – transactions with related parties
Article 99 of Law 4548/2018 (valid from 01.01.2019), which incorporated Directives 2007/36/EC and 2017/828/EU, provides that the conclusion of any contracts of an S.A. company with specific persons which are referred to as related parties, as well as the provision of securities and guarantees to third parties in favor of these persons, without special approval provided by a decision of the board of directors or by exception of the general meeting of shareholders, is prohibited and invalid.
The persons (individuals or corporations) that are considered connected to the S.A are: a) for listed S.A. companies, the persons defined as connected to it according to the International Accounting Standard 24 (as indicative members of a close family environment, companies belonging to the same group ), as well as the legal entities controlled by them, in accordance with International Accounting Standard 27, b) for other joint-stock companies, the members of the board of directors, the persons controlling the company, the close family members of these persons, as well and the legal entities that are controlled by the above and c) persons that may be provided for in the articles of association of the S.A. company, in particular the Managing Director and the members of the BoD.
As an exception, the above-mentioned approval is not required in the following cases: 1) for transactions that do exceed the limits of the company’s current transactions, i.e. transactions that are normal in relation to the operations and the object of the company’s business activity, in terms of the type and their size and are entered into under normal market conditions, 2) contracts regarding the remuneration of the company’s board members, the Managing Director, as well as its executives, 3) contracts concluded by credit institutions based on measures aimed at safeguarding their stability, following the approval of the competent authority responsible for prudential supervision, 4) contracts of the company with its shareholders, as long as the possibility of training is offered to all shareholders of the company, under the same conditions, and equal treatment is ensured of all shareholders and the protection of the interests of the company, 5) contracts of the company with a one hundred percent (100%) subsidiary or a subsidiary, in which no person related to them participates, 6) contracts of the company with a subsidiary or insurances or guarantees in favor of a subsidiary, which are concluded or provided in the interest of the company, its subsidiary and their shareholders who are not related parties, including minority shareholders, or from which their interests are not at risk. In this case, a report is drawn up, which assesses the extent to which there is sufficient protection of these interests. The previous two paragraphs do not apply to companies with shares not listed on a regulated market, 7) transactions for which the law requires approval by the General Meeting, as long as the relevant legislative provisions specifically address and sufficiently protect the fair treatment of all shareholders, the interests of the company and shareholders who are not related parties, including minority shareholders.
In order to validly conclude a contract of the joint-stock company with a related party or to provide securities and guarantees to third parties in favor of the related party, it is necessary to grant permission by a decision of the board of directors, which is valid for six (6) months and which is subject to publicity formalities (registration in GEMI) before the completion of the transaction.
In detail, the stages of the process followed are as follows:
- the Board of Directors of the company decides on the granting of the approval to conclude the transaction,
- this decision of the board of directors is published in GEMI before the completion of the transaction and contains a minimum content of information: a) as to the nature of the company’s relationship with the related party, b) the date and value of the transaction and c) any other information necessary to assess whether the transaction is fair and reasonable for the company and persons who are not related parties, including minority shareholders;
- within ten (10) days from the publication of the announcement of the granting of the license by the board of directors, shareholders representing 1/20 of the capital, may request the convening of the general meeting to decide on the issue of granting the approval and
- the agreement for which approval was given by the board of directors is considered definitively valid only after the ten (10) day period has passed or the approval has been received from the general meeting or the written declaration of all the shareholders to the company that no intend to request the convening of the general assembly.
It should be noted that for a listed company the decision of the board of directors or the general meeting is made based on a report by a certified public accountant, which assesses whether the transaction is fair and reasonable for the company and its shareholders who are not related parties.
* The information is accurate to the best of our knowledge as at the time of writing. We have no obligation to update it. We accept no responsibility against any third party who is not a client of the firm and has not signed the terms of our engagement.