Bill will radically reform corporate law, enhance rights of minority shareholders

A draft law presented yesterday by Development Minister Dimitris Sioufas will bring important changes to corporate law. The draft bill intends to cut down on red tape during the setup and the daily operations of a company, increase the rights of minority shareholders, simplify decision procedures by boards of directors and general meetings and make use of the new technologies to allow such meetings to take place by teleconference and to allow voting by electronic means. The previous law governing the operation of corporations dates from 1920 and its revision had long been announced. Its update became inevitable because Greece has to integrate several European Union directives into its corporate law. The draft bill does not include all these directives: Additional legislation will be required to reform accounting law and regulate corporate changes such as mergers and acquisitions. According to Development Ministry officials, the draft bill has three main aims: to decrease the extent of administrative intervention in corporate operations, to broaden shareholders’ rights, and to give corporations greater leeway in revising their charters. The law extends the right to information on company operations and finances, currently provided only to shareholders holding a minimum 5 percent stake, to owners of individual shares. It also lowers the threshold for blocking minorities or for a minority of shareholders to demand an extraordinary general meeting. Minority shareholders can also demand, and obtain, a share buyback from the company or the majority shareholder. Additionally, boards of directors will be elected by ballot. The right to ask a court to investigate a company is given to shareholders representing at least 5 percent of the company or, in the case of bigger firms, those whose shares have a total book value of over 300,000 euros. A company charter can further lower these thresholds (although not lower than 50 percent of the thresholds prescribed by law). This right can be exercised if shareholders believe that corporate governance does not meet certain standards. According to a Development Ministry official, «Greece is the only country in Europe where the state still exerts such tight control over enterprises. This is not adapted to current needs. Experience shows that… this administrative supervision, for example when approving charters or their revision, does not produce benefits that can override the administrative costs.» The new law will exempt those firms with an initial capital of up to 3 million euros from state inspection and approval of their charter: these smaller firms can file their charter directly with the Corporate Register.