Spain will Finally Regulate Loyalty Shares


According to the newspaper Cinco Días, the vice-president of Economic Affairs, Nadia Calviño, continues her efforts to transfer the EU directives that have been on the shelf for months to the Spanish legislature. Tomorrow the Council of Ministers will approve a bill that should have come into force on June 10th. The most important new element is the possibility of giving double voting rights to long-term shareholders, which will eliminate the obligation, almost exclusive to Spain, of publishing the results of the first and third quarters.

Thus, the “one share, one vote”  principle will be broken in Spain in favor of investors who remain at least two years in the capital, according to the initial project. Their shares will have double the voting rights. The regulation has been drawn up in the image and likeness of the legislation already in place in other European countries, such as Italy, the Netherlands and France.

But the regulation that is expected to be approved in Spain includes a safeguard. In order to be approved in Spain, at least 60% of the capital present or represented at the meeting must vote in favor if shareholders with 50% or more of the capital attend, and 75% if shareholders with between 25% and half of the shares attend. In any case, the minimum period of two years to be eligible for the award may be extended, starting from the time it is approved at the meeting, but it may not be reduced.

The elimination of the vote for loyalty may be agreed at any time by a meeting with a reinforced quorum, equal to that required to increase or reduce capital: absolute majority if 50% of the capital attends or two thirds if the percentage is lower. In addition, existing loyalty votes will not be taken into account for withdrawal of the privilege after 10 years from its adoption. This way, the winners will not be able to use their advantages to block their withdrawal. It is hoped that this measure will help family businesses take the step to go public, without losing control of the company.

Quarterly Reports
In addition, listed companies that wish to do so may continue to submit their quarterly financial reports, but those that are “overburdened” or perceive that their publication causes them to “suffer from short-term” market pressures may stop doing so. This is a request that had been made repeatedly by the president of the CNMV, Sebastián Albella, since Spain is an island in Europe in terms of this obligation.

Spain is one of the few EU countries that requires financial information at the end of March and September. Europe, through a directive published in November 2013, eliminated the obligation for listed companies to publish an interim statement or quarterly financial report, although Spain was the only country, along with Poland and Romania, that still required it.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.