I OVERVIEW OF GOVERNANCE REGIME

An unprecedented and long financial crisis, dramatic market changes and EU interventions have strongly influenced the corporate governance regime in Greece, which is drawn from two main sources of law: the company law containing the rules applicable to companies limited by shares2 and the specific corporate governance legislation applicable to listed companies.3 These provisions are complemented by other mandatory rules contained in a regulation issued by the Hellenic Capital Market Commission (HCMC),4 the Athens Exchange Rulebook and other separate laws.

The latest comprehensive reforms of the corporate governance rules and the extensive changes to the practices of corporations in this field clearly follow international trends and EU measures. Amendments to company law mainly touched upon disclosure obligations and protection of minority shareholders, while specific corporate governance rules imposed control committees and notification obligations.

In 2010, as a result of the transposition of a directive5 into the Greek legal framework, a new mandatory requirement was introduced for listed companies to disclose a statement of corporate governance as a specific section in the annual management report. This statement is made by the board and contains, as a minimum, the information required in the law. A key element of the corporate governance statement is the reference to the code to which the company is subject or chooses to apply, and to the corporate governance practices implemented that are beyond the requirements of the law. The company is also required to indicate the internet site where this information is available. Pursuant to the rule in place, the corporate governance statement must include a description of the internal control and risk management systems in connection to the financial reporting process, the information required by the provisions of the Directive on takeover bids, information on the shareholders’ meeting and its powers and the shareholders’ rights, and the composition of the board. Further, the law requires the company to explain any deviations from the stipulations of the relevant code, adopting the ‘comply or explain’ principle.

Reacting to this rule, the Hellenic Federation of Enterprises has taken the initiative and drafted a corporate governance code in an attempt to promote corporate efficiency and provide companies with a ‘well-run’ and sustainable model that follows the international benchmark of Organisation for Economic Co-operation and Development principles. Following this lead, the newly established Hellenic Corporate Governance Council has established a new, soft-law code, which was introduced as the new Greek Corporate Governance Code (the Code or Greek Code). The Code is mostly relevant to companies whose shares are admitted to trading on a regulated market, but, as explicitly stipulated, it is designed to prove useful to all Greek companies limited by shares. Its goal is to provide the Greek corporate sector as a whole with a useful tool for the standardisation of corporate governance practices. Hence, the code consists of two types of provisions: ‘general principles’ and ‘special practices’, the latter concerning only listed companies.

In view of the financial crisis and the particularities of the banking sector associated with governmental involvement in terms of guarantees, high-stake systemic consequences in the event of bank failure and the important role of stakeholders (depositors), there has been strong appetite for specific corporate governance rules. Therefore, Law 4261/2016 transposing Directive 2013/36/EU, was introduced to regulate access to the activity of credit institutions and prudential supervision of credit institutions and investment firms. In particular, Law 4261/2016 provides that institutions shall have robust governance arrangements, which include a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks they are or might be exposed to, adequate internal control mechanisms, including sound administration and accounting procedures, and remuneration policies and practices that are consistent with and promote sound and effective risk management.

ii CORPORATE LEADERSHIP

i Board structure and practices
Structure

Listed and non-listed Greek companies limited by shares follow the one-tier system. The board of directors is in charge of the general management and leadership of the company.

Composition of the board

The boards of all Greek companies limited by shares must comprise at least three members. The Greek Code recommends as best practice a minimum of seven and a maximum of 15 members.

There is a compulsory distinction between executive, non-executive and independent non-executive members. The number of non-executive board members should not be lower than one-third of the total number of board members, and there should be at least two independent non-executive directors on the board. The Code recommends that the majority of the members of the board should be non-executive, the independent members should comprise at least one-third of the board and the executive members should number at least two. Pursuant to the law, in cases where there are representatives of the minority shareholders on the board, there is no obligation for the appointment of independent members. However, the draft of the new corporate governance law seems to abandon this flexible approach to the members of the board, and provides that half of the non-executive members should be independent and, in any case, no fewer than two should be independent.

Independent board members are appointed by the general meeting of shareholders and the executive and non-executive directors are nominated by the board.

It is prohibited for independent, non-executive members to possess more than 0.5 per cent of the share capital during their terms of office and to have a dependent relationship with the company or with parties related thereto. Circumstances that suggest dependency pursuant to the law include a business, professional or employment relationship with the company or its subsidiaries, the position of president or manager in the company or its subsidiaries and the status of being married to or being a relative, up to the second degree, of an executive member or a manager or a majority shareholder of the company.

The Greek Code has expanded the scope of these circumstances to include cases where the member has already completed 12 years on the board or has served as the auditor of the company within the past three years, or controls either directly or indirectly over 10 per cent of the company’s voting rights. Such a clause will be put to good use, especially if there is an amendment to the law to include, as proposed, a general provision obliging the board to examine on a yearly basis the independence of its members, in principle and in substance. If interdependency is detected, the board should demand the member’s resignation and inform the general meeting of shareholders accordingly.

The law has been severely criticised for not providing professional quality selection criteria for board members, such as experience, skills or other similar considerations. These aspects, combined with the fact that in most Greek companies a ‘reference’ shareholder exists, may be the source of potential conflicts of interest. To address this gap in the requirements set by the law, the Code introduced an explicit obligation for the board to inform the shareholders adequately and in good time about candidates’ profiles. The board should opine on the independence and the adequacy of each candidate.

The Code encourages companies to pursue diversity, mainly by ensuring gender balance on their boards as well as in managerial positions.

Although the board should act collectively, in practice, most of its duties are carried out by its executive members, who are engaged in the day-to-day management of the company. Until the issuance of the Code, there was no requirement for a minimum number of executive members and in some cases the only executive member of the board was the chief executive officer (CEO).

Legal responsibilities of the board

All the activities of the company that facilitate its objectives directly or indirectly fall under the competence of the board, except for issues that by law fall within the scope of the general meeting.

Representation of the company

The board represents the company and acts on its behalf. The board is free to decide on the allocation of powers among its members and must record the powers of the executive and non-executive members in the internal regulations of the company. Third parties are protected if the board acts beyond its power or the company’s objectives.

Delegation of board responsibilities

It is a general principle that the board should act collectively. The CEO is usually granted a wide power of representation, but the company’s statutes may allow the board of directors to assign certain decision-making powers either to one or more of its members, or to a third party. However, pursuant to a newly enacted prohibition, boards in listed companies cannot delegate further decisions regarding their transactions with parties related to company parties (as defined by International Accounting Standard 24). The assignee may further delegate the relevant responsibilities provided that this is allowed by the statutes and by the decisions of the board. Certain independence requirements and notification obligations for third parties are set out in the law to avoid conflicts. Even after delegation, the board may still exercise its powers and remains fully responsible for decisions within the scope of its responsibilities. Third parties are similarly held responsible to board members.

Separation of the roles of CEO and chair

The separation of the roles of CEO and chair is not explicitly provided by law, but it is a growing trend in Greek companies. The Greek Code recommends that their responsibilities should primarily be clearly defined by the board and, when the same person exercises both roles, an independent vice chairman should be appointed with specific duties such as the power to request that the chairman include specific items in the agenda, to coordinate with non-executive board members and give voice to their views, to lead the board’s evaluation of the chairman, lead the meeting of non-executive board members and lead discussions on corporate governance issues with the shareholders.

Remuneration of directors

The law holds the board of directors responsible for setting up the remuneration policy of each company, including the fees for managers and auditors. The remuneration of the non-executive members should relate to the time dedicated to attending board meetings and performing their duties. In general, company law does not distinguish between remuneration in listed companies and non-listed companies. For listed companies, the total of the remuneration and any other compensation of non-executive board members should be reported in the annex of the annual financial statements.

The Greek Code explicitly provides that the remuneration of the executive members should comprise a fixed and a variable part, or other benefits, calculated on the basis of an appropriate balance. In contrast, the remuneration of the non-executive members should not, according to the Code, include bonuses or stock options or other benefits that relate to the results achieved.

Bonuses may be granted to members only upon deduction of the amount corresponding to the regular reserves and to the ‘first’ dividends (which should be at least 6 per cent of the share capital). Special permission from the general meeting is required to enter into an employment or service agreement with a member of the board. Where such an agreement is considered to be of an everyday business nature, however, it may be exempted from this requirement. Any other amounts paid to a board member are legally binding only upon approval by the general meeting. The law grants the right to minority shareholders to oppose and request the reduction of the board’s remuneration.

Stock option schemes addressed, inter alia, to the members of the board provided under company law are also subject to the approval of the general meeting or the board itself upon the authorisation of the general meeting. In several cases involving listed companies, abuses of stock option schemes have been detected by the competent authorities, especially in recent years. The Code suggests that stock options should not vest within three years of the grant date and their exercise price should be no lower than the average closing share price of the past 30 trading days prior to the grant date.

Loans or credits granted by the company or by its subsidiaries to the members of the board, founders, managers or their relatives, as well as to legal entities controlled by the above persons, are null and void. The granting of guarantees and securities to such persons is only allowed provided the company’s interests are protected and the general meeting grants its approval.

Generally, the Greek Code and a draft proposal for a new law that has been publicised in the past, in an attempt to address existing remuneration provisions considered fragmentary and inadequate, dedicate a special part to the reform and unification of the remuneration systems of corporations. In particular, to ensure transparency the Code recommends the inclusion of an annual report on the remuneration of the board members in the corporate governance statement, where the whole compensation package for each member shall be described, as well as details of the proportion of variable and fixed payments, and of the criteria on the basis of which the variable payments for the executive board members will be determined. Moreover, the Code has clearly defined the role of the remuneration committee and its competencies. The Code also recommends the establishment of a right for the board to demand full or partial recovery by its executive members of any bonuses granted on a misleading basis.

Within the same context of ensuring transparency, a proposed draft of a new law stipulates that the remuneration policy of each company, as currently in force, should be posted on the internet. The same draft expands the obligation for listed companies to publish in their annual financial reports the remuneration of non-executive members, so that the companies will also be obliged to publish the total remuneration of each board member (executive and non-executive), as well as the amounts received by the five most highly paid people in the company.

For state-owned companies, a restriction has been put forward by recent legislation on the amounts paid to their managers and CEOs, as well as to the members of their boards.6

Committees

Prior to 2008, the establishment of committees was not compulsory for companies, although in practice in many large corporations committees were operating with the task of assisting in the basic decision-making areas, such as financial reporting, internal audit, management and determination of remuneration for board members and executives. In 20087 the audit committee was introduced as being compulsory for listed companies. The audit committee assists the board in monitoring the financial information process, the effectiveness of the internal controls system and the risk management unit, as well as the progress of the financial reports; it further monitors the independence and impartiality of the financial auditors. The committee consists of at least two non-executive members and one independent non-executive member from the board. These members must all be appointed by the general meeting. The financial auditor has to cooperate with the audit committee and report all the deficiencies regarding the financial reports and the internal audit unit. Recently, in 2017, the legislative framework on audit committees was amended. Currently, the audit committee, which is constituted as either an independent committee or a committee of the board of directors, consists of at least three members. The members can be non-executive members of the administrative body of the audited entity or members appointed by the general meeting of shareholders of the audited entity, or both. The majority of the committee members are independent from the audited entity and at least one member of the committee is a suspended or retired certified public accountant or a person with accounting and auditing competence.

Furthermore, the creation of two additional committees, a remuneration and a nomination committee, which would assist the board, are recommended by the Code.

Board and company practice in takeovers

Greece has incorporated Directive 2004/25/EC on takeover bids. During takeover periods, the board is required to decide only on regular business matters and refrain from acting in a way that could lead to the cancellation of the bid. The board must publish a document stating its reasoned opinion regarding the bid, specifically regarding its consequences for the company, its shareholders and employees.

ii Directors
Legal duties and best practice

Directors of listed companies have an explicit legal obligation to constantly pursue the reinforcement of the long-term financial value of the company and to protect the general corporate interest.

Conflicts of interest

The duty of loyalty imposed on the members of the board, or any third party exercising the powers thereof, prohibits them from seeking to promote their own interests to the detriment of the company’s interests and requires the prompt disclosure of any potential conflict between their interests and the interests of the company. In the general government sector, officers are required to perform their duties with integrity, objectivity, impartiality, transparency and social accountability, act exclusively in the public interest, and respect and abide by the rules of discretion and confidentiality regarding matters that come to their knowledge in the performance of their duties. In addition, incompatibilities and conflicts of interests are required to be reported for the period prior to, during and after the performance of general government officers’ duties mainly with respect to activities, people and entities related to the aforementioned duties.

As regards the financial institutions, the competent supervisory authority (Bank of Greece) may specify, by way of derogation from the general provisions on sociétés anonymes, the procedures, maximum limits and any other terms regarding credit institutions’ loans of any type, other credits, guarantees, as well as holdings in the persons maintaining, directly or indirectly, close links with the credit institution, to ensure that such transactions are not carried out under preferential terms compared with those generally applied by the credit institution or in a manner that may operate to the detriment of the credit institution’s prudent and sound management. More specifically, as regards credit institutions’ loans of any type and other grants of credit to persons maintaining close links with the credit institution, the Bank of Greece provides for a decision by the general meeting or the board of directors of the credit institution on the matter, if such a procedure is provided for in the institution’s articles of association.

Liability

Each member of the board can be held liable by the company for any wrongful conduct within the context of the management of the company’s affairs, and for omissions or misleading statements included in the financial statements. The members are requested to demonstrate the qualities of prudent and diligent businessmen or businesswomen, and the care required must be judged on the basis of the duties and capacity of each member. Members will not be held liable where a relevant lawful resolution of the general meeting has been taken, or for business decisions taken in good faith, based on sufficient information and to serve the company’s interests. The Code has drawn attention to the need for board members to receive adequate information during the decision-making process, especially in cases of transactions entered into between the company and parties related thereto. This provision aims to avoid conflicts of interest, given that in Greece most listed companies are controlled by majority shareholders.

Since 2010, there has been a collective duty and liability of the board to ensure that the annual financial statements, the annual report and the corporate governance statement are drawn up and published according to the law and pursuant to international accounting standards.

Shareholders may claim damages for direct losses suffered if the members of the board acted intentionally. In a case of indirect damage suffered by a shareholder (loss of share value), the general meeting may decide the filing of an action. The same right is attributed to shareholders having one-tenth of the share capital, who may request that the board file an action and, if a period of six months has lapsed, they may request that the court appoint special representatives to that effect.

It should be pointed out that most of the time the courts are not able to apply the ‘business judgement rule’, especially when the possible liability is derived from complex business transactions. Furthermore, the success of the claim presupposes that the loss suffered and the link between the conduct and the loss can be proven by the applicant. Gathering evidence for both of these elements may prove a very costly and time-consuming process and very often hinders the enforceability of claims against the board. Criminal liability could also be founded on several provisions.

iii DISCLOSURE

i Financial reporting and accountability

In addition to annual financial statements, listed companies are requested to disclose annual and half-yearly financial reports, as well as annual and half-yearly reports by the board of directors. In the latter, the board should outline the performance of the company, significant events and risks, and transactions with related parties; these reports should also include the statement of corporate governance and refer to the corporate governance practices and systems of internal control and risk management.

Reporting is also required for ongoing company events that relate to the convening of general meetings, the resolutions adopted thereby, cases of capital increase, and transactions by executives and related to companies’ own shares, etc.

Corporate governance rules provide for the establishment of a corporate announcements department.

Recently, draft amendments to the provisions ruling the content of the management report and the corporate governance statement have been set under public consultation, to implement the relevant provisions of Directive 2013/34/EU as amended by Directive 2014/95/EU. Based on the relevant European law provision (Article 19a of Directive 2014/95/EU), large undertakings, which are ‘public interest’ entities employing more than 500 employees, shall include in their management report, except for the financial statement, a non-financial statement containing information required for the understanding of the development, position of the company and its operations in relation to environmental, social and employment issues, human rights issues, anti-corruption and bribery matters.

Furthermore, public consultation has been initiated on a draft provision for the transposition of the European law rule referring to the corporate governance report.

ii Auditor’s role and authority, and independence

Financial statements of companies limited by shares are audited by external auditors appointed by the general meeting of shareholders for the relevant financial year. Small undertakings pursuant to Directive 2013/34/EU are not under any legal audit obligation but may opt to undergo one. Auditors are liable to the company and may be held liable by shareholders or third parties in cases of intentional cause of damage.

Statutory auditors are subject to a set of professional ethics principles, including confidentiality, objectivity and professional secrecy. They are required to be independent in the performance of their tasks and should not interfere with the company’s internal audit work. Pursuant to the law that implemented relevant EU rules, in the case of statutory audits of ‘public interest’ entities, auditors have to further confirm annually in writing to the audit committee their independence, disclose any additional services rendered and discuss with the committee the safeguards applied to mitigate any relevant problems. Moreover, auditors that carry out statutory audits of public interest entities must publish annual ‘transparency’ reports on their websites regarding their corporate structure, quality assurance reviews, etc.

IV CORPORATE RESPONSIBILITY

i Risk management

A listed company’s board is required to take measures to identify and assess business risks and establish an internal audit unit, which must preserve its independence and, pursuant to the Code, should report to the audit committee of the board of directors.

Pursuant to this, the audit committee of the company must monitor the effectiveness of the company’s internal control and risk management systems, unless that responsibility expressly lies with the board itself or another committee of the board. To that effect, the audit committee should periodically review these systems to properly identify, manage and disclose relevant risks.

With respect to the banking sector, in particular, institutions shall ensure that: (1) granting of credit is based on sound and well-defined criteria and that the process for approving, amending, renewing and refinancing credit is clearly established; (2) they have internal methodologies that enable them to assess the credit risk of exposure of different kinds; these internal methodologies shall not rely solely or mechanistically on external credit ratings. Where own-funds requirements are based on a rating by an external credit assessment institution or based on the fact that exposure is unrated, this shall not exempt institutions from additionally considering other relevant information for assessing their allocation of internal capital; (3) the ongoing administration and monitoring of the various credit risk-bearing portfolios and exposure of institutions is operated through effective systems; and (4) diversification of credit portfolios is adequate.

ii Compliance policies and whistle-blowing

In limited cases, legal provisions establish alert procedures and disclosure obligations for professionals and individuals holding certain offices with regard to specific violations such as money laundering. Although there is no general requirement in law for a company procedure dealing with whistle-blowing, the Code provides for the establishment of proper internal communication channels intended to support the role of the system of internal controls and the role of the employees. It is specifically suggested that a whistle-blowing policy should be in place for the reporting of illegal acts of company employees. Customers, statutory auditors and external counsels may serve as important sources of information and should thus be given means of communicating with the company. Usually, large companies that have either experienced relevant problems in the past through employees’ illegal behaviour or are part of multinational groups have already adopted whistle-blowing reporting practices.

iii Corporate social responsibility

In the Code, good practices and effective business operations require that a company’s board is also able to effectively read the social (and customer) business context within which it is called to act. Hence, as a best practice model, the board should take into consideration the interests of stakeholders such as employees, creditors, customers and social groups that are influenced by the way the company operates, provided that these interests are not in conflict with the interests of the company. Corporate governance, social responsibility and sustainable growth are said to constitute the three main pillars of a business, which needs to develop on a solid social grounding.

Large companies’ boards have to disclose in their management reports information on certain non-financial performance issues, including environmental and employee matters.

v SHAREHOLDERS

i Shareholder rights and powers
Equality and voting

The basic principle applied in the legal regime for corporates is that all shares of the same class are equal as regards ownership and voting rights (the ‘one share, one vote’ rule), with the sole exception of non-voting preference shares. While common shares necessarily carry voting rights pursuant to the Companies’ Law, preference shares may be issued with no voting rights and provide exceptional rights such as preferential payments of first dividend or preferential repayment of contribution in the case of liquidation.

The main tool available to shareholders for controlling corporate governance arrangements and influencing the objectives of a corporation is their participation in general meetings. The law lays down the matters that fall within the exclusive competence of the general meeting and refer mainly to major corporate decisions, including approval of financial statements, distribution of profits, changes in the share capital, election of the board, and merger, transformation, dissolution or revival of the company. Exceptionally, under certain conditions, the board may decide upon the aforementioned matters; for example, members of the board may be elected by the board itself when members have resigned, or in certain cases of share capital increases or distribution of profits (within the relevant financial year and based on a prior general meeting authorisation).

Corporate governance concerns with regard to shareholder engagement brought about the EU intervention and the adoption of the directive on the exercise of certain rights of shareholders in listed companies,8 which introduced minimum standards to remove obstacles that deter shareholders from voting. This directive has been transposed into law in Greece via recent legislation focusing on procedural issues and certain – rather limited – material aspects of shareholder participation.

In companies limited by shares, minority shareholders owning one-twentieth of the paid-up share capital have the right to put forward a request for the convocation of a general meeting, specifying the agenda to be discussed. They may also request that specific matters be added to the agenda of an already convoked meeting, in which case they are subject to observing minimum time frames for prior notification of such requests to the board.

To attend, participate and vote in a general meeting of a non-listed company, the shareholder should proceed with depositing the relevant shares (at the company’s treasury or the Deposits and Loans Fund, or any bank in Greece). In listed companies, however, it is especially provided, in the implementation of the aforementioned Directive, that the exercise of rights of general meeting participation and voting should not require the blocking of shares or any other formality or procedure that could limit any possible sale or transfer thereof within the period until the general meeting is held. In an attempt to reconcile precautionary measures for ensuring safe voting for shareholders with the need to facilitate cross-border voting, verification of shareholder identity in the latter case is effected through the records of the entity where the securities are kept. The crucial date for determining the rights of a shareholder to participate and vote in a general meeting of a listed company is the fifth day prior to the general meeting date (record date system); this system of shareholder recognition with regard to the company, which may foster instances of empty voting, was a significant shift from the previous shareholder recognition status and has thus given rise to strong – and, for now, theoretical – debate.

Voting by proxy is in general permitted, and especially for listed companies it is explicitly stipulated in law that this right may not be restricted by the articles of association. A proxy may proceed with split voting when acting for different shareholders. When casting the votes, the proxy is required to follow the directions, if any, of the appointing shareholder.

ii Shareholders and the board of directors: interaction between ownership and management

The election of the board, as already mentioned, is within the powers of the general meeting of the shareholders, except where the articles of association of the company provide for the right of one or more shareholders to appoint members thereof. Shareholders’ appointees in total cannot exceed one-third of the number of the board members. Removal of members of the board is once again a matter falling within the sole competence of the general meeting, with the exception of cases of shareholders’ appointees, who may be removed by the relevant appointers (or by means of a court decision following a petition filed by shareholders representing at least one-tenth of the share capital).

The general meeting of the shareholders is declared in law as the highest in the corporate hierarchy and, in this context, shareholders acting as a company body may impose certain courses of action on the board of directors; nonetheless, it is generally accepted in case law and by scholars that the foregoing principle does not alter the fact that the board of directors is solely responsible for standard management decision-making. During the corporate law reform of recent years, an attempt has been made to improve the position of the shareholders with respect to their rights, albeit neither revolutionary nor sufficient. Further to the aforementioned rights referring to general meetings and agenda items, minority shareholders are entitled to information on company affairs and assets, and on board member remuneration (which has to be announced in the annual meeting of the shareholders), except for cases where the board has significant reason to refuse to comply with requests for this information, etc.

iii Takeover defences
Shareholder and voting rights plans, and similar measures

Law 3461/2006 constitutes the core regulation of the takeover bid processes regarding target companies whose shares are listed on a regulated market and transposes the EU Takeover Directive (Directive 2004/25/EC). The Directive aimed at setting minimum standards for ensuring equal treatment of shareholders, protection of minority shareholders in the event of change of control, prohibiting market manipulation and abuse and ensuring that shareholder have sufficient time and information to make a properly informed decision on the bid.

Greek law provides for mandatory offers where direct or indirect control of more than the one-third of the voting rights in a company, and hence the control of said company, is acquired. The law imposes the same obligation on shareholders who hold more than one-third but less than half of the voting rights and acquire within six months more than 3 per cent of the voting rights.

Although, the board of the target company is obliged by law to make public its opinion on the bid and its reasoning on the effects of the takeover on the company’s interests as well as its employees, the board neutrality rule provided in Article 9 of the Directive is adopted by Greek law as mandatory for target companies that fall within its scope. This rule weakens the board’s power to raise obstacles to hostile bids since, during the bid period, the support of the general meeting of the shareholders is required for any actions taken outside the normal business of the company and may frustrate an offer. Companies may decide to opt out of the implementation of this rule if the offeror is not subject to the rule.

The Greek legislator has, however, opted out of the implementation of the breakthrough rule introduced by the Takeover Directive and instead allows general meetings of the shareholders of target companies to opt in and apply the rule. Based on this, restrictions on the transfer of securities already provided in the articles of association of the target company or in contractual agreements do not apply as regards the offeror during the period provided for the acceptance of the bid. Similarly, restrictions on voting rights do not apply in the general meeting of the shareholders that authorises the adoption of post-bid defences. Finally, at the first general meeting following a successful takeover bid, and if the offeror holds at least 75 per cent of the voting rights, restrictions on transfers of securities or voting rights or special rights for appointment of board members do not apply and facilitate the offeror to easily remove the board and modify the articles of association.

Further, for a period of three months following a takeover, the bidder that has acquired more than 90 per cent of the voting rights can squeeze-out minority shareholders while the latter have a similar sell-out right if the same threshold is reached.

White-knight defence

Within the Greek environment, mechanisms against hostile takeovers are not often tested, since a large number of firms are in the safe harbour of family control and less exposed to hostile acquisition. This, however, becomes more and more relevant in the current environment of the ever-growing need for capital.

VI OUTLOOK

Reforms during the past decade in the corporate governance regime have been introduced mainly through mandatory legal provisions. The adoption of a corporate governance code is a shift towards more flexible and business-friendly tools. Recent developments, including recapitalisation of banks, capital controls restrictions, imposed since last year, and companies struggling with non-performing loans, have highlighted the need for stronger corporations that can cope with an ever-changing and still troubled environment. Challenges lie with the need to review the systems the boards operate, especially controlling and managing conflicts of interest, as well as the role of the monitoring authorities and the judicial system, which in many instances have proven insufficient to assist the implementation of corporate governance rules. Discussions also focus on board remuneration and performance issues that relate to the general financial situation of the company, the enhancement of the role of existing internal committees and the establishment of new ones that could monitor the business operations and the board. A debate is still going on as to the need for a new law that shall codify sparse provisions. In the same context of effective management organisation, prevention of conflicts and principles that ensure prudent and effective remuneration policies, Directive 2013/36/EU on credit institutions and investment firms was incorporated into Greek law. Furthermore, the Commission has acknowledged the need for a general review of the current corporate governance framework for European undertakings and has highlighted the need for enhancing the level of asset managers’ and shareholders’ involvement, transparency and transmission of cross-border information.

The corporate governance framework has been significantly changed and developed in recent years; however, we posit that the financial crisis and difficult business environment will bring about more debate on the need for adapting corporate governance regulation. Market players are faced with the challenge to seek new transparent yet efficient ways to rebuild trust and address society’s expectations of a ‘business renaissance’. Difficult times call for creativity and action both from the regulators as well as the business community and once again the operational framework of corporates will need to improve to attract investment and foster development.

Footnotes

1 Sofia Kizantidi is a senior associate and Efi Palaiologou is an associate at Tsibanoulis & Partners.

2 Codified Law 2190/1920.

3 Law 3016/2002.

4 Code of Conduct for listed companies, HCMC Decision No. 5/204/2000.

5 Directive 2006/46/EC.

6 Law 3833/2010 as amended and Law 4093/2012.

7 Law 3693/2008.

8 Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies.