The Mergers & Acquisitions Review: Greece
Overview of M&A activity
Following many years of deep recession and increased levels of unemployment, Greece is now trying to recover and restore stability in the Greek economy. Enterprises are always looking for stability and solutions to structural problems of the Greek economy, which will allow extrovert business, new investments and the creation of new jobs.
At the same time, the government has shown progress both in terms of the privatisation procedures but also with regard to further measures for the strengthening of the private economy, including decreases in taxation and social security costs.
Of course, it cannot be disregarded that in 2020, and still in 2021, all countries have been hurt by an unprecedented economic downfall relating to the coronavirus pandemic. This has affected economies, companies and stocks, and the Greek market is no exception. Tourism has collapsed, huge number of deals have been abandoned or drastically revisited, and there has been a common fear in the market that we are sailing in uncharted waters.
The private sector, to the extent that it is not dependent on the state, has shown it is capable of surviving despite these difficulties. While overcoming the pandemic and stabilising the global financial environment, it should be possible for the Greek market to move forward and grow rapidly.
General introduction to the legal framework for M&A
The Greek M&A legal framework is mainly composed of the following:
- Law 4548/2018, on public limited companies;2
- Law 4601/2019 (corporate provisions for business transformations);
- Law 4172/2013 (tax incentives for business transformations);
- Law 2166/1993 (tax and other incentives for business transformations (e.g., merger, split, spin-off));
- Law 1297/1972 (tax incentives for business transformations);
- Law 3049/2002 on privatisations, and Law 3985/2011 and Law 3986/2011 on the Privatisation Fund;
- Law 3864/2010 on the Hellenic Financial Stability Fund;
- Law 3777/2009 on cross-border mergers of limited liability companies (implementation of Directive 2005/56/EC);
- Law 3401/2005 on prospectuses in the case of public offers of securities (implementation of Directive 2003/71/EC), which was amended by Law 4374/2016 (adopting EU Directives 2013/50 and 2014/51);
- Law 3461/2006 on public takeovers (implementation of Directive 2004/25/EC);
- the Athens Stock Exchange Regulation;
- Law 4706/2020 (corporate governance rules for listed companies); and
- Law 3959/2011 on Greek merger control provisions.
Developments in corporate and takeover law and their impact
Following the legislative initiative in 2018, in combination with Law 4601/2019 (on business transformations), a modern and more attractive framework has been established for Greek companies. A new element is that a new law (Law 4706/2020) has been recently enacted with regard to corporate governance rules, which is also a modern tool primarily for listed companies, expected to strengthen the Greek stock market.
Indeed, requests from the business community concern more important measures that need to be taken to increase the competitiveness of Greek enterprises in their daily operations, such as fast-track permit procedures.
Foreign involvement in M&A transactions
Notwithstanding the above efforts, the business environment in Greece remains to a large extent characterised by bureaucracy, administrative procedures and actual disincentives for foreign investors. One of the recent legislative initiatives refers to the reform of the framework for strategic investments, the results of which remain to be seen in the near future.
Other than that, the privatisation programme run by the Hellenic Republic Asset Development Fund is still ongoing, with several significant projects being in progress. It was positive that the projects for the sale of DEPA Infrastructure and for the concession of Egnatia Odos have been recently successfully completed.
Significant transactions, key trends and hot industries
There have been a couple of M&A deals during the past 12 months. The energy sector remains at the top of activity in the Greek market, not only in the gas and electricity market, but also in terms of renewable energy sources (RES) projects. The recent acquisition by Hellenic Petroleum of the largest RES plant in Greece with an installed capacity of 204MW (in the area of Kozani) is undoubtedly a highlight.
Another interesting sector to watch in Greece is the food market. The recently announced acquisition of Chipita by Mondelez has certainly been one of the recent highlights (in the snacks area of the food sector). Also, CVC Capital invested further in the Greek market, this time in the food sector. Following its dynamic entry into the Greek health sector and a recent acquisition of the e-commerce platform (skroutz.gr), this year CVC has acted for the acquisition of Vivartia, as well as the dairy companies Dodoni and Kolios. Furthermore, a couple more funds have invested in several food companies, while several new projects in the food sector are currently in progress.
Despite the covid-19 pandemic and the temporary freeze in the market, the real estate sector is fast-moving, notably in terms of huge investments in the tourism sector around Greece, but also in terms of office buildings, especially in Athens.
In the telecoms sector, BC Partners acquired Wind Hellas, following its recent acquisition of Forthnet SA (nova).
Financing of M&A: main sources and developments
As far as mergers are concerned, there is no practical need for financing because they are implemented through an exchange of shares. Acquisitions can either involve an exchange of shares (which was the case in several past deals, especially in the banking sector) or a cash consideration, in which case financing is required. Such financing normally takes the form of one of the two following alternatives:
- self-funding by the shareholders of the acquiring company: the procedures for an increase in share capital are rather formal, as per the EU directives, especially when made in cash. A main point of interest is the price offered for the new shares to be issued (which cannot be less than market value), because this is linked with the valuation of the company and determines the balance between shareholders; or
- bank financing, which can either be in the form of a classic bank loan or that of a bond loan (common or convertible) issued by the company: experience shows a tendency in favour of bond loans because of their favourable tax and other treatment, as well as because of the easy transfer of bond titles, if needed. Contrary to the recent past, the severe financial situation has heavily affected and practically eliminated bank financing for M&A.
In a case of intra-group financing, attention should be paid to the applicable provisions of Law 4548/2018 regarding related party agreements. In any case, one must also be cautious about the arm's-length principle, in accordance with transfer pricing rules.
Employment legislation was not further developed during 2020 or to date in 2021 as far as M&A activity is (directly) concerned, and in particular there were no changes regarding the conditions for the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
On the one hand, there is a plethora of special provisions of law regarding, inter alia, mergers and restructurings of state-owned enterprises (SOEs) within the banking sector. Numerous provisions have been further instituted on an ad hoc basis to regulate the employment relations of specific state organisations (see, for instance, Article 3 of Law 4138/2013 regarding the merger of local development organisations). However, no generally applicable rule can be derived therefrom that would be of any interest for the private sector; past governments very often established special legislative texts for M&A of SOEs because of their politically sensitive nature.
On the other hand, as a general rule, in the case of a merger there is a full succession of the surviving (absorbing) entity regarding all the rights and obligations of the merged company. Accordingly, the latter becomes fully liable for any and all labour obligations of the former. In the case of acquisitions, there are protective provisions regarding transfers of businesses (implementation of European law) that provide that both the transferor and the transferee shall be jointly and severally liable in respect of labour obligations that existed at the date of transfer. It is worth mentioning that the means of transfer (i.e., if it takes place via a contract – even an invalid one – or by law, or even by a simple assignment of the operation of the business without transfer of tangible or intangible assets) is irrelevant, but the transfer and succession in the employer's position is examined on a case-by-case basis.
Since 2010, it has been expected that the downturn in the Greek market and the crisis in the Greek economy would generally give rise to significant changes in employment law, which might not refer directly to M&A topics but would nevertheless have an impact, because the labour perspective is generally a critical point of assessment in an M&A deal. As part of the agreement for the financial support of the country, Greece undertook to proceed quickly with radical changes in many sectors of the Greek economy and in the labour market. The main areas that have been affected from a labour law perspective are as follows:
- introducing restrictions in the system of collective labour agreements or negotiations, and a more flexible regime;
- abolishing the procedure of referring collective labour disputes to an organisation for mediation and arbitration;
- increasing the thresholds in the case of group dismissals and, eventually, abolishing the authorities' prior approval;
- decreasing severance pay and allowing its repayment in instalments;
- introducing more flexible employment terms (sub minima) for workers under the age of 25;
- extending probationary periods, facilitating greater use of part-time work, moderating wages for overtime and introducing remuneration connected to the productivity of a business; and
- keeping salaries temporarily frozen (initially) for three years after the conclusion of the previously mentioned memorandum.
There have been quite a few examples of the implementation of the above-mentioned guidelines during the past seven years. For instance, the Ministers' Council issued Act No. 6/2012, which instituted an obligatory decrease of 22 per cent in minimum wages under the national collective labour agreement, and abolished the possibility of unilaterally resorting to arbitration in cases where collective bargaining fails. Law 4093/2012 further reduced the termination severance (mainly by preventing the accrual of seniority rights after November 2012), facilitated the split of annual leave, decreased the requirements for the operation of temporary work agencies and instituted a number of additional favourable provisions for the labour market. Most importantly, however, Law 4093/2012 abolished the system of determining the minimum wage through collective bargaining procedures by introducing the minimum wage itself. Finally, it vests the government with the power of adjusting the minimum wage.
In general, the purpose of the above amendments was to reduce the cost of labour and make the Greek employment market more competitive. On the other hand, various provisions have been instituted to protect vulnerable groups, such as older employees. Thus, it is obvious that, because of the financial support of EU Member States and the International Monetary Fund, Greece has been obliged to proceed more quickly to implement those measures to ensure the 'flexicurity' of the employment market.
However, based on the experience of recent years, the measures implemented so far have not efficiently served these purposes. The above situation, apart from rendering any reforms ineffective, has made it unclear whether each provision of this multitude of recent laws affecting the employment terms in the public and private sectors would survive if contested before the Greek courts. There had been various judgments of first instance courts (within the framework of injunction measures) that considered certain provisions concerning public sector employees as being contrary to the provisions of the Greek Constitution and European law. In addition, such legislative initiatives of the government had raised multiple concerns for the Committee on Freedom of Association of the International Labour Organisation's governing body, especially as to what regards the weakening and eventual abolishment of collective bargaining rights and the overall scope of collective bargaining laws. However, said changes and restrictions on collective bargaining agreements seem to be reduced after the expiry of the middle-term bailout programme, and the competent authorities will start interpreting the respective terms in a way that is more favourable to the unions' side. For instance, a collective bargaining agreement at the level of a business could include provisions deviating from the agreement made for a specific market or profession and introduce provisions weakening workers' rights and even reducing salaries, which is no longer the case as, since August 2018, said option is considered as no longer valid. Similarly, the government has reinstated the obligatory extension of collective bargaining agreements, which had been suspended until the end of the economic adjustment programme.
Moreover, the government has made use of the option to define the minimum wage, and by the end of 2018 had increased the minimum wage to €650 per month (the previous minimum wage was €586.80), and abolished the distinction between the minimum wage for young (up to 24 years old) workers and employees that gained a gross salary of €511.00. Said increase also impacted the social security contributions for both employers and employees, as well as of other professionals, as the new minimum wage is the basis for the calculation of the minimum social security contribution for professionals (e.g., lawyers, engineers). On the other hand, since 1 January 2019, a decrease in the social security contributions for this category of professionals has been introduced equal to one-third of the percentage calculated on the total income of the individual, but a suspended auxiliary social security contribution for these professionals started to be implemented as of 1 January 2019, although not any more as a percentage on the individual's income but just on the minimum wage amount (as determined with a calculation of years of service); therefore, the hit on the market seems to be less hard than was expected. In 2014, the Administrative Supreme Court found certain provisions of Ministers' Council Act No. 6/2012, and in particular the ones requiring the consent of both parties (employer and trade union) for the initiation of an intermediation and arbitration process, to be non-compliant with the constitutional provisions, which led to the reinstatement of the previous regime of the unilateral application of the interested party (Law 4303/2014). Currently, the minimum wage remains at the level of €650 but it has been announced that an increase of 1 per cent should be anticipated.
In 2016, the government launched a dialogue regarding the introduction of a new social security system, which was however rejected by, inter alia, the trade unions and professional associations. The draft bill comprised several structural changes in the area of social security, with the major ones being to have all social security funds and organisations merged into one; and the implementation, for all categories of employees, self-employed persons and other professionals, of a uniform treatment with regard to the calculation of their contributions based on their annual or monthly income falling within a range of 25 to 36 per cent. There were a variety of reactions about this restructuring of the social security concept (e.g., Greek lawyers abstained from their duties for almost six months), but the government managed to pass the legislation (Law 4387/2016). In terms of employment, a direct impact of the recent Social Security Act is employees being subject to more than one social insurance organisation (e.g., through being employees and self-employed at the same time), who are now required to pay more (approximately double) social security contributions without being entitled to additional pension amounts.
In 2017, Law 4472/2017 introduced a radical change pertaining to the collective dismissals legal framework by abolishing the ministerial veto that used to apply under the previous legal regime, which provided for an information and consultation procedure between the parties involved as well as the prior approval of the competent authorities in cases where the parties failed to reach an agreement. New Law 4472/2017 set out a different procedure on collective layoffs, including the extension of the consultation process of up to 30 days and the supervision of the procedure by a new supervising body, the Supreme Labour Council. Pursuant to these new statutory provisions, the Supreme Labour Council is now in charge of the collective layoffs process, and is also responsible for checking whether employers have abided by the consultation and information requirements set out in law. If the Supreme Labour Council finds that these requirements have been met, an employer is free to proceed with the intended group dismissal. On the other hand, non-compliance with these requirements would be the only reason for the government to discontinue a collective redundancy process, in the sense that the government's role is now limited to the inspection of the existence of these typical consultation requirements.
Until very recently, Presidential Decree 178/2002 on the protection of employees' rights in the event of a transfer of business (which harmonised EU Directive 2001/23) was not applicable in the case of ship transfers. Through Law 4532/2018, said protection is now extended to transfers of ships under the Greek flag, but only when they are part of the business to be transferred and on the conditions set forth in Law 4532/2018.
Finally, the government recently adopted the wording of the Revised European Social Charter as to what regards the termination of an employment agreement, and introduced into Greek employment law the compulsory 'causal' redundancy. Until the introduction of Law 4611/2019 (Article 48), Greek law provided that the termination of an employment agreement should not be grounded on a specific cause if it was made in writing and the employee was receiving legal severance. Today, the right of an employer to terminate must be grounded on a specific cause as per Article 24 of the Revised European Social Charter (ratified by L4359/2016), and the employer must prove that these conditions have been met in cases where the validity of the termination is challenged. This new condition will probably affect and reduce the right of termination of employers, especially in cases of a termination for no apparent reason. The above provision regarding causal termination was eventually abolished by the recent Law 4623/2019 practically reinstating the former statutory regime on termination of employment, i.e., termination of indefinite term employment contracts without any cause whatsoever.
During 2020, a plethora of radical, though temporary, employment changes was issued pursuant to a series of emergency measures implemented by the Greek government owing to the covid-19 outbreak, including, inter alia, the suspension of operation of businesses affected by the adverse consequences of the outbreak and the suspension of employment contracts of respective personnel with the provision of a state allowance, social security relief, Easter, Christmas and leave allowance reimbursement by the state, flexible remote working and other working time schemes, the temporary suspension of specific publication formalities regarding working time schedule changes, special treatment for employed parents and vulnerable employees, and the special labour support mechanism Syn-Ergasia (cooperation) as motivation for maintaining the existing headcount and avoiding collective layoffs. Employers' eligibility for such relief measures is combined with an absolute prohibition on dismissals.
These measures are being revised on a regular basis, depending on the number of new coronavirus cases and the overall picture of the outbreak in Greece.
As of June 2021, by virtue of Law No. 4808/2021, several reforms in the employment law have been adopted in several areas of an employment contract (e.g., termination, working hours as well harassment and discrimination in working places) that can be summarised as follows.
i Termination conditions
The new Law provides that, in case a dismissed employee claims that termination was made as a result of one of the following reasons, then the termination is considered as invalid, while the burden of proof to the contrary lies on the employer:
- discrimination or retaliation on the basis of sex, gender, race, colour, political, religious or philosophical beliefs, national or racial origin, genealogy, sexual orientation, age, identity, sex characteristics, disability or trade union membership;
- reaction to the employee's lawful right; and
- being contrary to a statutory provision, including, inter alia:
- retaliation towards an employee's request for compliance with the equal treatment principle;
- exercise of an employee's violence-related or harassment-related rights;
- protection of pregnant women and new parents against dismissal;
- reaction to an employee's request for leave of absence or flexible work for childcare;
- dismissal during annual leave;
- termination of persons enjoying protection against dismissal without following relevant process;
- termination of employees on military service;
- violation of group dismissals provisions;
- termination of members of trade union organisations without meeting statutory requirements and as a reaction against legal trade union activity; and
- termination of employees rejecting the employer's offer of part-time employment or flexible work arrangement as a result of temporary increased workload or as a result of the employee's right to disconnect.
The employer is still free to terminate the agreement without mentioning any reasons whatsoever (unless otherwise provided by law, such as in the case of an employer's rejection of an employee's request for family leave). However, the employer should now be more careful when rejecting an employee's request (e.g., for leave of absence) or in case special circumstances exist that might be used by the dismissed employee in order to challenge termination as invalid (e.g., pregnancy, harassment complaints, etc.) The employee has the right to argue about the validity of the dismissal, especially if it is grounded among the above-mentioned list, but the employer is now obliged to prove the opposite.
In this case, the employee may: (1) either challenge termination as invalid and claim their reinstatement at work along with any salaries accrued up to the court's decision date; or (2) claim an additional termination severance amount ranging between three months' salary and up to double the termination severance amount already paid upon termination, especially if termination is made on different grounds (e.g., restructuring).
Moreover, as of 1 January 2022, in terms of compliance with all termination-related issues (e.g., notice period, calculation of termination severance pay, resignation or termination as a result of retirement, etc.), both blue-collar workers and white-collar employees shall be treated the same.
Finally, Law No. 4808/2021 has introduced for the first time in Greek employment law the 'garden leave' concept, in the sense that an employee terminated upon prior notice may be forced to take partial or full garden leave throughout the notice period, during which the employee might be employed by another employer. During said garden leave, the employee is still entitled to all salaries up to termination date.
ii Working time
The statutory work time schedule of 40 hours per week for both a five-day and a six-day working system still applies.
The working time schedule is eight hours per day on a five-day working time system and 6.40 hours per day on a 6-day working time system.
The daily or weekly full-time employment may be decreased by collective labour agreements or by individual employment contracts.
A four-day working time system is considered as full-time employment for the implementation of flexible work arrangements at a collective or individual level. The employer may introduce 'flexible' working time schedules, consisting of a period of increased work and a period of decreased work. These periods of increased and decreased work may not exceed six months in total within one year. During the period of increased work, the employee renders his or her work for two hours more than the contractual time schedule. This increased work is 'recompensed' by the periods of decreased work (i.e., working for two hours less than the contractual time schedule) or by increasing the days off or by a combination thereof. Also, further schemes of 'flexible' time schedules have been instituted; for example, the working periods of up to 32 weeks on a yearly basis when the total working hours may be increased by 256 working hours in total. The application of these systems requires consent of the work union, council or association. In the absence thereof or if no agreement is reached, this might be implemented by a written agreement between the employer and the employee concerned following the employee's request. If the employment relationship is terminated before this 'recompense' takes place, the employee is entitled to receive respective compensation for the extra hours worked, being calculated on the basis of overwork and overtime statutory provisions.
The law also provides for the implementation of an electronic real-time attendance system for entire personnel with the use of a digital card. By using this card, any change in the working time schedule, including start time, end time, lunch breaks, overtime/overwork, is automatically recorded to an ERGANI II system3. This data will be crosschecked with the data mentioned in the Analytical Periodic Statement (APD), which may also be filled out automatically when using the card. Moreover, an administrative sanction of €10,500 per employee may be imposed on the employer, if an employee is found at the premises with a non-activated card during work. Technicalities, application and specifications for the eligible business sectors will be defined by special implementing ministerial decisions that are still pending. The use of a digital card is expected to be implemented during the first semester of 2022.
For work provided for at least four consecutive hours, the lunch break may range between 15 and 30 minutes. This break does not qualify as 'work time' and cannot be provided at the beginning or at the end of the daily working time schedule. For employees working on an intermittent full-time schedule, the rest hours between the parts of daily working time cannot be less than three hours.
In case of part-time workers, it is provided that additional work may be requested by the employer in case of urgency. Such additional work may extend the employee's daily part-time working time up to the threshold provided by the law on daily working time. A special remuneration equal to an increase of 12 per cent on top of the agreed hourly rate is granted for each extra hour of additional work.
For any work exceeding 45 hours per week (overtime), for every hour of overtime work and up to three on a daily basis and up to 150 (instead of 120) on an annual basis, the employee is entitled to their contractual hourly wage increased by 40 per cent. In case of emergency, the Ministry of Labor may approve an extension of this overtime, for which the employees are entitled to their contractual hourly wage increased by 60 per cent. In case of unlawful overtime (i.e., one for which the statutory formalities have not been made), the employee is entitled to their contractual hourly wage increased by 120 per cent (instead of 80 per cent).
Telework may be implemented:
- by mutual agreement;
- applicable for any form of employment (full-time, part-time, rotation etc.); or
- either as an initial contract upon recruitment or as an amendment of the existing contract. Telework may combine both remote work and work at the premises; or
- on an employer's decision as a result of public health circumstances confirmed by the Ministry of Health; or
- on an employee's request, because of a documented health risk for the employee that might be avoided if telework applies. In case of dispute, the employee can file a petition for settlement before the Labor Inspection Authority.
Working hours for telework and combined telework is submitted to ERGANI. A ministerial decision specifying the necessary requirements and details justifying an employee's request for telework still pending.
Within eight days as of the commencement of telework, the employer must also provide the employee with the standard form under PD 156/94 for notifying the latter on at least the following telework terms:
- the employee's right to disconnect;
- additional teleworking costs and how these are covered by the employer;
- the necessary teleworking equipment;
- any restrictions for equipment use and relevant sanctions;
- 'readiness for work' (stand-by) agreement, working time limits and deadline for employee responsiveness (no further details are provided as to how this will be implemented);
- health and safety conditions during telework and the process in place for labor accident announcements;
- the obligation for protection of professional and employee personal data as well as the necessary procedures to be implemented in order to safeguard this.
This notification may also be provided online, to the extent there are no personalised terms and conditions for individual employees.
The implementation of technical and organisational measures (TOMs) safeguarding the 'right to disconnect' is also required for teleworking and for the health and safety policy for teleworkers, including the specifications of the teleworking space, the use of screens, breaks and the above TOMs.
As a general rule, the employer bears the teleworking cost, including the cost of equipment, telecommunications, maintenance and restoration costs as well as the replacement of equipment if needed. Specific details on the employee's compensation for such teleworking costs and the monthly cost for using their house as a workplace must be defined in the relevant contract. This teleworking cost, in the form of compensation payable to the employee is not considered as 'salary', is not subject to any taxes and social security contributions, but qualifies as a deductible expense for the company. The law provides for a special Presidential Decree and ministerial decisions that are still pending for the definition of the implementation details.
iv Public (mandatory) holidays
The new law has named as public holidays the following days: 1 January (New Year's Day); 6 January (Epiphany); 25 March; second day of Easter (Easter Monday); 1 May (Labor Day); 15 August; 25 December (Christmas Day); and 26 December (second day of Christmas). It has been also provided that by virtue of ministerial decisions to come, more days (up to five per year) may be determined as mandatory or optional holidays.
v Leaves of absence
Fourteen business days for each father as of the date of birth, regardless of the father's family status. Paternity leave may be granted: (1) two days before the due date, so the remaining 12 are granted, overall or partially, within 30 days from the due date; or (2) after the due date. In the case of adoption or fostering a child under eight years old, paternity leave is granted as from the child's integration in the family. This is a mandatory paid leave. The father should notify the employer of the expected due date in advance either in writing or not, or by email. Paternity leave days are not increased because of multiple births. In case the date of birth was before 19 June 2021 but less than a month before this date, the new father is entitled to 12 more days (on top of the two days already provided under the previous legal framework) up to the completion of one month as of the date of birth.
Each parent or person with child custody, if they have completed one year of consecutive work or successive fixed-term contracts with the same employer, has the right for a four-month parental leave that can be used consecutively or partially until the child reaches the age of eight years. In case of adoption or fostering a child up to eight years old, parental leave is provided as from the child's integration in the family.
For the first two months of parental leave, the Manpower Employment Organisation (OAED) is obligated to pay parental leave allowance to each parent, on a monthly basis, for an amount equal to the statutory minimum wage, including the respective Easter and Christmas bonus portions being calculated on that amount. The remaining two months of parental leave may be covered by the employer. If not, the employee is entitled to request a full social security coverage from the Social Security Organisation (EFKA).
Parental leave can be given consecutively, partially or under any other flexible arrangement on the employee's request, which must be submitted at least one month before, while the employer must accept this unless special circumstances exist that might impede business operation. In case the employer does not accept this or wishes postponement, this should be in writing, explaining the reasons for the rejection and suggesting other solutions to the employee. The parental leave should be indispensably granted within two months of the employee's request.
Other flexible arrangements (e.g., in the form of a reduced daily working time schedule) might apply on an employee's request. The paternal leave shall be reported to ERGANI. Parental leave is considered as real work time for the purposes of calculation of salary, leave allowance, days of annual leave, promotion and termination severance.
Eligibility is as follows:
- parents, foster parents, those with parental responsibility, surrogate mothers are exercised by each parent alone;
- in case of multiple births, parental rights are exercised by each parent alone and extended to each child;
- in case of more children under the age of eight, parental rights are extended for each child, under the terms and conditions provided by law; and
- priority is given to disabled parents, parents with disabled or sick children, single parents, new mothers following maternity leave, etc.
Carer's leave is allowed for five working days per year, provided that the employee has completed six months of total service with the employer and that serious health issues exist and are certified by a relevant medical report. 'Carer' means any employee providing personal care or support to a relative or person living with him or her and being in need of significant care or support, including the husband or wife, the partner under a cohabitation agreement, the children, siblings and in-law relatives. This is a mandatory paid leave.
Force majeure leave
This leave is twice a year and up to one day each time for every parent or carer, in case of sudden illness or accident of the dependent person, provided that this is documented by a medical report from a hospital or a doctor. This is a mandatory paid leave.
Flexible work arrangements
The parents of children under the age of 12 or those acting as a carer are entitled to request flexible work arrangements (e.g., teleworking, flexible working time schedule or part-time employment), provided that they have completed six months of service in total. The employer should respond to the employee's request within one month. Any rejection or postponement should be justified. The employer may approve the employee's earlier return to work if this is justified by the circumstances.
Maternity leave (nine weeks after the date of birth) and all allowances and benefits connected thereto are also extended to surrogated mothers and foster mothers adopting children under eight years old.
For 30 months after the maternity leave (i.e., after nine weeks from birth) or after the six months' special leave for protection of new mothers provided by OAED, or after the above-mentioned parental leave, the working hours for new parents or foster parents etc., are reduced by one hour (at the beginning or at the end of the working day). Alternatively, if agreed with the employer:
- the daily working time may be reduced by two hours for the first 12 months after such leave and by one hour for the remaining six months;
- these reduced working hours may be converted into additional consecutive leave;
- full days of absence are allocated on a weekly basis; or
- any other format agreed between the parties.
This right may be exercised by either parent alone or may be shared by both of them, following the submission of the relevant solemn declarations by both parents to their employers who are obligated to provide them with relevant certificates. These are mandatory paid leaves.
Parental leave for performance at school
This leave covers some hours of the business day and up to four business days per year until the child reaches the age of 18. The employer's prior approval is required. This right may be exercised by either parent alone or may be shared to both of them, following the submission of the relevant solemn declarations by both parents to their employers who are obligated to provide them with the relevant certificates.
In case of marriage or a cohabitation agreement, the employee is entitled to paid leave for six working days, if they work six days a week, or five days, if they work five days a week. This leave is not counted in the days of annual leave and is a mandatory paid leave.
Prenatal medical testing
Employees are entitled to paid leave for prenatal medical testing upon prior notice to the employer. This is also a mandatory paid leave.
Disabled children leave
Parents working at businesses with more than 50 employees are entitled to ask for a daily working time reduced by one hour if they are responsible for children with a physical or mental disability. This not a paid leave.
Leave in case of sickness of dependants
Parents may apply for an unpaid leave in case of illness or sickness of their child or dependant persons, of up to six business days per year. If the employee has two children, he or she is entitled to eight days and fourteen days if he or she has more children. This unpaid leave might be granted consecutively or partially.
Special leave for a child's serious illness
This is paid leave of 10 days per year to parents with children under 18 years old in need of treatment related to blood transplant or haemodialysis, neoplastic disease or in need of a transplant, or with severe intellectual disability, Down's syndrome or autism (without age limitation). Each parent is entitled to such leave without any extra requirements.
Medical care or hospitalisation of children
Paid leave for the period of ongoing treatment and up to 30 days per year.
Single parent leave
Single parents having the exclusive custody of their child are entitled to six days per year paid leave (or eight days per year if they have at least three children).
Both employer and employee may agree on an employee's unpaid leave of absence, which might last up to one year, while further extension may be agreed in writing. During the unpaid leave period, the employment contract is considered suspended and no social security contributions are payable. The relevant unpaid leave contract should be submitted to ERGANI and notified to e-EFKA as well. After expiry of the unpaid leave period, all employee rights under their employment contract are reinstated.
Annual leave transfer
The days of annual leave not taken within the relevant calendar year may be carried forward to the next year and granted by the first quarter thereof (i.e., end of March).
vi Anti-violence and harassment in the workplace
Businesses with more than 20 employees are obligated to draft a policy to prevent and combat violence and harassment at work. This policy may be part of or accompanied by the equal opportunities or non-discrimination policy. The content should include:
- violence and harassment risk assessment;
- measures for prevention, control, restriction and monitoring of such incidents or behaviours;
- raising awareness;
- information rights and obligations of both the employer and the employees in case of incident report, as well as on the procedure followed;
- appointment of a 'focal point' at business level, responsible to guide and inform the personnel on such issues; and
- protection of employment and support of employees who are victims of domestic violence.
Businesses with more than 20 employees are obligated to draft a policy on handling complaints. This policy may be part of or accompanied by other policies. The content should include:
- safe and easily accessible communication channels for filing a complaint and definition of the persons responsible to receive and examine them and inform the complainant;
- inquiry and investigation (confidentiality and personal data should be respected at all times);
- prohibition of retribution and further victimisation of the person affected;
- description of the consequences if violation has been confirmed; and
- collaboration with the authorities if needed.
Both policies should be part of the Internal Employment Regulation, especially the parts referring to the disciplinary measures, procedures and sanctions provided.
The policies are subject to consultation with the trade union organisation or works council. In absence thereof, the employer should draft and share these with the entire personnel and then wait for the employees' opinion before finalising them.
Ministerial decisions on the application of such measures are pending. Templates for both policies are expected to be provided by the Ministry of Labour.
vii Protection against dismissal
Termination as a result of an employee's request or use of family leaves
Any termination as a result of the employee's request for family leave or flexible work arrangement or because they exercised any lawful right relating to the protection of family life is void. In case of an employee's dismissal as a result of the above reasons, the employer must mention the reasons for termination in writing, whereas any violation of such obligation shall mean (unless proved otherwise) that said termination is void. In case of such employee's claim before court, the burden of proof lies on the employer who must evidence that the termination took place for other reasons.
Fathers' protection against dismissal
For six months after the date of birth, unless serious grounds exist.
Civil procedure code
One of the first measures adopted by parliament directly after the conclusion of the July 2015 agreement with EU institutions was the adoption of a new Civil Procedure Code. Law No. 4335/2015 has introduced amendments in most areas of civil disputes aimed at expediting the process up to the hearing of cases (which, prior to this change, could take more than three to four years). The new Code provides that the whole process starts with the filing of a claim, without setting a more specific date for its hearing, which will take place within a maximum of 160 days from its submission. The process is concluded without a real hearing, and is based only on documents and affidavits of the parties, while the presence of barristers is no longer necessary and grounds for the deferral of a hearing are practically abolished. Furthermore, the new Code has adopted a much quicker process for the enforcement of judicial decisions and a swift procedure for the collection of debts. The new Code came into force on 1 January 2016.
The first couple of years of implementation showed a slight improvement in the courts' addressing of civil cases and delivering judgments more speedily. However, it seems that the main purpose and aim of the new Code will not be satisfied entirely, as the courts are showing that they cannot deal with the number of the cases addressed to them: hearing dates are now set in most cases eight to 12 months or more from the final submission of the pleadings of the litigants, and the publishing of judgments has started to show significant delays. In September 2021, a new draft bill aiming to improve certain of the new Civil Procedure Code's inconsistencies has been sent to consultation. This bill is extending the period of time for the submission of pleadings, is regulating certain formalities and discrepancies and is aiming to introduce a new 'pilot' trial before the Supreme Court for issues of general interest and importance.
Moreover, as of 1 January 2020 and for all cases to be trialled thereafter, even if they were seeking the recognition of a claim or a right and not an enforceable judgment, it is necessary to pay a court fee equal to approximately 1 per cent of the claim. This obligation was abolished for these kinds of claims in 2016, but was reinstated in late 2019. The risk for the claimant that has not paid or is not willing to pay this fee is the total rejection of the claim on the merits, and the immediate consequence is that the claimant is considered as not participating in the trial (in absentia).
A new tool for dispute resolution was introduced in 2018 with the aim of helping the government in its efforts to relieve the courts of the volume of cases and claims pending. Law 4512/2018 provided initially for a compulsory mediation before the start of any judicial proceedings in certain areas of day-to-day business activity (e.g., disputes over trademarks, patents and IP rights in general may not be submitted for resolution to the competent court before the claimant can prove that mediation has been attempted but failed).
The implementation of this process has been postponed several times, and finally the law was replaced by Law 4640/2019 and started to apply as of 1 July 2020 according to the provisions of Law 4690/2020. The mediation process is compulsory for all claims of a civil or commercial nature filed in Greece exceeding €30,000 and are to be trialled under the regular process. The mediation process aims to expedite the resolution of judicial disputes and allow parties to settle their claim with the assistance of an expert mediator, but its compulsory part is limited to only the first meeting of the parties initiated by the mediator, without any obligation to continue the process thereafter. This first meeting is a necessary formality for the admissibility of the claim, and the respective minutes of the meeting must be submitted to the court together with the pleadings of the parties (and at least of the claimant). The context of the minutes of this first meeting may be limited to recording the names, addresses and other formal elements of the litigant parties and of the mediator, a short description of the claim and the willingness to continue the process of mediation or not. The cost of a mediator for such a meeting is €50 and is shared between the parties that may be represented together with their attorneys, and they must have special powers of attorney for participation in this meeting. An absent litigant risks paying an additional judicial fee of up to €500 for not attending the first mediation meeting.
The process starts with a request for mediation from the claimant (or future claimant) and in particular for the appointment of the mediator. This request may be addressed to a certified mediator or the Central Mediation Committee for the appointment of a certified mediator. The claimant can seek the approval or common appointment of the mediator. Thereafter, the mediator contacts the defendant to obtain his or her agreement to start the process, or if there is an objection to the appointment of the mediator, a mediator is appointed by the Central Mediation Committee from the list of accredited mediators.
After the appointment of the mediator, the claimant must submit or email a request describing briefly the subject matter and the claim, pay the initial fees and keep a record of the communication. Thereafter, the mediator contacts the parties to set the details of the first meeting (time and place) and, if they cannot reach an agreement, the mediator will set the respective time and place and address invitations to the parties to attend the meeting. This first meeting has to be set within 20 days of the date of the request for the initiation of the process after the appointment of the mediator, or 30 days for a defendant residing abroad. The main matter of the first meeting is limited to the signature of non-disclosure and confidentiality agreements and whether the parties agree to continue the process or not, which is reflected in the respective minutes to be signed by the participants or the mediator only. If the parties are not keen to continue with the process, then the judicial process may continue (all time frames and limitations are suspended as long as the parties are participating in the process of mediation). In the event that an agreement is reached through this process, the minutes containing the agreement or settlement may be filed to the court in order to become enforceable, with a fixed cost of €50.
There are some benefits for the parties and more specifically the claimant in this process not only because of its swiftness, but also because of the lack of judicial costs (non-payment of court fees, circa 1 per cent of the amount claimed, non-payment of enforceability fees, etc.). As the official implementation of the process covers all lawsuits filed after 1 July 2020, there is no precedent for this process.
Following the complete replacement of the Code of Income Taxation (CIT) and the introduction of a new Code of Fiscal Procedure, both of which came into force on 1 January 2014, as of 1 January 2015 the Greek Accounting Standards4 abolished the Code of Transactions Tax Reporting and the Greek accounting legislation, thereby becoming more compliant with the International Accounting Framework.
During 2021, changes in the tax legislation continued, mostly aiming at implementing reforms agreed by the government within negotiations for financial support and enhancing the collection of public revenues, but also adopting EU rules and complying with commitments under international treaties.
The most important tax issues are outlined below.
i Transfers of shares
From 1 January 2014, any capital gain that derives from a transfer of shares of non-listed companies is subject to a 15 per cent tax if the transferor is an individual (Articles 42 and 43 CIT). In the case of legal entities, the capital gain shall be added to the gross income and, should there be a profit from the business activity, it shall be subject to the tax rates that apply to income from business activities (i.e., 22 per cent for fiscal years 2021 onwards). For the calculation of the capital gain, the acquisition cost is deducted from the price.
The aforementioned tax is also imposed on the transfer of shares of listed companies provided that the following conditions are cumulatively met: the transferor participates in the share capital of the company with a stake of at least 0.5 per cent, and the shares to be transferred were purchased after 1 January 2009. In any case, a tax on stock market transactions is also imposed.
From 1 July 2020 onwards, companies are exempt from capital gains tax arising from the disposal of participation held in a legal entity, provided that the conditions of Directive 2011/96/EU (Parent-Subsidiary Directive) are met (see Section IX.iii).
ii Corporate income tax rate
The corporate income tax rate for public limited companies, limited liability companies, private capital companies, Greek branches of foreign corporations and, in general, any company that maintains double-entry accounting books (apart from credit institutions where special tax rates apply), has been gradually reduced to 22 per cent (for fiscal years 2021 onwards) (Article 58, Paragraph 1 CIT).
iii Taxation on dividends
For profits distributed from 1 January 2020 onwards, a withholding tax of 5 per cent is applicable on dividends. Withholding of the aforementioned tax exhausts the tax liability, provided that the taxpayer is an individual (Article 36, Paragraph 2 CIT) or a legal entity that is not a Greek resident and does not have a permanent establishment in Greece (Article 64, Paragraph 3 CIT). Under specific conditions, which are set out by Article 63 CIT (adopting Directive 2011/96/EC), intra-group dividends may be totally exempt from withholding taxation.
Dividends distributed to Greek legal entities or legal entities with a permanent establishment in Greece are also subject to withholding tax at a rate of 5 per cent, although an exemption under the conditions of Article 63 CIT may apply in the case of intra-group dividends. However, their income from dividends is added to their annual gross income and taxed as a profit at a rate of 22 per cent (for fiscal years 2021 onwards). In such a case, the tax withheld is credited against the tax payable.
Pursuant to Article 48 CIT, intra-group dividends received by a legal entity that is a tax resident of Greece are totally exempt from tax, provided that:
- the recipient holds a minimum participation of at least 10 per cent of the value or number of the share capital, core capital or voting rights of the legal entity that makes the distribution of profits;
- the aforementioned minimum participation is held for at least 24 months; and
- the legal entity that makes the distribution of profits:
- has a legal status that is included in the list of EU Directive 2011/96/EC;
- is a tax resident of an EU Member State, in accordance with the laws of that state, and may not be considered as a tax resident of a third country (non-EU Member State) by virtue of the double taxation treaty that has been signed with that third country; and
- is subject to one of the taxes listed in EU Directive 2011/96/EC.
In such cases, dividends received by the legal entity must form a tax-free reserve until they are further distributed to the entity's shareholders.
Pursuant to Directives 2014/86/EC and 2015/121/EC, intra-group dividends are exempt from taxation to the extent that the respective dividends have not been deducted by the subsidiary. Furthermore, the aforementioned exemptions (of Articles 48 and 63 CIT) shall be alleviated in cases where it is considered that a non-genuine arrangement exists (i.e., an arrangement that has not been put into place for valid commercial reasons reflecting the economic reality).
iv Transfer pricing
The new CIT and the Code of Fiscal Procedure include transfer pricing (TP) provisions that differ in some ways when compared to the previous legal framework. Under the new legal framework, an advanced pricing agreement may be established with the Ministry of Finance, which (by virtue of Law 4714/20) may even roll back to previous years.
Taxpayers having intra-group transactions exceeding the thresholds provided in the above legislation have two main obligations:
- preparation of a TP report for the documentation of intra-group transactions within the deadline for submission of the annual tax return (the report is submitted to the tax authorities upon request and within 30 days of the request); and
- the filing of a summary information table within the same deadline.
TP legislation provides serious penalties for the violation of the arm's-length principle and for the failure to comply with the above obligations.
There are also new penalties provided for the inadequacy, inaccuracy or late submission of the summary information table and TP report. Greek TP legislation specifically refers to the OECD Transfer Pricing Guidelines for the documentation of intra-group transactions (Article 50, Paragraph 2 CIT). Note that Greek tax authorities have already adopted the relevant OECD Guidance on the transfer pricing implications of the covid-19 pandemic (Circular E. 2054/2021).
In accordance with the new CIT, losses incurred abroad cannot be used against profits of the same tax year or against future profits unless there is income that derives from other EU or EEA Member States and there is no provision in a double taxation treaty that provides a tax exemption for it. By virtue of a recent circular issued by the Ministry of Finance, losses incurred abroad shall be monitored per country and may be used against future profits incurred in the same country. Moreover, by virtue of a more recent circular, before the deduction of said losses in Greece, Greek entities shall need to prove before the fiscal authorities that they have made every effort to deduct losses abroad and have failed to do so.
In addition if, during a fiscal year, direct or indirect ownership of the share capital or voting rights of a company is changed by more than 33 per cent of its value or number, the transfer of losses ceases to apply as regards losses incurred during that fiscal year and the previous five years, unless it is proven by the company that the change of ownership has been exclusively made for commercial or business purposes, and not for tax-avoidance or tax-evasion purposes.
vi Deductibility of interest – thin capitalisation rules
According to the CIT, borrowing costs are not recognised as deductible business expenses to the extent that the surplus of the interest expenses against income from interest exceeds a rate of 30 per cent of taxable profits before interest, taxes, depreciation and amortisation (EBITDA). The term borrowing costs includes, apart from interest on loans, inter alia, other costs economically equivalent to interest and expenses incurred in connection with the raising of finance, as well as the finance cost element of finance lease payments and the capitalised interest included in the balance sheet value of a related asset. The aforementioned rate used to be higher during previous fiscal years, and was gradually reduced.
However, interest expenses shall be recognised as fully deductible business expenses up to an amount of €3 million net-registered interest expenses per year. Any interest expense that is not deductible pursuant to the aforementioned rules shall be carried forward with no time limit. This does not apply to credit institutions or to leasing and factoring companies.
vii Exit tax rules (incorporation of ATAD 2)
Law 4714/2020 incorporated Article 5 of Directive 2016/1164/EE, by virtue of which an exit tax is applicable in Greece in the following cases:
- transfer of assets from the head office of the taxpayer in Greece to a permanent establishment in another Member State or third country;
- transfer of assets from a permanent establishment in Greece to a head office or another permanent establishment in another Member State or third country;
- transfer of the taxpayer's tax residence from Greece to another Member State or to a third country, apart from those assets that remain effectively connected with the permanent establishment in Greece; and
- transfer of the business carried on by a permanent establishment in Greece to another Member State or to a third country.
The payment of the exit tax, which is calculated on the market value of the assets at the time of the exit, less their value for tax purposes, exhausts any income tax liability of the taxpayer, the partners, the shareholders and its members relating to the transfer of assets.
The exit tax is paid in a lump sum with the submission of a tax return three days before the exit of the assets takes place. Under specific conditions, payment may be deferred in five equal annual instalments.
viii Automatic exchange of information on reportable cross-border arrangements (incorporation of DAC 6)
Law 4714/2020 incorporated Council Directive (EU) 2018/822, introducing mandatory disclosure rules for intermediaries and, in certain cases, taxpayers with regards to reportable cross-border arrangements. The new rules apply in Greece as of 1 July 2020.
Any reportable arrangement should be reported to the fiscal authorities within 30 days of the arrangement being made available or ready for implementation, or after the first step in the implementation has been made (whichever happens first). Failure to comply with the reporting obligations incurs penalties defined by the law. Lawyers are exempted from reporting obligations owing to legal professional privilege.
ix The concept of tax avoidance
The new Code of Fiscal Procedures introduced a general anti-abuse clause, pursuant to which:
the tax administration shall ignore any arrangement or a series of arrangements which, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or the purpose of the applicable tax law, are not genuine, having regard to all relevant facts and circumstances.
x Statute of limitations
The statute of limitations period varies depending on the category of tax and the fiscal year.
The basic statute of limitations for fiscal years 2014 onwards is five years, which (from 2018 onwards) may be raised to 10 years in cases where no tax returns have been filed, or new data or information is brought to the attention of the Greek tax authorities, which could not have been brought to its attention within the standard five-year statute of limitations period. For tax years 2012–2017, a 10-year limitation period is applicable in cases of tax evasion.
Merger control provisions are included in Law 3959/2011 regarding the protection of free competition (Articles 5 to 10) and are enforced by the Hellenic Competition Commission (HCC), an independent administrative authority.
The Greek merger control system provides for pre-notification to the HCC (30-day deadline) in cases of concentration where the following two thresholds are cumulatively met: all participating enterprises have an aggregate worldwide turnover exceeding €150 million; and at least two of them each has a national (Greek) turnover of at least €15 million. In such a case, the transaction cannot be completed without the clearance of the HCC. The latter theoretically has the power to block a transaction (but has not blocked any application to date).
There is currently no post-notification obligation for minor mergers under Greek law.
1 Cleomenis G Yannikas and Vassilis S Constantinidis are senior partners and John M Papadakis is a senior associate at Dryllerakis and Associates.
2 Sociétés anonymes, not to be confused with listed companies.
3 ERGANI is a central platform operated by the Ministry of Labour, where the employer mainly (and in some instances the employee) uploads data and information concerning the employment contract of the employee (e.g. hiring, status, termination, dismissals or resignation, working hours, overtime etc.). The purpose of these uploads is strictly for the facilitation of monitoring of these data by the administration and to allow inspection of application of labour law. ERGANI has proved as a useful tool for the monitoring of the implementation of several initiatives of the Ministry during the last two periods of covid-19 pandemic as in the case of suspension of work, teleworking etc.
4 Law 4308/2014.