Law No. 3,016/2002 on corporate governance introduced the obligation for participation of non-executive and independent non-executive directors in the board of directors, with certain criteria determining when independence is indeed secured (article 4). Additionally, this law obliges listed companies to set an internal audit function characterised by autonomy from the other functions of the company and monitored by the board of directors’ non-executive members, without any member of the board of directors being allowed to be also a member of the audit function. Duties of the audit function include the monitoring of the corporate and legal obligations of the company and the referral of cases of conflicts of interest to the board of directors. With regard to consequences of non-conformity with the said provisions, Law No. 3,016/2002 provides for an administrative fine issued by the Hellenic Capital Market Commission.
As mentioned above, Law 2,190/1920 on sociétés anonymes was recently replaced by Law 4,548/2018. The latter also applies to listed and non-listed companies limited by shares and it serves as the main piece of legislation for the functioning of the above undertakings. Hence, it provides a general framework for compliance and risk management issues, as discussed below.
Primarily, board of directors members are responsible for fulfilling the scope of company’s management, managing the company’s assets and the corporate object in general. They are also entrusted with a duty of loyalty, a duty of care, an obligation of non-competitive conduct, etc. article 96 constitutes a novelty in the Greek legislation for sociétés anonymes since it introduces a general clause regarding the general duties of their board of directors. In particular, members of a board of directors are required to:
- exercise their duties according to Law, the articles of association of the company and the resolutions of the general assembly;
- to manage the company’s business in favour of company’s interest;
- to oversee compliance with their decisions and the resolutions of the general assembly, and
- also to inform the other members of the board of directors for any company’s business.
Furthermore, according to paragraph 2 of the above article, a board of directors is required to keep relevant records and books, to disclose and publish an annual financial statement, an annual management report and a corporate governance statement, where applicable, according to law. These obligations, in combination with the one that calls for carrying out an extraordinary internal audit, is of utmost importance for the purposes of the regulatory provisions in force. Reference should be made to the audit carried out in terms of the law, the statute and the decisions of the general meeting (articles 142 and 143). The annual management report (articles 150 and 151) should comply with the obligations of risk management and of the battle against corruption and bribery.
According to article 12, the appointment and the cessation for any reason whatsoever of the following persons are subject to publication: persons who carry out the management of the company or have the power to represent the company jointly or individually, or are competent to carry out regular audits.
Further to the above, the articles of association may specify the matters in respect of which the power of the board of directors is exercised in whole or in part by one or more members thereof, company directors or third parties, as stipulated in article 87. It may also authorise or require the board of directors to entrust the internal audit of the company to one or more members or third parties, without prejudice to other provision of the law. Such persons may authorise other members or third parties to exercise the powers conferred on them. Thus, related to article 102, every board of directors member shall be liable for compensation towards the company for any act or omission constituting a breach of their duties. They shall be responsible for any omissions or false entries in the balance sheet concealing the actual position of the company. The annual management report and the corporate governance statement, where applicable, shall be drawn up and are also subject to this kind of obligation to be published.
The content and information of an annual management report is specified according to the new article 150, and may differ depending on the size of the company and on whether the company under consideration is a subsidiary of another company that requires a consolidated management report or a separate report. It is further clarified that the provisions for the corporate governance statement under the new article 152, regarding sociétés anonymes with transferable securities admitted to trading on a regulated market, specify the content of the corporate governance statement that must be incorporated in the management report of said companies. The content of the corporate governance statement also differs depending on the size of the company. One of the introduced reformations is the provision about the criminal liability of the board in case of missing any of the required information in both the management report and the corporate governance statement (see question 16 below).
The duties of the board of directors’ members follow in exactly the same vein, providing that they shall keep absolute secrecy on confidential matters of the company, while refraining from any action pursuing their own interests contrary to the company’s interests. They are also required to disclose to the other members of the board of directors their own interests, which may arise from company’s transactions falling within their duties. In case of conflict of interests, any board of director member dealing with the concerned conflict shall abstain from the relevant voting procedure, and should the necessary quorum be not achieved, the non-concerned board of directors members shall call for a general assembly, in order for the latter to resolve on the relevant matter.
Further to the above, the executive committee is a noticeable introduction in the SA Law. In particular, article 87 paragraphs 4 and 5 provide sociétés anonymes with the right to establish executive committees based on a relevant resolution of their boards of directors, or on a relevant provision in their articles of association. The said committee may be authorised to exercise some of the powers or duties of a board of directors.
As regards listed companies, they may appoint executive, non-executive and independent members, under the requirements and the consequences of Law 3,016/2002. These rights are granted also to non-listed companies, should there be such provision in their articles of association.
As far as listed companies are concerned, Articles 110-112 of the SA Law introduce an innovation in the remuneration policy of board of directors members, with the purpose to achieve harmonisation with EU Directive 2,017/828 amending Directive 2,007/36/EC as regards the encouragement of long-term shareholder engagement. Specifically, listed companies are required to establish a detailed remuneration policy for board of directors members and general directors, for a maximum period of four years. The said policy is subject to approval by the general assembly of shareholders, in which the shareholders who are also board of directors members or general directors are not allowed to vote and shall not be accounted for the fulfilment of quorum requirements. Hence, the principle of ‘say on pay’ is introduced, as prescribed in article 9 of the aforementioned directive. By virtue of the latter, shareholders shall have an opinion, on the basis of a binding or consulting vote, on the payments of the senior managerial members.
The Greek law adopted the option of the shareholders’ binding vote. Furthermore, according to paragraph 6 of article 110, deviations from a company’s approved remuneration policy are possible provided that they are necessary for the long-term benefit of the company. Moreover, the said deviations, as well as the relevant procedural details, must be specified. Additionally, the board of directors must introduce, as an agenda item in the general meeting of shareholders, the remuneration statements of the previous use, on which shareholders shall have a consulting vote. Thus, harmonisation with the directive’s provisions on the disclosure of the remuneration policy is achieved. The remuneration statement must also be made available on the company’s website for a minimum period of 10 years.
There is also a significant obligation for board of directors members regarding shareholder information. To be more specific, board of directors members should provide the general meeting with extensive information for the election of a candidate to the board of directors with regard to the reasons justifying the nomination, a detailed curriculum vitae (including information on the current activity of the candidate, their participation on other board of directors and other positions, distinguishing between the positions they hold in companies belonging to the same group and positions they hold in companies outside the group, etc) and the criteria to determine whether the candidate is in a conflict of interest (indicating in particular any relationship between the company in which the candidate works or is mainly employed and the company for whose board they are a candidate).
Besides the above, the rights of information granted to minority shareholders by virtue of article 39 of the previous law, remain in force under the new Law 4,548/2018 (article 141). Additionally, the above-mentioned law introduces a new set of rights for individual shareholders of non-listed companies. Specifically, by virtue of paragraph 10 of article 141, a shareholder is able to request the following information from the board of directors:
- the company’s capital;
- the categories of shares which have been issued;
- the number of shares owned by them; and
- a table of the company’s shareholders.
Hence, the shareholder is always able to identify the shares’ composition of the company.
Greek public limited companies (as well as branches and agencies of foreign public limited companies) are audited in respect of drawing up the balance sheet, the financial administration and general operations. Furthermore, the Minister of Commerce may, whenever they deem it necessary, carry out such inspections through the appropriate employees of the Ministry or through the inspectors of public limited companies.
Credit and insurance undertakings
As stated above, Law No. 4,261/2014, which is applicable to credit institutions, includes details of corporate governance as well as specified risk management provisions. That said, credit institutions are obligated to establish a sound and efficient corporate governance system that contains a clear organisational structure, including an efficient division of competencies, internal audit systems consisting of appropriate administrative and auditing processes, and an effective system for the detection, monitoring, management and reporting of risks faced, or possibly faced, by the institution.
Moreover, remuneration policies and strategies shall be in line with efficient risk management. The above system shall be appropriate for dealing with the complexity of the risks, as well as being suitable for the activities of the institution, and will be closely monitored by the board of directors. Particularly for important credit institutions (as defined in article 68 of Law No. 4,261/2014), a risk management committee consisting of non-executive board of directors members should be in place, having the obligation to report to the board of directors and to provide assistance throughout risk management.
With regard to insurance undertakings, Law No. 4,364/2016 introduces a set of provisions on governance systems and risk management that is very similar to that for credit institutions, as discussed above. As for specific provisions, article 32 of Law No. 4,364/2016, among others, provides the minimum of risks targeted by the system. It also foresees that specific risk management policies shall be set out in order to address each one of the risks concerned.
Public interest undertakings (listed, insurance, credit and financial undertakings)
Law No. 4,449/2017, on the statutory audit of annual and consolidated financial statements, and public oversight of the audit work, is referred to by the undertakings that are obliged to keep financial statements. The audit must be carried out according to the international auditing standards by an auditor, which may be an auditing accountant or an auditing company. The provisions ensure the objectivity and the independency of the auditor throughout the whole procedure. The auditor conducts an audit report in which they present the conclusions of the audit, having taken into account any reports of third countries’ audit work. The audit report must be conducted in writing and must include very specific information and data of the controlling undertaking, as well as the opinion and the conclusions of the auditor, who bears full responsibility for the report. It is worth mentioning that the auditors are also subject to a system of quality assurance (quality control). The competent body for this quality control is the Hellenic Accounting and Auditing Standards Oversight Board.
According to article 44 of the said law, every public interest undertaking has an audit committee, consisting of mainly independent and experienced members. This committee may be either an independent committee or a committee of the board of directors of the controlled undertaking, but the president shall be independent. The committee informs the board of directors about the results of the statutory audit, explains the importance of such an audit and generally monitors the procedure of statutory audit ensuring the procedural integrity. It also monitors the financial informing by submitting recommendations and suggestions, and monitors the efficiency of the internal systems audit as well. The principal regulatory and enforcement bodies for the supervision of compliance with provisions regarding the committee are the Hellenic Capital Market Commission and the Bank of Greece (see question 4).
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