Are there different types of thresholds for minority shareholders?
Yes. There is a variation of thresholds i.e. one share, 1/20, 1/10, 1/5, 1/3. The higher the percentage the more significant these rights are.
What are the rights of shareholder(s) that have at least 1/20?
Shareholding of at least 1/20 of the share capital confers to the shareholders the following rights: a) right to request a convocation of an Extraordinary General Meeting of the Shareholders. The Board of Directors has the obligation to convoke the said Extraordinary General Meeting of Shareholders at the date requested by the Shareholder provided that this date is not longer than 45 days from the date of the Meeting)1; b) right to supplement the agenda of the General Meeting of the Shareholders that has already been convoked, provided that such request has been submitted at least 15 days prior to the General Meeting2; if the Board of Directors does not respond to such a request, they may publish the notice by themselves; c) in listed companies, they have the right to submit drafts of the decisions for items on the agenda, d)right to request for a postponement of the General Meeting of the Shareholders3;
The temporary Chairman of the General Meeting of Shareholders is obliged to postpone the meeting for the requested day, which can not be fixed beyond twenty days; d) right to request specific information defined by the law to be provided in the GMS4; e) right to request for the decisions in the GMS to be taken by roll-call vote5; f ) right to request the disclosure to the Annual GMS of the amounts paid to Directors, managers and employees during the last two years6; g) right to perform a legal audit of the company, following a Court order by the Single-Member Court of First Instance, if certain acts violate the provisions of the law or the company’s Articles of Association or the General Meeting’s decisions7; h) right to ask for a convocation of a General Meeting of the Shareholders to decide upon any transaction with a related party if this transaction has been cleared by the Board of Directors; in case the contract pertaining to this transaction has been executed prior to the General Meeting of the Shareholders, then the Minority of 1/20 has the right to veto such transaction8; i) the right to request the Company to file a lawsuit against members of the Board of Directors9 to indemnify losses they caused to the Company from their actions or omissions.
What are the rights of shareholder(s) that have at least 1/3?
The second threshold of having at least 1/3 shareholding in the Company confers to the Shareholders the following veto rights in major decisions of the General Meeting of the Shareholders concerning the Company i.e.: the change of the Company’s nationality, the modification of the scope of the Company, the increase of the shareholders’obligations10, the increase of the share capital (unless such share capital increase takes place ex lege or is effected by capitalisation of reserves), the share capital decrease, the change in the distribution of profits, the merger, demerger, conversion, revival, extension of its duration or dissolution, the granting or renewal of the power of the Board of Directors to effect a share capital increase.
What are the rights of shareholder(s) that have at least 1/5?
The third threshold of having at least 1/5 shareholding confers to the Shareholders the right to audit the company, following a Court order by the Single-Member Court of First Instance, if from the overall course of business it is credible to believe that the management is not exercised according to the rules of fair and prudent management11. Contrary to the legal audit provided for the 1/20 shareholding, the current audit is an audit of substance.
What are the rights of shareholder(s) that have at least 1/10?
The forth threshold of at least 1/10 shareholding confers to shareholder(s) the right to request information about the course of the Company’s matters and its financial situation12.
Are there any other percentages with specific rights as per L.2190/1920?
There are also some other thresholds in the law, such as 2/100. The above percentage gives the right to any shareholder(s) having that percentage to request the annulment of any decision of the GMS, taken contrary to the law or the Articles of Association of the Company13.
Is there any specific right that a shareholder having even one share has according to the law?
Any holder of even one share has the right a) to ask (and the Company has the obligation to provide) specific information needed for the factual assessment of the items of the agenda in the GMS14; b) to file a lawsuit to recognize the invalidity of a Decision of the GMS15, c) for non listed companies, to request information pertaining to the share capital, the shares. These can be considered as special minority rights, intending to control the controlling majority and the management of the Company, contrary to the rights inherent to the share itself, which are the automatic consequence of the shareholding i.e. the right to participate in the GMS, the voting right, right to receive dividends, right to participate in any increase of the share capital, the right to receive the relative proportion of shares in case of capitalization of reserves and the right to receive the proportion of its shareholding from the proceed of liquidation of the Company.
Are these thresholds fixed or can they be lowered by the Articles of Association of the Company?
The Articles of Association can: a) lower both the 1/20 and 1/10 thresholds, but not more than half of it; b) provide additional rights (such as information request) on different percentages; c) increase the majority needed to adopt decisions in the GMS, thus lowering the percentage of minority shareholders that can block decisions.
How can these rights be exercised?
The shareholder(s) who wish to exercise these rights have to prove their capacity as shareholder as well as the exact number of shares they own. This can be done for example by depositing the shares (if there are share certificates) to the Company or provide a relevant certificate that these shares are kept in a bank institution or by reference to the shareholders book in case of registered shares which have not been incorporated in titles. Any petition must be addressed to the competent body (the Board of Directors or to the GMS).
Is there any put option of the minority shareholders?
With the amendment of law 2190/1920 in 2007 the put option right was introduced and kept in law 4548/2018. Actually there are two put options: One versus the Company and one versus the Majority Shareholder. More specifically. a) Vis a vis the Company: One or more shareholders may request by the filing of a civil lawsuit, the repurchase of their shares by the Company in the following cases: i) the GMS decides to transfer the siege social of the Company to another country; or ii) the GMS decides to introduce limitation in the transfer of the shares or a change of the objects of the Company or iii) in all cases provided for in the Articles of Association (on condition that the Articles of Association also provide for a relevant deadline for the filing of the civil law suit). A general condition in all above cases, is that it is detrimental to the shareholder to remain in the Company as Shareholder. The civil law suit must be filed within three (3) months from the day the relevant amendment in the Articles of Association takes place. b) Vis a vis the Majority Shareholder; If a shareholder acquired after the incorporation of the Company and still owes at least ninety five percent (95%) of the share capital of the Company, one or more of the remaining shareholders may request through a civil lawsuit the purchase of their participation by this shareholder. The competent court for the hearing of this lawsuit is the Multi-Member Court of First Instance of the registered seat of the Company. The law suit must be filed within a deadline of five (5) years from the time when the shareholder’s participation reached the above percentage,
Could the Articles of Association provide for additional rights?
Of course the Articles of Association can provide for additional rights as well as the procedure to be followed for their exercise, unless the law provides differently. There could be for example a right to information, a veto right, a right to appoint a member in the Board of Directors etc.
Can the Shareholders sign separate agreements (outside of the Articles of Association) defining their relations?
Based on the freedom of contractual relations, provided as a basic rule of Greek civil law (CC361) the Shareholders are free to sign any agreement between them (signing parties) in relation to their Shares and the Company and define their relationship. It is very common the shareholders to enter into a“Shareholders Agreement”to regulate subjects, like composition of the Board of Directors, first refusal rights etc.
Can the Shareholders Agreement have clauses contrary to the Articles of Association? And are they valid?
Yes, to the extent the relevant clauses do not reflect provisions of the law of public order. The parties are free to define their own rules as per freedom of contracts between parties16. The shareholders agreement however binds the parties for their relation but does not supersede the Articles of Association vis a vis third parties. As an example if the majority Shareholder violates its obligation to elect a number of Directors designated by the minority, he/she/it is in default and is liable to penalty or indemnity but still the election of the board is valid.
What is the difference between a clause in the Shareholders Agreement and the Articles of Association?
The Articles of Association is the document that regulates the operation of the Company and defines its modus operandi. Its clauses are binding for third parties as well. The Shareholders Agreement is a contract between specific (or all) shareholders that defines the relations between themselves. The Articles of Association bind all the shareholders as well as third parties that have any relation with the Company, whereas the Shareholders Agreement is binding only between the parties (shareholders) that have signed it. As a practical consequence, any violation of the Articles of Association could lead to nullity of any action whereas any violation of the Shareholders Agreement will lead to liability vis-àvis the shareholders that have signed the Agreement.
What type of clauses do the Shareholders Agreements usually have?
A shareholders Agreement can have any clause (in theory) as a civil law contract. The main categories are the following: a) the way the Company works (i.e. Board of Directors/ Meetings of Shareholders/Administration), b) specific rights linked to the transfer of the shares (First Refusal Right, Put Option, Call Option, Tag Along, Drag Along etc), c) specific rights of shareholders (for example information request, etc), d) competition issues (usually obligation not to compete to the extent tolerated by the relevant legislation). Of course the above list is not exhaustive.
Could you explain the different rights linked to the transfer of the Shares?
The first typical clause is the First Refusal Right: any shareholder that wishes to sell his/ her/ its shares must first offer them to the other parties. In most cases the exact procedure is described in details in the Shareholders Agreement. Another right is the Put Option: a specific shareholder has the right to offer its shares to another shareholder(s) at a specific time frame and the other shareholder(s) has (have) the obligation to buy. The Call Option is exactly the opposite: a specific shareholder has the right to ask to buy the shares of another shareholder(s) at a specific time frame and the other shareholder(s) has (have) the obligation to sell. The Tag Along is a right to protect a “minority”shareholder: if the majority shareholder wishes to sell its shares to a third party then the minority shareholder (who has the right to tag along) can ask and the majority shareholder has the obligation to sell the shares of the minority shareholder. On the opposite direction, the Drag Along right is a right to protect the “majority” shareholder: if the majority shareholder wishes to sell its shares to a third party then he can ask the minority shareholder, and the minority shareholder has the obligation to, sell his or her shares along with the majority shareholder. These are the common and typical rights but the parties (shareholders) are free to define their meaning as well as their relationship in general as they want, describing other rights and possibilities.
Why not have the above clauses in the Articles of Association?
Various reasons dictate the inclusion of a provision in a Shareholders Agreement and not the Articles of Association. First in the law may not allow a regulation like the one the parties wish e.g. the way the Board of Directors is elected and its composition. Secondly, confidentialityissues: the Articles of Association can be viewed by all the shareholders and third parties, and it is valid for all shareholders. With the Shareholders Agreement you can define the relations between certain shareholders (and only between them). Thirdly there is a limit to what you can put in the Articles of Association: even though L.4548/2018 has expanded the list of what can be actually inserted in the Articles of Association, there are still provisions that might prove problematic if inserted in the Articles of Association.
What happens if there is a conflict between the Articles of Association and a Shareholders Agreement?
As mentioned hereinabove, the Shareholders Agreement is an Agreement between Shareholders and is binding only between the parties that have signed it. The Articles of Association, from the other hand, is a document that is binding vis-à-vis all the shareholders and to some extent vis-à-vis third parties. So, to take one example, if there is a first refusal right in the Articles of Association, if not respected then the transfer of shares is null and void. On the other hand, if such right (first refusal) is provided for in the Shareholders Agreement and not respected, this does not affect the validity of any transfer, it only creates a right for damages (or whatever other sanction the parties have agreed upon) between the contracting parties.
In view of the above how can a Shareholders Agreement be enforced?
As any contract, the Shareholders Agreement can be enforced through courts or arbitration. The contracting party may be obliged by court ruling or by arbitral award to buy or sell through or perform the contract in a feasible way. Also, any violation of the Shareholders Agreement creates a liability of the violating party for indemnity or agreed penalty. This means that the party who has suffered damages can seek compensation before the Civil Courts or the Arbitration Tribunal. In order to avoid having to prove the amount of damage, usually the Shareholders Agreement has specific monetary penalty clauses in cases of defaults (e.g. if one sells the shares although subject to a first refusal right, the agreed penalty may by equal to their value).
1. Article 141 par. 1 of L.4548/2018
2. Article 141 par. 2 of L.4548/2018
3. Article 141 par. 5 of L.4548/2018
4. Article 141 par. 6 of L.4548/2018
5. Article 141 par. 9 of L.4548/2018
6. Article 141 par. 6 of L.4548/2018
7. Article 142 par. 1 of L.4548/2018
8. Article 100 par. 4 of L.4548/2018
9. Article 104 par. 1 of L.4548/2018
10. Article 132 par. 2 of L.4548/2018
11. Article 142 par. 3 of L.4548/2018
12. Article 141 par. 7 of L.4548/2018
13. Article 137 par. 3 of L.4548/2018
14. Article 141 par. 6 of L.4548/2018
15. Article 138 par. 4 of L.4548/2018