Statutory obligations for publicly traded joint stock companies increase
The National Council of the Slovak Republic has adopted an amendment to the Commercial Code, which enacts new rules in relation to remuneration of members of board of directors, supervisory board and certain individuals in the top management of publicly traded joint stock companies. The amendment also concerns special rules in relation to significant commercial transactions, aiming to increase the protection of interests of the company and associated shareholders, including the minority shareholders.
Remuneration of members of bodies of publicly traded joint stock companies
Under the new rules each publicly traded company will be obliged to draw up rules of remuneration of:
members of the board of directors
members of the supervisory board, and
individuals in the top management of the company, if they are not also members of the board of directors or the supervisory board of the company.
The general meeting of the company will have the authority to approve and adopt amendments to the rules of remuneration. Members of the board of directors will have the liability for drawing up and submitting the rules of remuneration for approval of the general meeting.
Following the approval of the general meeting, the company will be obliged to publish the rules of remuneration without undue delay on the website of the company. Their validity will be limited for a period of 4 years. After this period the board of directors of the company will be obliged to draw up new rules of remuneration and submit them for approval of the general meeting. Publicly traded joint stock companies are obliged to adopt and publish the first rules of remuneration no later than 31 March 2020.
The amendment also sets out the criteria and substantial requirements of the rules of remuneration, which must observe the business strategy of the company, its long-term goals, the interest of sustainability, prevention of conflicts of interest.
The board of directors will also be obliged to prepare a report of remuneration, which will provide a complete overview of the awarded remuneration, including any benefits in any form awarded or due for the preceding financial period to the persons subject to the rules of remuneration. Subsequently, the board of directors will be obliged to submit the report of remuneration to the general meeting. The Commercial Code sets out the substantial requirements of the report of remuneration, whereas the auditor of the company will be entitled to comment on the fulfilment of the report of remuneration. The board of directors of publicly traded joint stock companies is obliged to submit the first report of remuneration to the approval to the general meeting for the fiscal period, which begins after 1 July 2019.
Significant commercial transactions
According to the amendments to the Commercial Code, a significant commercial transaction is regarded as a discharge or a guarantee under an agreement, if the following conditions are met:
the discharge or the guarantee are provided by a publicly traded joint stock company,
the discharge or the guarantee are provided to the benefit of a person associated with the publicly traded joint stock company*, and
the value of the discharge or the guarantee exceeds 10 % of the value of the company’s registered share capital.
Prior to the conclusion of a significant commercial transaction, publicly traded joint stock companies are obliged to:
deposit a notice on the significant commercial transaction together with its draft to the Collection of Deeds, and
to publish a notice of deposition of the significant commercial transaction into the Collection of Deeds.
In cases of violation of the abovementioned obligations, the value of the significant commercial transaction must be refunded to the company under the rules of unjust enrichment. The members of the board of directors which exercised their office at the time of closing and also members of the board of directors who have exercised their office at the time when the company has not exercised the right to a refund or the security provided and knew or could have known about it in the light of all circumstances, guarantee jointly and inseparably its refund.
The amendments with respect to the significant commercial transactions does not apply to a significant commercial transaction, if the following conditions are met:
in the ordinary course of business and under normal market conditions, taking into account normal market conditions and the conditions under which the company normally provides similar transactions in the ordinary course of business with others;
concluded by a publicly traded joint stock company, which is a bank or a foreign bank on the basis of imposed remedial measures, forced administration and measures of early intervention pursuant to the special regulation;
the conclusion of which was proposed to all of its shareholders as associated persons with the publicly traded joint stock company under equal terms;
provided as remuneration to members of the Company's bodies pursuant to Section 201a para. (2) of the Commercial Code; or
concluded with a company associated with the publicly traded joint stock company**
These changes are due to the transposition of Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies.
The changes to the Commercial Code shall become effective as of 1 July 2019.
* A person associated with the publicly traded joint stock company is considered:
- a member of the statutory body, a senior employee, a proxy or a member of the supervisory board of a publicly traded joint stock company,
- a natural or other legal person, which holds a qualified holding in the publicly traded joint stock company,
- a member of the statutory body, a senior employee, a proxy or a member of the supervisory board of a person referred to in Lit. (b)
- a related person of a natural person referred to in Lit. (b) to (c),
- another legal person in which a public limited company or one of the persons referred to in points Lit. (a) to (d) has a qualified holding.
Qualified holding means a direct or indirect share representing at least 5% of the registered share capital of a legal person or of voting rights in a legal person, or the possibility of exercising influence over the management of a legal person comparable to that corresponding to that interest; an indirect share means a share held indirectly by way of legal entities in which the holder of an indirect share has a qualifying holding.
** An associated company is a company, in which the publicly traded joint stock company has shares or shares linked with all voting rights.