In the course of the last few years, Greece has undertaken a major overhaul of its corporate governance structure, particularly with respect to companies listed on the Athens Stock Exchange. There are currently about 300 companies with shares quoted on the ASE, while an additional 250 are in various stages of being admitted for trading. General corporate law affecting the largest number of enterprises (since the corporation is the prevalent company form in this country), has not been subject to any important amendments and is mostly following the developments at the European Union level. Listed companies on the other hand, with their increased importance in economic life, have drawn the interest of regulators, who have produced various new rules. This article will provide a brief description of the corporate governance initiatives of the Greek authorities and the resulting landscape affecting listed companies and investors.

CMC Code of Conduct

In 2000 the Capital Market Commission issued its Decision 5/204, which established conduct rules for companies listed on the Athens Stock Exchange and for their directors, executives and other connected persons. According to the code every listed company must announce to the public any important event, i.e. which is deemed capable of affecting the market of its shares. Such events are, indicatively, changes in business, strategic decisions or agreements, decisions to launch a tender offer, changes in management, mergers, important changes in financial condition etc. Such matters must be announced to the public only once there is decision of the competent organ of the company or a specific agreement detailing the obligations of the parties, as the case may be. However, if there are rumors or information leaks, the company must immediately confirm or reject them, or even deny any comment pending final announcements.

Further, the decision includes more detailed provisions on the obligations of insider persons to avoid trading while in possession of sensitive information. Significant shareholders, i.e. holding more than 10% of the share capital, must announce their intention to sell shares, if more than 5% of the issuer’s share capital is intended to be sold within a three-month period.

The Code creates additional obligations for listed companies to establish a compliance department, a shareholders’ department and a unit for corporate announcements, as well as publish annually an ‘information note’ containing some of the information which must be included in a prospectus, according to existing regulations, and including a cash-flow statement.

The CMC is finally empowered to impose monetary fines on the persons who violate the provisions of the Code.

New corporate governance law

In addition to the Code promulgated by the CMC, a recent law approved by the Parliament in May 2002 (which, following Government Gazette registration, came into force as law nr. 3016/2002) gave to the Greek legal framework on corporate governance more content.

Three areas are affected by it, namely, the composition of the Board of Directors, the internal audit function of listed companies and the use of funds collected through share capital increases.

As regards the first, issuers now have the obligation to include non-executive members in their Board of Directors. These must be at least 1/3 of the total number of the Board members. At least two of the non-executive members must further be independent. The law defines explicitly when a director is to be accepted as independent. They must not own shares in the company nor be ‘dependent’ upon it nor upon any connected persons (which is defined as having any business or professional relationship affecting its business activity, or being a chairman of the Board or executive or an employee of the company or a connected company) nor be related or spouse of an executive member of the Board or other executive or a controlling shareholder. The remuneration of non-executive members must be in line with their function within the company and must be announced in the company’s financial statements.

As regards the creation of a compliance unit, there are specific rules for the content of the internal audit regulation and the organization of such a department. All companies must further have an Internal Audit Regulation, and the operation of the compliance officers is supervised by the non-executive members of the Board. Finally, the rules regarding the use of capital funds are a peculiarity of Greek law, which places emphasis on this point, following the excesses of listed companies in previous years. These are a follow-up to similar obligations included in the Code enacted by the CMC in late 2000 (see above), and their purpose is to ensure that the use of such funds complies with the decisions of the shareholders’ meetings and there is always adequate disclosure of any deviation.

Companies are expected to comply within a period of six months and in case of breach, the CMC is authorized to impose penalties. It is a further interesting aspect, whether private investors have a right of compensation against a company that fails to comply with the new rules.

Other initiatives

Apart from the two important new regulations mentioned above, some other initiatives are worth mentioning. These are the introduction of a regulation on takeovers and of International Accounting Standards for Greek listed companies. The takeover regulation – mostly along the lines of the previous draft of the 13the Directive on company law was adopted by decision of the CMC in 2000 and contained a mandatory offer obligation. Such rule has so far been met with skepticism. Very recently the Commission imposed a fine to a company for failing to abide with this obligation, while an additional similar case is still under review. Introduction of the IAS was made by law earlier in 2002. Companies must comply starting from the end of 2003 – that is, two years earlier than the date imposed by the European Union for a similar move at the European level.