Right to information from the Company under the new Law 31/2014, which amends the Companies’ Act with the aim of strengthening the corporate governance

The exercise of the shareholders right to information in the Public Limited Companies (S.A.) is modulated by the reform. It is done so in accordance with the principle of good faith, with the understanding of this right as an essential aspect of good governance within companies.

Firstly, any reference to the Chairman or President of the Board as having the power to refuse information is eliminated and such power is granted to the Directors. This change is especially relevant if one or more of the minority shareholders are represented in the Board of Directors through one or more members, because the position of President of the Board ususally is occupied by the individual appointed or representing the majority shareholder. The circumstances when Directors can refuse to provide the information requested by shareholders are specified. Thus, the Directors are required to provide requested information unless (i) it is unnecessary for the protection of shareholder rights; or (ii) may be used for extra-corporate purposes; or (iii) its publication may harm the company or other companies within the group. Nevertheless, the information cannot be refused when the request is supported by shareholders representing at least 25% of the equity capital. The articles of association can establish a lower percentage but it must always be higher than 5% of capital.

The reformed article 197 of the Companies Law adds two new subsections, intended to prevent fraudulent use of the information required under this provision. It distinguishes the legal consequences of information requested prior to the General Meeting from information requested during the General Meeting.

In this regard, subsection 5 expressly excludes as a matter of challenging the General Meeting’s resolutions, any failure by the Directors to fulfil the obligation to inform. Such a duty to provide information solicited by the shareholders during the General Meeting is previously laid down in subsection 2 of article 197. Such a failure will only allow the affected shareholder to demand compliance with the duty to inform and, where appropriate, to seek compensation for the damages and losses incurred (under Spanish laws it is essential to prove a direct relationship between a cause and the damages it has produced). It will not, however, allow the affected shareholder to challenge the corporate resolutions approved by the General Meeting. This provision is intended to avoid the problems that material evidence has shown exist in the rules practical application. Namely, that abuse of the right to information during the General Meeting, in the sense that it is exercised with the sole purpose of creating a reason to challenge the decisions of the General Meeting and not the genuine intention to obtain enough information to exercise an informed vote, is only justified when said right to information has been exercised prior to the General Meeting.

Also with aim of avoiding abuse by the shareholders, the new subsection 6 creates direct shareholder liability for any damages and losses that may arise from the fraudulent or harmful use of the solicited information. This may be an unnecessary addition since it merely repeats what is already stipulated in Article 7 of the Spanish Civil Code.