Conflict of Interest
Conflicts of interest under the new Law 31/2014, which amends the Companies’ Act with the aim of strengthening the corporate governance:
Conflicts of interest are regulated under article 190 of the reformed Companies Act. Conflicts of interest were previously restricted to Limited Liability Companies (S.L.) and have now been expanded by the recent reform to include Public Limited Company’s (S.A.) but with some notable characteristics.
In general, the concept of conflicts of interest refers to those situations where a shareholder cannot vote because the matter implies granting or revoking a right to this shareholder. The situation is relatively common, because loan, sale or supply agreements among group companies would be included in this category of agreements.
The new regulation of conflicts of interest revolves around two main considerations:
Firstly, in the most serious cases of conflicts of interest , a general prohibition of voting by the shareholder who incurs a conflict of interest is established. The right to vote is forbidden in the situations already established by the Law for Limited Liability Companies (S.L.) but is now extended to all capital companies. However, the new law establishes that in Public Limited Companies (S.A.) there are two situations which are exceptions to the general rule of prohibition of voting when there is a conflict of interest and such situations are instead subject to statutory provisions. The exceptions are:
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