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Spain

New regulations for compensation systems of directors and managers through shares and stock options

Recent Law 55/1999, of December 29, has established a new regulation for the payment of directors and managers through the delivery of shares, stock options and other payment systems related to the value of the company's shares.

The most relevant aspects of these regulations are the following:

Regarding any corporate directors (whether of listed or non-listed companies), the law establishes two requirements for the implementation of this kind of payment system:

  • it must be expressly contemplated in the Articles of Association; and
  • the previous resolution of the shareholders' meeting will be necessary, expressing its particular conditions.

Regarding executive managers, the previous approval of the implementation of this payment system by the shareholders' meeting is required. However, this approval is only required for executive managers:

  • of listed companies; and
  • that develop high level management functions.

In addition, the particular conditions of the payment system (number of shares or options, period for execution, price to be paid) can be left for approval by the board of directors.

Finally, and also for listed companies, certain information duties arise out of the implantation of these payment systems.

Directors of listed companies have two information duties:

  • notification of significant holdings (of the acquisition or transfer of stock options over the shares that is executed under any right of ownership); and
  • notification of "relevant fact" to the CNMV of the delivery of shares, the stock options granted and the payment system, as well as their modifications, related to the shares' value received or recognized in execution of this payment system.

Managers of listed companies must only make the communication of "relevant fact" to the CNMV.

Luis de Carlos / Mª del Rosario Mirat

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