A Bill that introduces new standards for the corporate governance of companies with shares listed on the Athens Stock Exchange was recently approved by the Greek parliament and following Government Gazette registration the new law has now come into force (as law No 3016/2002). These new corporate governance rules are a follow-up to a Code of Conduct for listed companies issued by a decision of the Capital Market Commission in late 2000.
Three areas are affected, namely, the composition of the board of directors, the way that internal audits function and the use of funds collected from the public through capital increases. The most important new rule involves the obligation to have non-executive members on the board of directors (at least one-third of the total number of members) and also independent members (at least two of the non-executive members). The law defines explicitly when a director is to be deemed as independent, which is generally when there is no business or other relation with the company, its shareholders or affiliated companies.
The new law introduces an obligation to create a compliance unit, with specific rules for the content of the internal audit regulation and the organization of such a department. Finally, the rules regarding the use of capital funds are a peculiarity of Greek law, which places special emphasis on this point, following the excesses of listed companies in the past (where large amounts of money were diverted to uses other than those described in offering circulars). It is now obligatory to account in detail for the use of funds deriving from capital increases, by drafting a special table of fund's use – which must be audited by an independent auditor. Any deviation from the use of funds described in the approved prospectus must be decided by the board of directors with a majority of three-fifths, as well as the shareholders' meeting and announced to the public, or the company faces possible suspension of trading of its stock and monetary fines.
Issuers must comply with the new obligations within six months from registration of the new law with the Government Gazette.