The Greek parliament recently approved Law 3310/2005 on measures to secure transparency and to prevent circumvention upon conclusion of public contracts, which applies to the procedure for the conclusion and performance of public contracts and is known as the Law on Substantial Shareholders. A substantial shareholder for the purposes of the Law is any natural person or legal entity, that: (a) holds 1% of the company's share capital or voting rights; (b) irrespective of its holdings, belongs to the 10 greater shareholders of a company because of its participation in the company's share capital or the number of voting rights that it holds; (c) is entitled to appoint or recall one member of the board of directors; (d) has concluded, either directly or indirectly, contracts with the company that yield income greater that one tenth of the company's gross income in the previous fiscal year.
The main provisions of the Law are as follows:
- The status of an owner, partner, substantial shareholder or director of a media company is incompatible with being owner, partner, substantial shareholder or director of a company that enters into public contracts, that is, contracts with the Hellenic Republic or entities of the public sector.
- Entering into public contracts with media companies as well as their partners, substantial shareholders or directors is prohibited.
- Entering into public contracts with offshore companies is prohibited. Moreover, offshore companies are not allowed to hold more than 1% of the share capital or to be a partner of a media company. In case of infringement of the above-mentioned rules the company that intends to conclude a public contract, or the media company, must ask the offshore company to sell the total or excess amount of shares in the respective company.
- The shares of sociétés anonymes that take part in the procedure for awarding public works, supply and service contracts that have a value higher than €1 million must be registered.
The registration requirement does not apply to shares listed on the ATHEX which are held by: (i) Ucits funds in the EU or OECD member states that are supervised by authorities that are Iosco members; (ii) investment companies; (iii) insurance companies; (iv) credit institutions complying with the Bank of Greece solvency criteria; and (v) social security organizations, provided that all the above reside in an EU or OECD member state.
In case of infringement of the provisions of the Law, the Greek National Radio and Television Council may either impose an administrative fine or oblige the natural persons or legal entities that fall into the prohibitions to sell the participation that triggered their characterization as substantial shareholders. The Law came into force on February 14 2005, but provides for a four-month period during which affected companies and their shareholders must comply with its restrictions. It is already affecting a large number of companies (as well as their shareholders) that have dealings with the Greek state or in the media sector, many of them listed on the ATHEX. It has also received a lot of criticism, as the Internal Market Directorate of the European Commission has threatened Greece with action, unless certain of its provisions are repealed.