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Print article BUSINESS — finance
Boosting Spain’s financial markete
The Spanish financial and capital markets have experienced a strong boost and been developed significantly over recent years, all on the basis of an increasingly harmonised regulatory framework which brings them closer to other EU statesn
Spanish legislature has addressed issues on several fronts, all aimed either at implementing EU Directives or addressing specific requirements determined by the market, such as, for example, a greater degree of transparency and liability on the part of the directors of listed companies; or a more flexible regulatory framework which deals with certain requirements from collective investment (Collective Investment Institutions) or venture capital sectors (Venture Capital Entities).
The following examples may be highlighted:
(1) Venture Capital. Law 25/2005, regulating venture capital companies and their managing companies. Other notable new features include a distinction between two types of entities, simplified or not, by reference to the number of shareholders or unit holders (more or less than 20), whether public offerings are made, whether investors are institutional or not and to the size of the minimum individual investment; and the possibility of creating venture capital entities investing in other venture capital companies. Capital requirements were maintained, which means that they amount to €1,200,000 for Venture Capital Companies, which must adopt the legal form of an SA company (sociedad anómina); €1,650,000 for Venture Funds (which have no legal personality); and €300,000 for Venture Capital Entity Managers.
Entities of this type have an optimal tax regime for eligible gains which can be up to 99% exempt.
(2) Collective Investment. Royal Decree 1309/2005, approving the Regulations for Law 25/2003, on collective investment institutions. This legislation implements Directives 2001/107/EC and 2001/108/ EC.
One of the most notable new features is the possibility of creating various compartments both in funds and in open-end investment companies with their respective investment and risk policies; the implementation of various types of funds such as Hedge Funds, Funds of Funds, and Exchange Trader Funds; an extension of the assets in which investments may be made; and the possibility of investing up to 10% of the assets of a Fund in a venture capital entity.
The new regulations are aimed at modernising the whole system for creating these institutions by simplifying procedures and reducing the time limits for approval. There cannot be less than 100 unit holders in a mutual fund, except in certain special cases, and, if there are compartments, these must have at least 20 unit holders. Security investment companies must adopt the legal form of an SA company (sociedad anónima) and, except in certain cases, they cannot have less than 100 shareholders. The minimum capital requirements vary according to the type of institution.
Lastly, we would highlight the cross-border marketing system for financial products of this type. Besides implementing the rules for marketing units in foreign funds in Spain (both those from other member states of the European Union and from countries outside the EU), it provides that shares and units in Spanish collective investment institutions can be marketed in other countries by foreign players.
(3) Public offerings of securities and requirements for issuing and admitting securities for trading on official secondary markets. Royal Decree 1310/2005, on the admission of securities for trading on official secondary markets, on public offerings or initial public offerings and the prospectus required for these purposes.
The publication of this Royal Decree marked the end of the process of implementing Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC in domestic legislation of the European Parliament and of the Council of 28 May 2001. This legislation notably standardised the requirements relating to the whole approval process for the prospectus required for admitting securities to trading on regulated EU markets and for public offerings, and made the so-called “prospectus passport” effective. Accordingly, all prospectuses approved in Spain will be valid in other EU member states with no further disclosure requirements. Besides, the Directive provides that the issuer or the person applying for admission may choose the competent authorities for prospectuses of certain categories of securities.
Spanish legislature has gone beyond merely implementing EU law to provide a modern, effective and efficient system for admitting securities for trading and for public offerings or initial public offerings, which enables the Spanish securities markets to stay and become more competitive. In the case of issuers domiciled in non-EU states, the competent Spanish authority (National Securities Market Commission (CNMV)) may approve a prospectus for admission to trading on a Spanish official secondary market or on another regulated market domiciled in the European Union, prepared under the legislation of the issuing state, where certain conditions are met (ie the prospectus must have been prepared under international standards established by international securities commissions).
(4) Corporate Governance
Spanish legislature has heeded requests for greater transparency
in the information supplied by listed companies,
and in the control of directors’ management of affairs by
approving a series of rules on disclosure requirements and
directors’ liability for companies with separate management
and ownership.
At the same time various special commissions and task
forces have been set up to analyse and propose a series of
measures, some of which have been included in positive law
and are therefore coercive, and others which have taken the
form of a series of recommendations.
Following the Olivencia “Sound Governance Code” (1998) and the “Aldama Report” (2003), a series of new items of legislation were introduced including: (a) an amendment to the rules governing the liability of directors of SA companies, to make them more restrictive (Law 26/2003, amending Securities Market Law 24/1988 and Legislative Royal Decree 1564/1989, approving the Spanish Corporations Law, as amended); an increase in the disclosure requirements for listed companies (ie obligation to publish an Annual Report on Corporate Governance or to provide information on transactions between related parties).
There is currently a draft Corporate Governance Code which includes some important recommendations for listed companies in order to ensure transparency and the due standard of care in their management. The main principle underlying this Code is the principle of “comply or explain”, which means that if a recommendation is not applied, an explanation must be given as to the reason why.
 Robert Simoncic |
Contact details:
Silvia Sorribas. Partner E-mail: silvia.sorribas@garrigues.com - Tel: ( 00 ) 34 93 253 3700 - Fax: ( 00) 34 93 204 6305