Pre-emption Right in a S.A.
The pre-emption right protects shareholders in a S.A., allowing them to acquire newly issued shares first in the event of a share capital increase. This ensures that they maintain their proportional ownership and influence in corporate decision-making.
Exclusion of Pre-emption Rights
Under Greek Company Law (Law 4548/2018), pre-emption rights are not absolute. Article 27 allows the General Meeting of Shareholders to exclude or limit these rights, provided certain legal requirements are met.
For such an exclusion to be valid, the following conditions must be satisfied:
- A special majority vote at the General Meeting of Shareholders.
- A detailed report by the Board of Directors explaining the rationale behind the exclusion.
- Transparent disclosure of the decision to ensure shareholder awareness.
Reasons for Exclusion or Limitation
The exclusion of pre-emption rights is justified when it serves the company’s best interests. Common reasons include:
- Attracting strategic investors who contribute to the company’s growth.
- Ensuring liquidity by securing immediate funding.
- Mergers and acquisitions, where new shares are issued in exchange for shares in another company.
Legal Requirements for Exclusion
For the exclusion of pre-emption rights to be legally valid, the following principles must be respected:
- Necessity: The exclusion must be essential for achieving a specific corporate objective.
- Proportionality: It must not excessively harm existing shareholders.
- Equal treatment: All shareholders must be treated fairly.
Shareholder Protection & Limitations on Exclusion
Greek law does not allow a permanent exclusion of pre-emption rights through the company’s articles of association. Each exclusion must be approved by the General Meeting of Shareholders, ensuring that shareholders retain oversight and control.
Conclusion
Pre-emption rights are crucial in a S.A. to maintain shareholder balance. However, their exclusion or limitation can be beneficial when done in accordance with legal safeguards, ensuring transparency and fairness.