In Spain, the cultivation of Cannabis for research, medical and/or scientific purposes is totally forbidden unless an authorization from the AEMPS is obtained.

The process to obtain such authorization, as well as the documentation and information to be provided during such process, is regulated with little accuracy in very old regulations (a Law passed in1967 regulating narcotics; and an Order approved in 1963 including rules for cultivation of plants used in the production of narcotics).

All such regulations are pre-constitutional and were approved in an economic and social context that has nothing to do with the current one. This situation has generated legal uncertainty to the companies interested in obtaining this type of authorizations.

The AEMPS was asked in February 2018 (under the Law 19/2013, on transparency, access to public information and good governance) about the process to obtain an authorization for the cultivation of Cannabis. The AEMPS answered with just a brief guidance list of the documentation that “is usually requested”. The AEMPS also clarified that it did not have a “public document with an exhaustive list of all the information needed” and that each specific case could have its own “particularities”.  Recently, there are signs of improvement towards legal certainty in this field.

In December 2018, the AEMPS published two informative notes detailing the contents that any authorization for the cultivation of cannabis shall include. Also in December, after being requested by the Council on Transparency and Good Government, the AEMPS published a list of the existing authorizations for the cultivation of Cannabis in Spain: only four for the cultivation of Cannabis for research purposes and three for the cultivation of such plant for medical and scientific purposes.

Authorization application for cultivation

The AEMPS has stated the following regarding the data and information to be provided by the applicant of an authorization for the cultivation of cannabis in Spain:

For the cultivation of cannabis for medical, scientific or research purposes, the applicant shall provide the AEMPS with documentation regarding the purpose of the cultivation, the origin of the seeds, the THC and CBD content of the plants to be produced, the land plots and facilities to be used, and the security measures to be adopted.

Additionally, and only for the cultivation of cannabis for medical and scientific purposes, it is expressly foreseen that the authorization application must include information about the authorized manufacturer to whom the harvest will be delivered.

La entrada Clarification of the authorization process for the cultivation of cannabis for research, medical or scientific purposes aparece primero en Faus Moliner.

Law 39/2015, on the common administrative procedure of public administrations and Law 40/2015, on the legal regime of the public sector were aimed to transform the public administration into a digital one. Both laws implied an unprecedented change in the relationships with and between public Administrations.

Law 39/2015 states that companies having to interact with the public administration must do so through electronic means. However, according to this law, the most important provisions in relation to the electronic transformation would only take effect after two years from its entry into force. Now, those two years have already elapsed and yet there are many doubts about the reality of the digital transformation of the Administration, often leaving individuals in a situation of legal uncertainty.

In the following lines we will comment on the Draft Royal Decree which develops Law 39/2015 and Law 40/2015 regarding performance and functioning of the public sector by electronic means, which sheds some light on this matter.

Electronic Sites, General Electronic Access Point and Personal File

All Public Administrations will have a General Electronic Access Point through which all services, procedures and information will be accessible.

The Electronic Access Point through will have an associated electronic site through which all electronic sites of the Administration will be accessible as well.

Additionally, there will be a single space of personal documentation for each interested party. This space for personal documents will be found in a Personal File. The Personal File will be a personalized area of interested parties for their interactions with the public sector as regards the Central Government Administration in Spain.

Electronic Signature Systems

Interested parties may act through an authorized representative who may be a person or an entity. In such case, a qualified electronic certificate as representative must be obtained.

There are various methods of electronic signature regulated in this Draft. Among such methods, there is the key concerted system (the so-called “·cl@ve” system) along with other systems that the Administration may consider valid and which must meet all the criteria approved and published by the National Cryptologic Centre.

Electronic Registry

Except for those matters having a specific submission way, the forms, documents and communications may be submitted using the General Electronic Registry of the Central Government Administration in Spain.

It is important to note that those documents for which there is a specific way of submission will not be considered as submitted or filed when done through the abovementioned General Electronic Registry.

Electronic notifications

The interested parties will be able to access all their notifications through the Point of Access.

This Draft Royal Decree also regulates the “Unique Enabled Electronic Address”, which is an information system managed by the Ministry of Finance and Public Affairs for the purposes of electronic notifications which will be integrated in the Point of Access.

Furthermore, the Draft Royal Decree provides that in order for electronic notifications to produce the legal effects, they must meet the following requirements:

– The Administration must inform that the access to the content of the notification shall be considered as a notification for legal purposes, and that the rejection of such notification will have the effects provided by law (i.e. the notification is considered completed and the administrative procedure carries on).

– The acceptance or rejection of the notification must be recorded on the electronic site. In both cases, the notification will be considered as completed.

Key aspects of the administrative file

There are some aspects of the administrative file which are key to understand its functioning and related features.

The most interesting key aspects on the administrative file are the following:

– When the interested party submits a paper copy of a document to be incorporated into an administrative file, the Administration must generate an authentic copy which will have equal value as the submitted paper copy.

– All electronic administrative documents must be marked with a timestamp or an electronic stamp.

– In connection with the delivery of an administrative file by the Administration to the interested party, documents will be organized by an electronic index ensuring that the administrative file is complete.

– When an interested party requests access to the administrative file, such party must be granted electronic access to the file and has the right to obtain a copy thereof.

– The Administration must keep in electronic form all documents which are part of an administrative file.

Conclusion

It is not clear whether the new Spanish Government will accept the ideas raised by the previous members of the Ministry of Finance by means of the Draft Royal Decree analysed herein.

In any case, the Royal Decree that is finally approved will be of great importance for companies in order for them to know their rights and guarantees when interacting electronically with the Administration.

La entrada The e-Administration: an unfinished business aparece primero en Faus Moliner.

As explained in the Preamble, the purpose of this Law is twofold: on the one hand the measures introduced are aimed at strengthening the role of the Shareholders Meeting, and at encouraging the shareholders’ participation in the company. On the other hand, the legislator recognizes the importance of having a well-managed Board of Directors. In view of this, specific regulation is introduced that addresses certain increasingly important aspects of the functioning of such governing body.

In this special edition of our CAPSULAS newsletter we will highlight the most relevant modifications that Law 31/2014 concentrating on those measures that affect unlisted companies.

Matters reserved to the Shareholders Meeting

Law 31/2014 expands the list of matters which require approval by the Shareholders Meeting. This now includes the purchase, sale or transfer of essential assets. An asset is presumed to be essential when the amount of the transaction exceeds twenty five percent of the aggregate value of all the assets of the company recorded in its last approved balance sheet.

As to the possibility that the Shareholders Meeting gives instructions on matters of management, that already existed for Limited Liability Companies (“Sociedades de Responsabilidad Limitada”), this faculty is now extended to the Shareholders Meeting of Joint Stock Companies (“Sociedades Anónimas”). For both types of Companies, the By-Laws may limit such faculty.

Conflicts of interest at Shareholders Meetings

The regime on conflicts of interest is modified, and the general clause that prohibits a shareholder to vote in the most serious cases of conflict of interest, listed in the Law, is extended to Joint Stock Companies. Furthermore, it is from now on presumed that the company’s interests have been violated in case a corporate resolution has been adopted with the determining vote of the shareholder(s) affected by a conflict of interest. If any such resolution is challenged, then the Company or the affected shareholder(s) shall have the burden of proving that the resolution does not harm the interests of the Company.

Adoption and challenging of corporate resolutions

A new article is introduced, making it mandatory to submit matters that are substantially independent to the Shareholders’ approval in a separate way, even though such issues may be included in the same point of the Shareholders Meeting’s agenda. Examples of matters that must be voted on separately are the appointment, the reelection or the dismissal of any director, the modification of any article of the by-laws that has its own autonomy, or those matters for which the by-laws have established such obligation.

As regards the adoption of resolutions by the Shareholders Meeting of Joint Stock Companies, it is clarified that such resolutions are validly adopted when approved by simple majority of the votes of the shareholders present or represented at the meeting, that is, when there are more votes in favor of a resolution than votes against. This was not quite clear in the previous wording of the Law on Share Capital Companies.

The regulation on the challenging of corporate resolutions has also been revised, on the basis of a balance between reasons of business efficiency, the protection of minority shareholders and the security of legal transactions. As a result, resolutions may no longer be challenged because of the infringement of certain minor procedural requirements.

Furthermore, the new law introduces a general regime for the annulment of corporate resolutions that simplifies the existing procedure. Actions for annulment expire after one year, except for actions against resolutions that are contrary to public order, which have no statute of limitations.

Finally, in relation to the challenging of resolutions that are detrimental to the corporate interest, it should be noted that such concept of corporate interest has been widened. From now, corporate interest will considered to have been violated when the corporate resolution is imposed in an abusive way by the majority of shareholders.

Duties of the Board of Directors

The current wording of the Law on Share Capital Companies already included specific provisions on the duty of care, the duty of loyalty, and on the conflicts of interest of the directors of the company, but Law 31/2014 reinforces all these provisions.

As to the duty of care, the new wording of the Law contains a more precise description of what this duty entails, having regard to the nature of the position held by each director and to the functions attributed to each of them. In this sense, we may highlight that directors must apply an appropriate degree of dedication and must adopt those measures that are necessary for the good governance and control of the company.

In the sphere of strategic business decisions to be adopted by the directors, the business judgment rule is introduced. This means that the director’s duty of care is considered to be fulfilled when he or she has acted in good faith, without the inference of personal interests, on the basis of sufficient information and in accordance with an appropriate decision making procedure. This business judgment rule does not apply to decisions that affect other directors or affiliated persons personally.

Board Meetings must be held at least quarterly

The new law places special emphasis on the importance of the direct implication of the directors in the daily management of the Company and on the continuous involvement of the directors in the company’s affairs. A result of these enforced requirements of implication is the newly introduced obligation that the Board of Directors must meet at least once every quarter. Even though the Law does not expressly state this, such meetings may be held by means of remote communication procedures, such as telephone or videoconferences, provided that each member of the Board of Directors who participates in the meeting is able to hear and address all of the other participating members simultaneously.

Duty of Loyalty

As regards the duty of loyalty, its contents is described with more detail and a specific procedure that must be followed in case of a conflict of interest is established. The fulfilment of the duty of loyalty is made imperative, and the company’s by-laws may not limit or exclude such duty. In case a director breaches his or her duty of loyalty, such director will be obliged to indemnify the damages caused to the company, and also to return to the company any unjust enrichment obtained that he or she might have obtained.

Liability of directors

As regards the regime for liability of directors, it is established that directors shall be liable towards the company, its shareholders and creditors for any damage caused by their acts or omissions that are contrary to the law or the By-Laws or by acts performed in breach of the duties that are inherent to the exercise of their positions. In order for liability to exist, the director must have incurred in willful misconduct or negligence, but this will be presumed to exist, unless proven otherwise, when the act is contrary to the Law or to the company’s by-laws.

In the event that no permanent delegation of the faculties of the Board of Directors has been made, all provisions on the duties and responsibilities of the directors will apply to the person who, in whichever capacity, has been entrusted with high management functions within the company, without prejudice to the legal remedies that the company may bring against such person on the basis of the legal relationship that binds the company with such person.

Remuneration of directors

As to the remuneration of the directors, the general rule continues to be that directors do not get paid in consideration for their holding such position unless the by-laws of the company state otherwise. In the event that the by-laws of the company determine that the position of Director is remunerated, Law 31/2014 introduces a specific regulation on the way in which the by-laws must establish the retributions that the directors may receive by virtue of their position.

The maximum amount of the yearly remuneration of all of the directors, in their capacity as such, must be approved by the Shareholders Meeting and will remain in force until expressly modified. Unless the Shareholders Meeting decides otherwise, the distribution of the amount between the separate directors will be decided upon by the directors themselves. If the directors operate as a Board, then the Board shall be the one taking such decision. This distribution must be made on the basis of the functions and responsibilities attributed to each member of the Board.

In any case, the law states that the remuneration of the directors must be proportionate to the magnitude of the company, to its economic situation and to the market standards of comparable companies. The remuneration system must be oriented towards promoting the long-term profitability and sustainability of the company, and incorporate those measures that may be necessary to avoid that the directors may be incentivized for taking excessive risks, or that they may be rewarded for unfavorable results.

Permanent delegation of faculties of the Board of Directors

As regards the faculties that the Board of Directors may delegate to one or more managing directors (“Consejeros Delegados”) or executive committees, Law 31/2014 lists a series of matters that may not be subject to delegation because they are considered to be at the core of the management and supervisory functions of the Board of Directors.

As an example we may cite the supervision of the effective functioning of the committees that may have been created or of the delegated bodies, the determination of the company’s general policies and strategies, the appointment or termination of managers who directly depend from the Board of Directors or from one of its members, and the establishment of the terms of the contracts of such managers, including their remuneration.

Furthermore, it has been established that when a member of the Board of Directors is appointed as managing director, or is otherwise given executive powers, the company and the appointee must enter into a written agreement that shall be attached as an annex to the minutes of the meeting in which the appointment is formalized.

This contract shall lay down all concepts for which the director may receive compensation related to the exercise of the executive functions, including, if applicable, the possible indemnity for the early termination of such functions, and the amounts payable by the company in concept of insurance premiums or payments to savings plans.

No payments may be made to the director for the exercise of executive powers in case the amounts or concepts are not contemplated in the contract, which must be in line with the remuneration policy that may be in force in the company.

The contract must have been previously approved by the Board of Directors, with the favorable vote of two thirds of its members. The member of the Board affected by the appointment shall refrain from assisting and voting at the meeting in which such contract is discussed.

Public information

Finally, the Second Final Provision of Law 31/2014 introduces the obligation for unlisted companies that formulate their annual accounts in unabbreviated form to include their average period for payment to suppliers on their website. Such companies were already under the obligation to include this information in their annual accounts; the novelty here is the publication on the website.

Entry into force

Law 31/2014 enters into force on 24 December 2014. The modifications that affect unlisted companies and that deal with the remuneration of Directors will enter into force on 1 January 2015, and the corresponding decisions by the Shareholders Meeting must be adopted in the first Shareholders Meeting that may be held after such date.

La entrada A step forward in the transparency and professionalism of the management of Spanish companies aparece primero en Faus Moliner.