Listed Companies and Legal Challenges

Companies listed on the regulated market of the Athens Stock Exchange (the “ATHEX”) have been always faced with the challenge of compliance with an intricate legal framework comprising rules on the operation of the stock exchange, disclosure obligations and corporate governance requirements.

This article focuses on the challenges posed to listed companies by the recently amended Athens Stock Exchange Rulebook (the “ATHEX Regulation”) as well as the changes to be introduced by the upcoming legislation which will implement EU Directive 2022/2381 on improving the gender balance among directors of listed companies (the “Gender Balance Directive” or “Directive”) in Greece.

Market activity and the new ATHEX Regulation

The Greek capital markets saw a dynamic start to 2024, marked by the IPOs of the Athens International Airport and Noval REIC and a number of private placements (including those of Piraeus Bank for HFSF’s shares, Austriacard, Jumbo, and Mytilineos). The year continued with the listing of Performance Technologies S.A. on the main market and of SOFTWeb on the alternative market (the “EN.A.”) and, more recently, with the placement of HFSF’s holding in the share capital of the National Bank of Greece and the share capital increase of Attica Bank. The recent listing of the Bank of Cyprus on ATHEX following its choice to delist from the London Stock Exchange, the combined public offering of Cenergy Holdings in Belgium and Greece and the parallel listing of its shares on ATHEX and Euronext Brussels, and the announced intention of Metlen for dual listing on the ATHEX and the London Stock Exchange show the increased market activity compared to previous years.

Such activity is expected to continue not only due to increased interest from investors in the Greek market but also due to the recent changes in the ongoing free float requirements that listed companies are obliged to observe pursuant to the revised ATHEX Regulation.

The new free float requirements, which apply not only at the time of admission to trading but also on an ongoing basis, and which will be tested semi-annually, require dispersion of at least 25% of the total number of stocks of the same segment to the wider public. This may be reduced to 15% solely for companies of larger capitalisation (ie, at least EUR200 million). Upon initial admission to trading, the free float should be allocated to at least 500 persons, which may be reduced to 300 persons but with the obligation to appoint market makers for at least one year. Exemptions from the ongoing free float thresholds are provided for stocks classed as having high trading activity, such as those included in the FTSE/Athex Large Cap index, those listed on a secondary market, and those displaying an average daily velocity of at least 0.05% with more than 200 trades.

The new rules aim to assist ATHEX in gaining in depth, liquidity and marketability. Tested against the criteria above, more than 18 listed companies are highly concentrated and thus fall short of the new free float requirements. These companies must seek to remedy this through share capital increases or private placements. The deadline to improve is tight considering that the requirements apply as of 1 July 2025 for companies already listed. The situation is also challenging for real estate investment companies (the “REICs”), since their listing on the regulated market is mandatory by law and their collective market capitalisation is estimated at around EUR3.1 billion with only EUR477 million, approximately, being dispersed to the wider investment public. REICs are therefore among the first expected to proceed with placements to remedy their low free float.

The new free float requirements do not leave much room for discretion depending on the orderly operation or the special conditions of the market, as was the case under the previous regime, when assessing the initial and the continuous minimum free float thresholds. On the contrary, the ATHEX will be now running periodic stress tests of the average free float of listed companies, which will take place biannually (January and July). Depending on the outcome of the stress tests, shares will be made subject to remedial action, be transferred to the surveillance segment until the free float is restored and, if the free float is found to be below the threshold, eventually be faced with suspension and possibly delisting.

On the other hand, delisting is not the only option for companies which fail to remedy a reduced free float. The new rules allow ATHEX the discretion to decide on the transfer of such companies’ shares to the EN.A. as an alternative to delisting.

New gender-balance targets for the companies’ boards

At the same time, while many listed companies are struggling to comply with the corporate governance rules set forth in Greek law 4706/2020 (the “Corporate Governance Law”), (at least large) listed companies will need to take additional steps to comply with the new gender-balance targets provided by the law which will implement the Gender Balance Directive (the “Gender Balance Law”), which is currently in the drafting process.

The Gender Balance Law shall apply only to large, listed companies. SMEs, defined as firms employing less than 250 persons and displaying an annual turnover not exceeding EUR50 million or an annual balance sheet total not exceeding EUR43 million, are out of scope of the Gender Balance Directive’s application. However, member states are encouraged to put in place policies to support and incentivise SMEs to significantly improve the gender balance at all levels of management and on boards. The Gender Balance Directive establishes minimum requirements, thus leaving untouched member states’ discretion to introduce or maintain provisions which are more favourable than those of the Directive, to ensure a more balanced representation of women and men in respect of listed companies incorporated in their national territory.

The Gender Balance Directive expects member states to ensure that large, listed companies achieve by 30 June 2026 a gender-balanced representation on their boards to be reached by achieving either of two objectives: (i) members of the under-represented sex holding at least 40% of non-executive director positions and (ii) members of the under-represented sex holding at least 33% of all director positions, including both executive and non-executive directors. Large, listed companies which have elected to achieve the non-executive director objective, will have to set individual quantitative objectives to be achieved by 30 June 2026 with a view to improving the gender balance among executive directors as well.

In order to achieve the aforementioned objective, large, listed companies will be required to adjust their processes for selecting candidates for election to director positions. More specifically, when choosing between candidates who are equally qualified in terms of suitability, competence and professional performance, the companies should give priority to the candidate of the under-represented sex unless, in exceptional cases, reasons of greater legal weight, such as the pursuit of other diversity policies, invoked within the context of an objective assessment, which takes into account the specific situation of a candidate of the other sex and which is based on non-discriminatory criteria, tilt the balance in favour of the candidate of the other sex. The burden of proof that reasons of greater legal weight tilted the balance in favour of the candidate of the other sex in the selection process will lie with the company.

Large, listed companies will report to the Hellenic Capital Market Commission each year on gender representation on their boards, distinguishing between executive and non-executive directors and, in the case that the gender balance objectives set by the Directive are not achieved, the companies will need to explain the reasons and describe the measures taken, or to be taken, in order to achieve them. Such information will have to be also included in the annual corporate governance statement that listed companies are obliged to make available to the public. A central list of the listed companies that have achieved either of the objectives set by the Directive will be published and regularly updated.

The Gender Balance Directive allows EU member states whose laws already provided, by 27 December 2022, for a 25% quota of all director positions, coupled with effective, proportionate and dissuasive enforcement measures in the event of non-compliance, the discretion to suspend the application of any additional measures as they are deemed to have achieved the quantitative objectives of the Directive.

Article 3 of the Corporate Governance Law currently provides that the under-represented gender should represent at least 25% of the total number of a listed company’s board of directors (without distinguishing between SMEs and other listed companies) and Article 24 lays down sanctions in the event of non-compliance. The Gender Balance Directive was first mooted for consultation at EU level in 2012 and may have been a source of inspiration in the context of the introduction of the 25% quota in the first place. Greece is therefore granted the discretion not to adopt any of the measures provided in the Gender Balance Directive. However, according to our information, Greece has decided to adopt additional measures and require (at least large) listed companies to achieve, by 30 June 2026, the objective of members of the under-represented gender holding at least 33% of all director positions.

In this respect, listed companies in Greece that are subject to, but do not achieve, the objective will be expected to adjust their nomination policies and procedures to the provisions of the Gender Balance Law and achieve by 30 June 2026 the objective of having at least 33% women on their boards. The Gender Balance Law is expected to be enacted within the deadline for transposition of the Gender Balance Directive – ie, by the end of December 2024. It is worth noting that the Corporate Governance Law is applicable to all listed companies irrespective of their size. If Greece were to decide to now exclude SMEs from the scope of the 33% objective (something which Greece is not required to do), it remains to be seen whether they will still be subject to the lower quota of 25% currently required by the Corporate Governance Law, be obliged to set individual quantitative objectives for all director positions or be left entirely free to adjust the gender balance of their boards as they see fit. Greece enjoys considerable discretion on this front given that the Gender Balance Directive is a minimum harmonisation directive.

Although the Directive sets objectives and allows companies time and discretion to define the appropriate measures to achieve such objectives, the Corporate Governance Law provides for a mandatory quota of the under-represented sex’s presence on the board of directors. Viewed from the perspective of the alleged scarcity and related difficulty faced by listed companies in finding female candidates who meet the individual suitability criteria of the Corporate Governance Law, the 33% mandatory quota risks becoming another formalistic measure for companies to achieve a “tick-the-box” compliance. An undesired side-effect of the mandatory quota was an observable trend among listed companies to appoint women in predominantly non-executive director positions limiting their say on daily management (without due regard of the considerable pool of women qualified for executive director positions). As a result, under-representation remains when it comes to executive directorships in Greece. This runs counter to the letter and spirit of the Gender Balance Directive which expects member states to require from listed companies to apply a gender balanced approach to the entire board members’ selection process.

That being said, in accordance with the Directive, member states are obliged to ensure that listed companies that do not pursue the objective of 33% relating to all directors, whether executive or non-executive, set individual quantitative objectives with a view to improving the gender balance among executive directors. As this Directive is a minimum harmonisation directive, this does not prevent member states legislating the objective of 33% relating to all directors (Greece included) from requiring the same. In a sense, in jurisdictions adopting the one-tier board system, such as Greece, the best way to achieve parity in both categories of directors may be to legislate a minimum of under-represented sex directors per category (executive and non-executive ones). 

Be that as it may, mandatory quotas should best be viewed as temporary legislation. The European Parliament, in its resolution of 6 July 2011, noted that it would be important that quota legislation be implemented on a temporary basis. In the same direction, the Gender Balance Directive has set 31 December 2038 as the date of its initially intended expiry. In the context of EU harmonisation, the Gender Balance Directive aims to bring EU member states up to the same high standards of gender-balanced representation by fostering a culture that shall then remain in the form of best practice. The fostering of such a culture should be at the core of any new legislative measure setting gender-balance objectives. Such a culture is still in the process of being developed in the majority of listed companies in Greece.

The introduction of new quotas for the presence of women on companies’ boards may not be enough. Large, listed companies have increased social responsibility and should probably consider promoting changes in their nomination procedures not only for directorship but also for senior management positions (which form a considerable pool of candidates for nominations to executive director positions). In that sense, a bottom-up approach is needed to complement the top-down effect of boardroom quotas. Otherwise, it will continue to be harder for such companies to identify suitable female candidates to appoint as executive directors, especially in sectors where members of a particular gender are under-represented.