Professionals

The various companies within a group sometimes have diverging interests when it comes to an intra-group operation.

If decisions or operations by listed companies may have an effect on other companies in the group, the law provides for conflict of interest rules. The starting point for this is that intra-group operations are permitted, but are subject to a procedure involving the independent directors and accompanied by an information obligation towards shareholders and third parties via the annual report.

The majority of legal commentators take the view that these conflict of interest rules apply only to decisions or operations that fall within the competence of the board of directors and do not apply to decisions or operations, such as those addressed in these FAQs, which fall within the competence of the general meeting. The protection offered by the procedure is not necessary, according to the current view, if the general meeting takes the final decision. For if the general meeting judges that an operation proposed by the board of directors is not in the interest of the company, it is free in principle to reject the proposal. In practice, however, this is not always the case, for example in situations where the reference shareholder has sufficient voting rights to approve the operation. For this reason, the FSMA supports the idea that when it comes to operations that give rise to conflicts of interest on the part of the persons initiating the operation, the conflict of interest rules be applied voluntarily or 'by analogy'.

The FSMA has noted, moreover, that in practice this is often what happens. The board of directors of a listed company applies the conflict of interest rules voluntarily, with the aim of determining whether the operation takes place under conditions that are at arm’s length. This practice deserves to be followed, because the application of the conflict of interest rules allows and at the same time requires independent directors, aided by one or more independent experts, to take an explicit standpoint regarding the operation.

The FSMA further considers it a good practice for the report drawn up by the independent directors to be made available in full to the shareholders at the time when the general meeting is called.