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16 June 2004
More Flexible Procedure
Protection of Bondholders
Law 3156/2003 regulates the issuance of debt securities by Greek private companies, including changes to the Company Law (2190/1920). The new law covers the following four types of bond:
The new regime introduces flexible procedures for the issuance of bonds and related tax incentives. It is intended and likely to be used by a substantial number of Greek companies for restructuring debt.
According to the new provisions, the issuance of ordinary and exchangeable
bonds can be approved by the general assembly of the company by a simple quorum
and majority (at least one-fifth of the shareholders must be present or represented
and the decision is taken by a majority vote). Alternatively, the board of directors
may decide to issue such bonds, provided that the articles of association allow for this.
The issuance of convertible bonds and bonds that carry a right to participate in the profits of the issuer is decided by the general assembly through an enhanced quorum and majority (at least two-thirds of the shareholders must be present or represented and the decision is taken by a majority of two-thirds of those present or represented). Alternatively, provided that the articles of association provide for this, the board of directors may approve the issuance of convertible bonds by a two-thirds majority where this right is exercised within the first five years of the company's incorporation and the amount of the loan does not exceed the initial share capital of the company. The general assembly may also delegate this authority to the board, in which case the amount of the debt incurred cannot exceed the fully paid-up share capital at the time of delegation.
The terms of the loan are determined by the competent body deciding the issuance of the bonds. They include the following:
The issuing resolution may also empower the board to determine any of the bond
terms, excluding the amount of the loan and the type of bonds to be issued. These terms are
binding on the bondholders and their successors, and any person accruing rights
from these persons.
Protection of Bondholders
Under the provisions, bondholders have discretion as a group to approve any amendment to the bond terms that is to their detriment. In the case of convertible bonds, any merger to be decided by the issuer must also be approved by the bondholders as a group.
The bondholders shall be organized as a group only in the case of bonds:
Unless provided otherwise, bonds are freely transferable. The issuer may redeem them at any time, subject to the terms of the bond instruments. Where the bonds are convertible or exchangeable for the issuer's equity, the issuer may convert or exchange them only if the Company Law provisions on the reacquisition of an issuer's own shares are met.
Finally, the law provides that any type of bond may be secured by any type of security (mortgage, lien or guarantee).
Pursuant to the provisions, the following are exempt from any direct or indirect tax, duty, levy, right or encumbrance:
Pursuant to Law 2682/1999, no income tax on interest paid where the bondholder is a foreign legal entity or individual. Where the bondholder is a natural or legal Greek person, no income tax is due if the bond is held until its maturity. Otherwise, under Article 11 of Law 2238/1994, a 10% income tax on the amount of the interest is applied.
For further information on this topic please contact Connie Katsigiannaki or Christina Chini at PI Partners by telephone (+30 210 28 86 550) or by fax (+30 210 28 86 910) or by email (email@example.com or firstname.lastname@example.org).
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