COMMON DRAFT TERMS OF MERGER BETWEEN BANKIA, S.A. … · 26/06/2017 · Any difference between the...
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COMMON DRAFT TERMS OF MERGER BETWEEN BANKIA, S.A. (as absorbing company) AND BANCO MARE NOSTRUM, S.A. (as absorbed company) 26 June 2017
Transcript of COMMON DRAFT TERMS OF MERGER BETWEEN BANKIA, S.A. … · 26/06/2017 · Any difference between the...
COMMON DRAFT TERMS OF MERGER
BETWEEN
BANKIA, S.A.
(as absorbing company)
AND
BANCO MARE NOSTRUM, S.A.
(as absorbed company)
26 June 2017
CONTENTS
1. INTRODUCTION - RATIONALE FOR THE MERGER 1
2. DESCRIPTION OF THE PLANNED MERGER 2
3. IDENTIFICATION OF THE MERGING COMPANIES 2
3.1 Absorbing company 2
3.2 Absorbed company 2
4. MERGER EXCHANGE 2
4.1 Exchange ratio 2
4.2 Manner of covering the exchange of shares; capital increase 3
4.3 Exchange procedure 4
4.4 Mechanism to facilitate the exchange 5
5. CONTRIBUTIONS OF LABOUR AND ANCILLARY
OBLIGATIONS 5
6. SECURITIES AND SPECIAL RIGHTS 5
7. BENEFITS EXTENDED TO INDEPENDENT EXPERTS AND THE
DIRECTORS 5
8. RIGHTS CONFERRED BY THE NEW SHARES 5
9. EFFECTIVE DATE FOR ACCOUNTING PURPOSES 6
10. BYLAWS OF THE RESULTING COMPANY 6
11. VALUATION OF THE ABSORBED COMPANY’S ASSETS AND
LIABILITIES 6
12. MERGER BALANCE SHEETS AND ANNUAL ACCOUNTS 7
13. CONSEQUENCES OF THE MERGER FOR EMPLOYMENT,
IMPACT ON THE GENDER BALANCE OF THE GOVERNING
BODIES AND IMPACT ON THE COMPANY’S SOCIAL
RESPONSIBILITY 7
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14. APPOINTMENT TO THE BOARD OF DIRECTORS OF THE
RESULTING COMPANY 8
15. TAX TREATMENT 8
16. CONDITIONS PRECEDENT 8
17. INDEPENDENT EXPERT 9
18. PUBLICATION AND INFORMATION 9
19. INTERIM PERIOD UNTIL THE MERGER IS EXECUTED 9
19.1 Purpose 9
19.2 Regular Management Commitment 10
19.3 Restricted Actions 11
19.4 Independent Monitoring Entity 14
19.5 Reciprocal information 16
19.6 Liability 16
COMMON DRAFT TERMS OF MERGER
between
BANKIA, S.A.
(as absorbing company)
and
BANCO MARE NOSTRUM, S.A.
(as absorbed company)
The Boards of Directors of Bankia, S.A. (hereinafter, “Bankia”) and of Banco Mare
Nostrum, S.A. (hereinafter, “BMN” and, jointly with Bankia, the “Merging Entities”),
pursuant to the provisions of Article 22 et seq. of Law 3/2009 of April 3 on Structural
Changes to Companies (“Law 3/2009”), have drawn up and signed these common draft
terms of merger (the “Draft Merger Terms”), containing the information required under
Article 31 of Law 3/2009.
1. INTRODUCTION - RATIONALE FOR THE MERGER
The planned merger establishes the combined bank (the “Resulting Entity”) as one of
the leading banks in Spain, making it the fourth largest in terms of total assets. The
geographical complementarity of the customer base and branch network increases the
Resulting Entity’s diversification and scope, reinforcing a strong competitive position.
The merger also allows the shareholders of both entities to benefit from significant value
generation through the expected synergies. Both banks have a business model focused on
retail mortgages and a similar customer profile, resulting in great potential for synergies
through reduction of duplicated costs, while the integration risk remains limited.
With the merger exchange through delivery of Bankia shares, BMN shareholders not only
benefit from the synergies but also gain liquidity, as they receive shares that are traded
on the Spanish stock exchanges.
Thanks to Bankia’s comfortable capital ratios, well in excess of the regulatory minimums
and above those of its peers, there is no need to raise funds in the markets to finance the
transaction. Through the merger, Bankia optimises the use of its capital surplus and
achieves a return above its cost of capital, which translates into value creation for its
shareholders.
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2. DESCRIPTION OF THE PLANNED MERGER
The planned transaction can be described as the merger by absorption of BMN (absorbed
company) by Bankia (absorbing company) (the “Merger”), on the terms provided in
Articles 22 et seq. of Law 3/2009, resulting in the winding-up of BMN through
dissolution without liquidation and the en bloc transfer of all its assets and liabilities to
Bankia, which by universal succession acquires all the assets and liabilities, rights and
obligations of BMN on the terms stated in these Merger Terms.
As a result of the Merger, the shareholders of BMN will receive shares of Bankia in
exchange for their participation in the absorbed company, following the procedure
described in Clause 4 below.
3. IDENTIFICATION OF THE MERGING COMPANIES
3.1 Absorbing company
Name: Bankia, S.A.
Registered office: Calle Pintor Sorolla 8, 46002 Valencia.
Registration details: Registered in the Valencia Mercantile Register, volume 9341,
book 6623, folio 104, sheet V-17274.
Tax identification number: A-14010342.
3.2 Absorbed company
Name: Banco Mare Nostrum, S.A.
Registered office: Paseo Recoletos 17, 28004 Madrid.
Registration details: Registered in the Madrid Mercantile Registry, in volume
28378, section 8, folio 1, sheet M-511037.
Tax identification number: A-86104189.
4. MERGER EXCHANGE
4.1 Exchange ratio
The ratio for the exchange of the shares of BMN for shares of Bankia, which has
been set based on the real value of the two entities’ assets and liabilities, will be as
follows, with no complementary cash consideration:
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ONE (1) ordinary share of Bankia, with a face value of one euro per share, for
every SEVEN POINT EIGHT TWO NINE EIGHT SEVEN (7.82987) ordinary
shares of BMN, with a face value of one euro per share.
Pursuant to Article 33 of Law 3/2009, the Boards of Directors of Bankia and BMN
will each issue a report giving a detailed explanation and justification of the legal
and financial terms of these Draft Merger Terms, with special reference to the share
exchange ratio (and the methodologies used in setting it) and any particular
valuation difficulties, and setting out the implications of the Merger for the
shareholders, creditors and employees of the merging companies.
On 26 June 2017, Morgan Stanley and Rothschild, retained by Bankia for this
purpose (the latter at the request of the Committee of Independent Directors set up
within Bankia’s Board of Directors to monitor and supervise the merger process),
each issued a fairness opinion, the former for the Board of Directors and the latter
for the abovementioned Committee of Independent Directors, concluding that, at
that date and based on the elements, limitations and assumptions contained in each
opinion, the proposed exchange ratio is fair from a financial point of view for
Bankia’s shareholders.
On the same date, Deutsche Bank and JP Morgan, retained by BMN for this purpose
(the latter at the request of the Committee of Independent Directors set up within
BMN’s Board of Directors to monitor and supervise the merger process), each
issued a fairness opinion, the former for the Board of Directors and the latter for the
abovementioned Committee of Independent Directors, concluding that, at that date
and based on the elements, limitations and assumptions contained in each opinion,
the proposed exchange ratio is fair from a financial point of view for BMN’s
shareholders.
The proposed exchange ratio will be subject to verification by the independent
expert appointed by the Valencia Mercantile Registry pursuant to Article 34 of Law
3/2009.
4.2 Manner of covering the exchange of shares; capital increase
Bankia will cover the exchange of BMN shares with new ordinary shares in the
ratio specified in the previous section.
For this purpose, Bankia will increase its capital by the amount required to cover
the exchange of BMN shares through the issuance of the necessary number of new
ordinary shares with a face value of one euro per share, of the same single class and
series as the shares currently outstanding, represented by book entries and
earmarked for subscription by the holders of BMN shares, with no preferential
subscription rights, as provided by Article 304.2 of the Capital Companies Act (Ley
de Sociedades de Capital).
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Pursuant to Article 26 of Law 3/2009, any shares of BMN held by Bankia and any
treasury shares held by BMN will not be exchanged but will be cancelled. For the
record, at the date of these Draft Merger Terms Bankia does not hold any shares of
BMN. At this same date, BMN holds 3,171,205 treasury shares.
Considering the total number of shares of BMN outstanding at the date of these
Draft Merger Terms that could opt into the exchange (i.e., 1,613,653,104 shares
with a face value of one euro per share, less the abovementioned 3,171,205 treasury
shares, which will be held in treasury until the merger takes effect and so will not
be exchanged), the maximum number of Bankia shares to be issued to cover the
share exchange is 205,684,373 ordinary shares of Bankia with a face value of one
euro per share, which represents a capital increase in a total maximum nominal
amount of EUR 205,684,373.00. The amount of the capital increase could vary
depending on BMN’s treasury shares and Bankia’s holding of BMN shares at the
time of the Merger.
Any difference between the fair value of the assets received by Bankia in the
Merger and the face value of the new shares will be allocated to the paid-in surplus.
Both the face value of the new shares and the resulting paid-in surplus will be fully
paid through the transfer en bloc of BMN’s assets and liabilities to Bankia.
Bankia will apply for the admission to trading of the new shares it issues to cover
the merger exchange on the Madrid, Barcelona, Valencia and Bilbao stock
exchanges, so that they may be traded through the Spanish Stock Exchange
Interconnection System (Sistema de Interconexión Bursátil) (Continuous Market),
completing all the formalities required by law for that purpose.
4.3 Exchange procedure
Following (i) the approval of this Merger by the General Meetings of Shareholders
of Bankia and BMN; (ii) the filing of the equivalent documents referred to in
Articles 26.1.d) and 41.1.c) of Royal Decree 1310/2005 of 4 November; (iii)
compliance with the conditions precedent referred to below; (iv) the recording of
the merger instrument and the related capital increase instrument in Bankia before
a notary as public documents; and (v) the registration of the merger instrument in
the Valencia Mercantile Register; the shares of BMN will be exchanged for shares
of Bankia, from the date indicated in the notices that are required to be published
by law or regulation.
The exchange of BMN shares for Bankia shares will be carried out through the
entities that are the depositaries of the BMN shares, following the procedures
established for the book-entry system, in particular the provisions of Royal Decree
878/2015 of 2 February on the clearing, settlement and registration of negotiable
securities represented by book entries, and applying, where applicable, the
provisions of Article 117 of the Capital Companies Act.
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As a result of the Merger the shares of BMN will be cancelled.
4.4 Mechanism to facilitate the exchange
Holders of a number of BMN shares which, under the agreed exchange ratio, does
not entitle them to receive a whole number of shares of Bankia may acquire or
transfer shares in order to then exchange them in accordance with that exchange
ratio.
However, the Merging Entities may establish mechanisms to facilitate the exchange
of BMN shares for Bankia shares by appointing an odd-lot dealer to act as
counterparty for the purchase of odd-lots of shares. By this means, every
shareholder of BMN who, under the agreed exchange ratio, does not have sufficient
shares of BMN to be entitled to receive at least one share of Bankia or who is
entitled to receive a whole number of Bankia shares but then has a number of BMN
shares left over that is insufficient to be entitled to receive an additional share of
Bankia may convey those left-over BMN shares to the odd-lot dealer, who will pay
their value in cash.
5. CONTRIBUTIONS OF LABOUR AND ANCILLARY OBLIGATIONS
As there are no contributions of labour and no ancillary obligations have been established
at either of the Merging Entities, no compensation is payable on that account.
6. SECURITIES AND SPECIAL RIGHTS
In neither of the Merging Entities are there any special shares or holders of special rights
other than simple ownership of the shares nor are any special rights or options going to
be granted to the holders of securities other than those representing capital. Consequently,
there is no need to grant any special right or offer any kind of option.
7. BENEFITS EXTENDED TO INDEPENDENT EXPERTS AND THE
DIRECTORS
No benefits of any kind will be extended to the directors of either of the Merging Entities
or to the independent expert who issues the required report on these Draft Merger Terms.
8. RIGHTS CONFERRED BY THE NEW SHARES
The new shares issued by Bankia to cover the merger exchange will be ordinary shares
of the same single class and series as those currently outstanding and will carry the same
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rights from the moment the merger instrument is registered in the Valencia Mercantile
Register.
In particular, from the date of registration of the merger instrument in the Valencia
Mercantile Register, those new shares will entitle their holders to participate in corporate
profits on the same terms as the rest of the holders of Bankia shares outstanding at that
date.
9. EFFECTIVE DATE FOR ACCOUNTING PURPOSES
The date from which the transactions of the absorbed company will be treated for
accounting purposes as having been carried out by the absorbing company will be the
date applicable under the General Chart of Accounts (Plan General de Contabilidad,
PGC) approved by Royal Decree 1514/2007 of 16 November, in particular rule 19
thereof, and International Financial Reporting Standard 3, in particular paragraphs 8 and
9 thereof, with which the PGC is consistent. In the event of discrepancies between the
abovementioned standards, the latter prevails.
Under the standards applicable at the date of these Draft Merger Terms, the effective date
of the Merger for accounting purposes will be the date on which, once the Merger has
been approved by the General Meetings of Shareholders of Bankia and BMN, the last of
the administrative authorisations required for the Merger to be effective within the
meaning of section 16 below is obtained, as that is the date on which, under the
abovementioned standards, the absorbing company is considered to have acquired control
of the absorbed company.
10. BYLAWS OF THE RESULTING COMPANY
There will be no need to amend the bylaws of the absorbing company because of the
Merger, except as regards the figure for share capital, which will have been increased to
cover the merger exchange.
The current text of Bankia’s bylaws is published on the corporate website
www.bankia.com (and a copy is attached hereto as an Annexe to this Draft Merger Terms
for the purpose of Article 31.8 of Law 3/2009).
11. VALUATION OF THE ABSORBED COMPANY’S ASSETS AND
LIABILITIES
As a consequence of the Merger, BMN will be dissolved without going into liquidation
and its assets and liabilities will be transferred to Bankia en bloc and by universal
succession.
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For the purposes of Article 31.9 of Law 3/2009, the main figures for BMN’s assets and
liabilities are as stated in BMN’s individual and consolidated balance sheets at 31
December 2016.
Also, in accordance with applicable accounting standards, the identifiable assets acquired,
the liabilities assumed and any non-controlling interest in the absorbed company will be
recognised and recorded in Bankia, separately from goodwill, at their fair value on the
acquisition date (effective date of the Merger for accounting purposes, as indicated
earlier).
For this purpose, independently of the date of registration of the Merger in the Mercantile
Register (and therefore of extinction of the absorbed company), the directors of BMN
expressly undertake to issue a balance sheet of the absorbed company as of the close of
business on the last day of the last month ended prior to the acquisition date (effective
date of the Merger for accounting purposes), which will be audited by BMN’s current
auditor.
12. MERGER BALANCE SHEETS AND ANNUAL ACCOUNTS
For the purposes provided in Article 36 of Law 3/2009, the balance sheet of Bankia as at
31 December 2016 that forms part of Bankia’s annual accounts for 2016, duly audited by
Bankia’s auditor and approved by its Ordinary General Meeting held on 24 March 2017,
will be considered to be its merger balance sheet.
Similarly, the balance sheet of BMN as at 31 December 2016 that forms part of BMN’s
annual accounts for 2016, duly audited by BMN’s auditor and approved by its Ordinary
General Meeting held on 5 May 2017, will be considered to be its merger balance sheet.
For the purposes of Article 31.10 of Law 3/2009, it is noted that the terms of the Merger
have been established based on the abovementioned annual accounts of the Merging
Entities for the year ended 31 December 2016.
13. CONSEQUENCES OF THE MERGER FOR EMPLOYMENT, IMPACT ON
THE GENDER BALANCE OF THE GOVERNING BODIES AND IMPACT
ON THE COMPANY’S SOCIAL RESPONSIBILITY
As provided in Article 44 of the recast Workers’ Statute, passed by Royal Legislative
Decree 2/2015 of 23 October regulating transfers of undertakings, the rights and
obligations of BMN arising from employment contracts will be transferred to Bankia.
The Merging Entities will meet their obligations to inform and, where applicable, consult
the legal representatives of their respective employees in accordance with employment
law. Notice of the planned Merger will also be given to the appropriate public bodies, in
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particular the General Treasury of the Social Security Administration (Tesoreria General
de la Seguridad Social).
After the Merger, the existing employment rights of BMN employees will be respected
in accordance with the law. Also after the Merger, Bankia will analyse any overlaps,
duplication or economies of scale arising from the Merger and will take such workforce
restructuring measures as it deems necessary, applying the provisions of employment law.
The Merger is not expected to have any impact on the gender balance of the governing
body of the absorbing company.
The Merger will not affect Bankia’s social responsibility.
14. APPOINTMENT TO THE BOARD OF DIRECTORS OF THE RESULTING
COMPANY
Pursuant to the agreements reached in relation to the Merger, the Board of Directors of
Bankia will submit to its General Meeting of Shareholders, as part of the merger
agreements, a proposal for the appointment of a director of BMN as an additional member
of the Board of Directors of Bankia, with effect from the date of registration of the merger
instrument.
All this is without prejudice to the application, where necessary, of the provisions of Law
11/2015 of 18 June on the recovery and resolution of credit institutions and investment
firms.
15. TAX TREATMENT
Under Article 89 of Law 27/2014 of 27 November on Corporation Tax Law, the Merger
will qualify for the special tax regime provided for in Chapter VII of Title VII and the
second additional provision of that law.
For that purpose, as provided in said Article 89 of Law 27/2014, the Merger will be
reported to the Spanish Tax Agency in the manner and at the time prescribed by
regulations.
16. CONDITIONS PRECEDENT
The effectiveness of the Merger is subject to the authorization of the Ministry for
Economy and Competitiveness, as established in the twelfth additional provision of Law
10/2014 of 26 June on the ordering, supervision and solvency of credit institutions, and
the obtaining of any other necessary authorisations from the Directorate General of
Insurance and Pension Funds (DGSFP), the National Securities Market Commission
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(CNMV), National Commission on Markets and Competition or any other administrative
body or entity.
17. INDEPENDENT EXPERT
Pursuant to the provisions of Article 34 of Law 3/2009, the directors of Bankia and BMN
will apply to the Valencia Mercantile Register for the appointment of a single independent
expert to prepare a single report on these Draft Merger Terms and the assets and liabilities
contributed by BMN to Bankia as a result of the Merger.
18. PUBLICATION AND INFORMATION
In compliance with the obligations imposed by Article 32 of Law 3/2009, these Draft
Terms of Merger will be posted on the corporate websites of Bankia and BMN. The fact
that they have been so posted will be announced in the Official Gazette of the Mercantile
Register (Boletín Oficial del Registro Mercantil) in the manner required by law.
The posting on the Bankia and BMN websites and the announcement of the posting in
the Official Gazette of the Mercantile Register will be done at least one month in advance
of the date set for the General Meetings of Shareholders that are to resolve on the Merger.
The website posting will continue for at least the time required by Article 32 of Law
3/2009.
The documents mentioned in Article 39 of Law 3/2009 will be posted on the
abovementioned corporate websites of Bankia and BMN, in such a way that they can be
downloaded and printed, before the notice of the General Meetings of Shareholders that
are to resolve on the Merger is published.
Lastly, the Draft Merger Terms will be submitted to the General Meetings of Shareholders
of Bankia and BMN for approval within six months of the date of the Draft Merger Terms,
in accordance with the provisions of Article 30.3 of Law 3/2009.
19. INTERIM PERIOD UNTIL THE MERGER IS EXECUTED
19.1 Purpose
The purpose of this clause of the Draft Merger Terms is to establish, as to the
Merging Entities themselves and their respective groups, certain covenants with
respect to the conduct of business from the date of these Draft Merger Terms until
the date of registration of the Merger (the “Interim Period”) and also with respect
to other decisions that could affect the Merger, in particular the steps taken to obtain
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the necessary administrative authorisations, always safeguarding the limits
established by law for that purpose, especially as regards Competition Law.
The Merging Entities assume a special good faith commitment to use their best
efforts to achieve the objectives specified in these Draft Merger Terms and
undertake not to take any action or enter into any contract, agreement or transaction
that could compromise the achievement of those objetives.
19.2 Regular Management Commitment
During the Interim Period, the Merging Entities covenant that their respective
governing bodies and management teams, including those of the companies in their
respective groups, will conduct their business in the ordinary course, substantially
consistent with its usual practice, without making any material changes to their
strategy or management, especially as regards the objectives, policies and processes
for the management of regulatory capital, credit risk, lending, liquidity risk, bank
restructuring, commercial efficiency and the marketing and product business
model.
In any case, the Merging Entities covenant and agree, as to themselves and the
companies in their respective groups, to comply with Article 30.2 of Law 3/2009
during the Interim Period and, in particular, to:
(i) Conduct their business in the ordinary course, within a framework of healthy,
prudent management, with the care of a good manager and in compliance
with applicable laws and regulations.
The ordinary course of business will be understood to consist of actions (acts
or omissions) that are consistent (in nature, amount and economic substance)
with usual practice in the entities’ normal business activities and that are not,
by their nature, extraordinary or exceptional in relation to the entities’ normal
activities.
(ii) Not take any action or enter into any contract that could compromise the
approval or execution of the Merger or materially change the bases (including
the budgetary and business bases) or terms and conditions of the Merger,
especially the share exchange ratio, or that could materially adversely affect
the Resulting Entity, except as expressly provided otherwise in these Draft
Merger Terms or with the prior consent of the other Merging Entity.
For the avoidance of doubt, actions taken in order to comply with regulatory
requirements or at the instruction of the competent regulators or supervisors will
not entail any breach of the covenants contained in this Clause 19 of the Draft
Merger Terms.
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19.3 Restricted Actions
Without prejudice to the provisions of the previous section, BMN covenants and
agrees, as to itself and the companies in its group, not to carry out during the Interim
Period any of the actions or operations detailed below (the “Restricted Actions”),
except as consented to by Bankia or where the action or operation concerned is
required by law or regulation or is carried out at the instruction of its competent
supervisors or regulators.
Bankia, for its part, covenants and agrees, as to itself and the companies in its group,
not to carry out during the Interim Period the Restricted Actions numbered (xiii),
(xiv) (except where the issues in question are issues of contingent convertible
securities (AT1), which will not be subject to any limitation; were provided for in
Bankia’s current funding plan; are carried out at fair value with disapplication of
pre-emption rights or without pre-emption rights; or are carried out within the
framework of an arm’s length corporate transaction that is economically neutral for
BMN shareholders or, otherwise, appropriate compensation mechanisms are
established for BMN shareholders), (xv) (except in carrying out its normal treasury
shares activity in accordance with its usual practice), (xviii), (xxvi) (except for
arm’s length corporate transactions), (xxviii), (xxx), (xxxi) and (xxxii), except as
consented to by BMN or where the action or operation concerned is required by
law or regulation or is carried out at the instruction of its competent supervisors or
regulators.
The Restricted Actions are as follows:
Corporate policies:
(i) Change its policies on risks (including changes to the policy or limits for
structural risk and the acceptance of significant new counterparties (market
risk)), sales, administration, capital management, liquidity and funding,
treasury management, payments to and from customers and suppliers, tax,
legal compliance and internal audit (particularly regarding compliance
issues (anti-money laundering, MiFID, etc.)), information security and use
of brands.
(ii) Start, acquire, dispose of or discontinue businesses or business lines, either
directly or through the acquisition of entities that carry on those businesses.
Risks:
(iii) Accept transactions in an amount greater than EUR 5,000,000 on behalf of
the same group or any increase in its position in relation to special groups
such as political parties, media companies, football clubs or trade unions.
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(iv) Approve debt refinancings or restructurings in groups to which it has an
aggregate exposure of more than EUR 3,000,000.
(v) Approve movements that affect provisions in amounts greater than EUR
500,000.
(vi) Purchase fixed income or equity portfolios in an aggregate amount greater
than that reflected in its business plan (specifically, with reference to the
BMN business plan at the date of these Draft Merger Terms, in an aggregate
amount greater than EUR 530,000,000).
(vii) Alter the models for valuing risks (scoring and rating models), foreclosed
assets and collateral.
(viii) Materially change its portfolio of commercial products and the associated
terms and conditions, including the conditions of deposits, unless the
changes are made in the ordinary course of business and in accordance with
its usual practice.
(ix) Accept haircuts of more than EUR 500,000 per transaction or set of related
transactions or per debtor (at individual or group level).
(x) Initiate, terminate, settle, desist from, fail to defend or carry out any other
act of disposal in relation to legal actions of any kind, whether individual or
class actions, in an amount greater than EUR 250,000.
(xi) Carry out sales of portfolios, individual loans or foreclosed assets in an
amount greater than EUR 500,000.
(xii) Issue instructions for the auction of individual assets in an amount greater
than EUR 1,000,000.
Financial and accounting:
(xiii) Change the accounting standards and principles applied to date, when the
change has an impact of more than 0.5% of its own funds on a stand-alone
basis at 31 December 2016 (the “Reference Own Funds”).
(xiv) Increase or reduce its share capital or issue new shares or securities that are
exchangeable for or convertible into shares or that confer subscription or
purchase rights.
(xv) Purchase or cancel treasury shares, except (a) in the execution of a final
court decision or (b) in the enforcement of a guarantee that was validly
established before the date of these Draft Merger Terms.
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(xvi) Issue debt securities, except in the ordinary course of business for the
refinancing of outstanding debt issues on market terms and conditions, or
change or enter into financing transactions for the entity or its group in an
amount greater than provided in its business plan. At the date of these Draft
Merger Terms, BMN’s business plan does not envisage any issues for the
current period, with scheduled maturities being financed by repo.
(xvii) Change its external auditor.
(xviii) Pay any final or interim dividend out of reserves or profit, whether in cash
or in kind, or make any other distributions out of share capital or reserves or
repay any part of its share capital.
Organisation and means:
(xix) Change its network of branches and offices.
(xx) Launch or change any projects that are material in terms of their amount or
importance in the areas of organisation and business processes or
information technology (including the purchase of hardware or software),
such as, without limitation, projects in an amount greater than EUR 500,000.
Human resources:
(xxi) Materially change its workforce or the terms of employment of its
employees, or award or pay extraordinary remuneration of any kind, except
in compliance with the law, the applicable collective agreement or the
employment contracts in force at the date of these Draft Merger Terms and
except for the payment of any bonuses for 2017 that were authorised by the
relevant bodies of BMN before the date of these Draft Merger Terms.
(xxii) Change the remuneration policy or the legal and economic conditions (terms
of employment, remuneration, pension obligations, indemnities, benefits,
loans, etc.) of senior management or identified staff.
Contracts and investments:
(xxiii) Enter into, renew, extend or cancel major agreements or contracts (in an
mount greater than EUR 500,000 or with a term of more than one year,
without the possibility of prepayment without a penalty), including, without
limitation, contracts for the purchase of hardware or software, other than
under existing, disclosed commitments or for duly approved investments in
job infrastructure that are compatible with the situation resulting from the
Merger.
(xxiv) Transfer, lease, license, pledge or encumber or otherwise dispose of any
material asset (which has an individual or cumulative net carrying amount
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of more than 1% of the entity’s Reference Own Funds or which is strategic
for the entity), other than under existing, disclosed commitments or where
the pledge or encumbrance is established or imposed by law.
(xxv) Enter into or modify transactions such as alliances with or without
reciprocal exchange of equity instruments, joint ventures, acquisition of
interests in other entities and other similar transactions.
(xxvi) Agree upon or carry out mergers, splits or other structural changes with
other parties or other corporate transactions that have a similar effect.
(xxvii) Approve any expenditure or investment not provided for in other sections
of this Clause 19.3 above an amount equal to 0.5% of its Reference Own
Funds per transaction or per set of related transactions.
Legal and governance:
(xxviii) Materially change its bylaws.
(xxix) Change the criteria for the management, acceptance and settlement of
individual or collective claims relating to (a) the voiding of the so-called
“floor clauses” or “expenses clauses” and, in general, any claims concerning
the general terms and conditions of customer contracts; (b) Law 57/1968 of
27 July on the receipt of advance payments in the construction and sale of
homes; (c) hybrid capital instruments; and (d) derivatives.
(xxx) Petition for the opening of bankruptcy proceedings or any other similar form
of insolvency proceedings, except where required by law.
(xxxi) Change the structure or composition of its Board of Directors or appoint or
remove members of the entity’s Management Committee.
(xxxii) Change the policy on directors’ remuneration or the legal and economic
terms of their service agreements (service conditions, remuneration, pension
obligations, indemnities, benefits, etc.).
Any written request submitted by one of the Merging Entities seeking the other’s
consent to a proposed action relating to any of the matters listed above will be
deemed accepted by the other Merging Entity if the latter does not state its
opposition, giving reasons, within three calendar days of receipt of the request if
the request relates to Restricted Actions (iii) to (xii) or within five calendar days if
it relates to any of the other Restricted Actions.
19.4 Independent Monitoring Entity
To monitor compliance with the undertakings given in Clauses 19.2 and 19.3 above
and completion of the necessary formalities to effect the Merger, including
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obtaining the necessary regulatory authorisations, the Merging Entities agree to
appoint a respected independent firm to act as monitoring entity (the “Independent
Monitoring Entity”).
The Independent Monitoring Entity will organise its work as it sees fit, setting the
scope and carrying out a plan of work which, to the best of it knowledge and belief,
will allow it to fulfil its mandate.
The Independent Monitoring Entity must act completely independently of the
Merging Entities and their shareholders, following its own professional judgment
and to the best of its knowledge and belief, in accordance with usual banking
practice and taking all the information at its disposal and the characteristics,
situation, ordinary management and usual practices of each Merging Entity into
account.
For this purpose, the Independent Monitoring Entity will have access to any
information held by the Merging Entities and their respective groups that may be
necessary or appropriate to verify compliance with the abovementioned
undertakings and monitor progress in obtaining the necessary regulatory
authorisations; and the Merging Entities undertake to make available, and cause
their advisers and consultants to make available, to the Independent Monitoring
Entity all the information, documentation and assistance it may reasonably require
in order to fulfil its mandate.
In particular, the Merging Entities must provide the Independent Monitoring Entity
with all the marketing and business information and any other information that
could affect the ordinary course of their business that is submitted to their senior
management or Boards of Directors for consideration, as well as any other
information they reasonably consider necessary for the purpose of Clauses 19.2 and
19.3 above, and must regularly provide the Independent Monitoring Entity with any
information that could be relevant for that purpose. Independently of this
obligation, the Independent Monitoring Entity may also regularly request such
information and each Merging Entity may also, through the Independent
Monitoring Entity, call upon the other Merging Entity to provide information to the
Independent Monitoring Entity for the purpose of verifying compliance with the
covenants.
If the Independent Monitoring Entity determines that one or more actions or
omissions by one of the Merging Entities constitutes, or could eventually constitute,
a breach of the covenants set forth in Clauses 19.2 and 19.3 above, the Independent
Monitoring Entity will report this circumstance to the Merging Entities, without,
however, disclosing strategic or commercially sensitive information to the other
Merging Entity.
The Merging Entities will have a period of five days, from the date on which the
Independent Monitoring Entity submits its report, in which to give such
- 16 -
explanations and submit such pleadings as they deem appropriate. After reviewing
the explanations and pleadings submitted by the Merging Entities, the Independent
Monitoring Entity will make a final decision and will notify the Merging Entities
accordingly in the following five days. The Merging Entities undertake to respect
the decision of the Independent Monitoring Entity and to act accordingly.
The Independent Monitoring Entity will maintain the confidentiality of all the
information to which it has access in the exercise of its function. In particular, it
will ensure that no strategic or commercially sensitive information it receives from
a Merging Entity becomes known to the other Merging Entity.
The terms of engagement of the Independent Monitoring Entity will specify the
operating and confidentiality rules it must follow, in accordance with the principles
set out above.
19.5 Reciprocal information
In strict compliance with the law, the Merging Entities will keep each other
reasonably informed of any fact or circumstance concerning themselves or their
respective groups that may be relevant to the Merger and any breach of the
covenants contained in this clause.
In particular, as far as legally possible, the Merging Entities will keep each other
properly informed of relevant contacts with public authorities and rating agencies
that could have a material impact on the Merger or the Resulting Entity.
Similarly, in strict compliance with the law, the Merging Entities will coordinate
with one another in relation to any relevant public announcement regarding the
Merger.
19.6 Liability
By approving and signing these Draft Merger Terms, the directors of each Merging
Entity undertake to exercise the care and loyalty required of directors in ensuring
that their Merging Entity complies with the stated undertakings during the Interim
Period and will be liable to the two Merging Entities and the Resulting Entity for
any damage caused, in accordance with company law.
* * *
In witness whereof, in accordance with the provisions of Article 30 of Law 3/2009, the
directors of Bankia and BMN sign these Draft Merger Terms, which were approved by
the Boards of Directors of both companies on 26 June 2017.
It is expressly noted here that, following corporate governance best practice, the Fund for
Orderly Bank Restructuring (Fondo de Reestructuración Ordenada Bancaria, FROB), as
a proprietary director of BMN with a majority interest in BMN’s capital, abstained from
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taking part in the deliberations and voting by the Board of Directors of BMN on these
Draft Merger Terms, as it also has a controlling interest in Bankia and so had a potential
conflict of interests. Accordingly, the FROB’s representative, Mr. Tomás González Peña,
has not signed the Draft Merger Terms.
Likewise following corporate governance best practice, Bankia, S.A.’s executive
directors, Mr. José Ignacio Goirigolzarri Tellaeche (Executive Chairman), Mr. José
Sevilla Álvarez (Chief Executive Officer) and Mr. Antonio Ortega Parra, abstained from
taking part in the deliberations and voting on these Draft Merger Terms by the Board of
Directors of Bankia, as they had a potential conflict of interests. Said directors also sit on
the board of directors of BFA Tenedora de Acciones, S.A.U., a wholly owned subsidiary
of the FROB and majority shareholder of Bankia. Mr. José Ignacio Goirigolzarri
Tellaeche sits on the board of directors of BFA Tenedora de Acciones, S.A. as the natural
person representative of the FROB as corporate director, while Mr. José Sevilla Álvarez
and Mr. Antonio Ortega Parra are natural person directors of BFA Tenedora de Acciones,
S.A.U. Accordingly, the abovementioned directors have not signed these Draft Merger
Terms.
* * *
[Signature pages follow]
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The directors of Bankia, S.A.
_________________________________
Mr. Joaquín Ayuso García
_________________________________
Mr. Francisco Javier Campo García
_________________________________
Ms. Eva Castillo Sanz
_________________________________
Mr. Jorge Cosmen Menéndez-Castañedo
_________________________________
Mr. José Luis Feito Higueruela
_________________________________
Mr. Fernando Fernández Méndez de
Andés
_________________________________
Mr. Antonio Greño Hidalgo
[Has not signed, as he was not physically
present at the meeting of the Board of
Directors, which he attended by conference
call, having voted in favour of authorisation
of these Draft Merger Terms.]
_________________________________
Mr. Álvaro Rengifo Abbad
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The directors of Banco Mare Nostrum, S.A.
_________________________________
Mr. Carlos Egea Krauel
_________________________________
Mr. Joaquín Cánovas Páez
_________________________________
Mr. Eduardo Aguilar Fernández-Hontoria
_________________________________
Ms. Isabel Aguilera Navarro
_________________________________
Ms. Leticia Iglesias Herráiz
_________________________________
Mr. Manuel Jesús Lagares Calvo
_________________________________
Mr. Álvaro Middelmann Blome
_________________________________
Mr. Antonio Jara Andréu
_________________________________
Mr. José Manuel Jódar Martínez
_________________________________
Mr. Juan Riusech Roig
ANNEXE
BYLAWS OF BANKIA, S.A.
Bylaws of
BANKIA, S.A.
Registered in the Mercantile Register of Valencia on June 1, 2017
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CHAPTER I. THE COMPANY AND ITS CAPITAL .................................................................. 1
SECTION 1. IDENTIFICATION OF THE COMPANY ......................................................................... 1
ARTICLE 1. CORPORATE NAME ...................................................................................... 1 ARTICLE 2. CORPORATE PURPOSE ................................................................................. 1 ARTICLE 3. REGISTERED OFFICE AND BRANCHES ............................................................ 1 ARTICLE 4. TERM OF COMPANY AND COMMENCEMENT OF OPERATIONS ..................... 1
SECTION 2. SHARE CAPITAL AND SHARES ..................................................................................... 2
ARTICLE 5. SHARE CAPITAL ............................................................................................ 2 ARTICLE 6. SHAREHOLDER RIGHTS ................................................................................. 2 ARTICLE 7. CO-OWNERSHIP, USUFRUCT, PLEDGE AND OTHER RIGHTS IN SHARES … ..... 2 ARTICLE 8. NON-VOTING SHARES .................................................................................. 3 ARTICLE 9. REDEEMABLE SHARES .................................................................................. 3 ARTICLE 10. REPRESENTATION OF SHARES ...................................................................... 3 ARTICLE 11. FREE TRANSFERABILITY OF SHARES .............................................................. 4 ARTICLE 12. UNCALLED CONTRIBUTIONS ......................................................................... 4
SECTION 3. INCREASE AND REDUCTION OF CAPITAL ........................................................................ 4
ARTICLE 13. CAPITAL INCREASE ....................................................................................... 4 ARTICLE 14. AUTHORISED CAPITAL .................................................................................. 5 ARTICLE 15. REDUCTION OF CAPITAL ............................................................................... 5 ARTICLE 16. MANDATORY REDEMPTION ......................................................................... 5
SECTION 4. ISSUE OF DEBENTURES AND OTHER SECURITIES .............................................................. 5
ARTICLE 17. ISSUE OF DEBENTURES ................................................................................. 5 ARTICLE 18. CONVERTIBLE AND EXCHANGEABLE DEBENTURES ........................................ 6 ARTICLE 19. OTHER SECURITIES ....................................................................................... 6
CHAPTER II. CORPORATE BODIES ................................................................................ 6
SECTION 1. CORPORATE BODIES AND DISTRIBUCION OF AUTHORITY ..................................... 6
ARTICLE 20. CORPORATE BODIES..................................................................................... 6 ARTICLE 21. DISTRIBUTION OF AUTHORITY ..................................................................... 6
SECTION 2. THE GENERAL MEETING OF SHAREHOLDERS................................................................... 8
ARTICLE 22. KINDS OF GENERAL MEETINGS ..................................................................... 8 ARTICLE 23. CALL OF GENERAL MEETING ......................................................................... 8 ARTICLE 23 BIS. INFORMATION PRIOR TO GENERAL MEETING. ........................................ 9
ARTICLE 23 TER. RIGHT TO INFORMATION.…………………………………………………………….….…9 ARTICLE 24. RIGHT OF ATTENDANCE ............................................................................... 9 ARTICLE 25. PROXIES AND ONLINE ATTENDANCE AT GENERAL MEETING ...................... 10 ARTICLE 26. PLACE AND TIME OF MEETING ................................................................... 11 ARTICLE 27. QUORUM FOR GENERAL MEETING ............................................................. 11 ARTICLE 28. GENERAL MEETING OFFICERS ..................................................................... 11 ARTICLE 29. LIST OF ATTENDEES .................................................................................... 12 ARTICLE 30. DELIBERATIONS OF GENERAL MEETING ...................................................... 13 ARTICLE 31. MANNER OF ADOPTING RESOLUTIONS ...................................................... 13 ARTICLE 32. ADOPTION OF RESOLUTIONS ..................................................................... 15 ARTICLE 33. MINUTES OF GENERAL MEETING ................................................................ 16
SECTION 3. BOARD OF DIRECTORS........................................................................................... 16
ARTICLE 34. STRUCTURE OF ADMINISTRATION BODY .................................................... 16 ARTICLE 35. ADMINISTRATION AND SUPERVISION AUTHORITY ..................................... 17 ARTICLE 36. POWERS OF REPRESENTATION ................................................................... 17
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ARTICLE 36 BIS. NON-DELEGABLE RESPONSABILITIES OF THE BOARD………………………… 17 ARTICLE 37. NUMBER OF DIRECTORS ............................................................................ 19 ARTICLE 38. CATEGORIES OF DIRECTORS ....................................................................... 19 ARTICLE 39. TERM OF OFFICE ........................................................................................ 20 ARTICLE 40. SUBJECTIVE CONDITIONS FOR BEING A DIRECTOR ...................................... 20 ARTICLE 41. MEETINGS OF BOARD OF DIRECTORS ......................................................... 20 ARTICLE 42. ADOPTION OF RESOLUTIONS BY BOARD OF DIRECTORS ............................. 21 ARTICLE 43. BOARD OF DIRECTORS MINUTES ................................................................ 21 ARTICLE 44. POSITIONS ON AND COMMITTEES OF BOARD OF DIRECTORS. .................... 22 ARTICLE 45. EXECUTIVE COMMITTEE ............................................................................. 24 ARTICLE 46. AUDIT AND COMPLIANCE COMMITTEE ...................................................... 24 ARTICLE 47. APPOINTMENTS AND RESPONSIBLE MANAGEMENT COMMITTEE ............... 25 ARTICLE 47 BIS. REMUNERATION COMMITTEE ……………….…………………………………….….. 26 ARTICLE 47 TER. RISK ADVISORY COMMITTEE ……………………………………………..……..……..26 ARTICLE 48. BOARD RISK COMMITTEE .......................................................................... 26 ARTICLE 49. REMUNERATION OF DIRECTORS ................................................................. 28 ARTICLE 50. TRANSPARENCY OF REMUNERATION SCHEME ........................................... 29
SECTION 4. REPORT ON CORPORATE GOVERNANCE AND WEBSITE....................................... 30
ARTICLE 51. ANNUAL CORPORATE GOVERNANCE REPORT ............................................. 30 ARTICLE 52. WEBSITE .................................................................................................... 30
CHAPTER III. MISCELLANEOUS .................................................................................................. 31
SECTION 1. ANNUAL ACCOUNTS ........................................................................................ 31
ARTICLE 53. FINANCIAL YEAR AND PREPARATION OF ANNUAL ACCOUNTS ................... 31 ARTICLE 54. APPROVAL AND FILING OF ANNUAL ACCOUNTS ......................................... 32 ARTICLE 55. IN-KIND DIVIDENDS ................................................................................... 32
SECTION 2. WINDING UP AND LIQUIDATION OF THE COMPANY ........................................... 33
ARTICLE 56. WINDING UP OF THE COMPANY. ................................................................ 32 ARTICLE 57. LIQUIDATORS ............................................................................................. 32 ARTICLE 58. REPRESENTATION OF WOUND UP COMPANY. ............................................ 33 ARTICLE 59. PAYMENT OF LIQUIDATION SHARE ............................................................ 33 ARTICLE 60. REMAINING ASSETS AND LIABILITIES .......................................................... 33
SECTION 3. NOTICES ......................................................................................................... 33
ARTICLE 61. NOTICES ..................................................................................................... 33
TRANSITIONAL PROVISION ……………..………………………………….………………………………..…..….…. 33
1
CHAPTER I. THE COMPANY AND ITS CAPITAL
Section 1. Identification of the Company
ARTICLE 1. CORPORATE NAME
The Company is called "BANKIA, S.A." (hereinafter the "Company") and is governed by these articles and the laws and regulations applicable to it.
ARTICLE 2. CORPORATE PURPOSE
1. The corporate purpose of the Company is:
a) all manner of activities, operations, acts, contracts and services related to the banking sector in general or directly or indirectly related thereto, permitted to it by current legislation, including the provision of investment services and ancillary services and performance of the activities of an insurance agency, either exclusively or in association, without simultaneous exercise of both activities; and
b) the acquisition, holding and disposition of all kinds of securities, without limitation including interests in other lending institutions, investment services undertakings or insurance or insurance brokerage companies, to the extent permitted by the legislation in force.
2. The activities comprising the corporate purpose may be undertaken indirectly, in whole or in part, in any of the ways permitted by law, in particular by way of ownership of shares of or participation in companies or other entities the purpose of which is identical to such activities or analogous, accessory or complementary thereto.
ARTICLE 3. REGISTERED OFFICE AND BRANCHES
1. The Company has its registered office in Valencia at Pintor Sorolla 8.
2. The board of directors has authority to resolve to change the registered office within the same municipality.
3. The board of directors also has authority to decide and resolve to create, close or transfer branches and business, representation and other offices of the Company, both domestically and abroad.
ARTICLE 4. TERM OF COMPANY AND COMMENCEMENT OF OPERATIONS
1. The Company has been formed for an indefinite term.
2. The Company will commence operations once registered in the Special Register of the Bank of Spain.
2
Section 2. Share capital and shares
ARTICLE 5. SHARE CAPITAL
1. The share capital is fixed at two thousand eight hundred seventy-nine million three hundred thirtytwo thousand one hundred thirty-six euros (€2,879,332,136.00 €).
2. It is represented by a single series and class and a total number of two thousand eight hundred seventy-nine million three hundred thirty-two thousand one hundred thirty-six (2,879,332,136) shares.
3. The shares will have a par value of one euro (€1.00) each.
4. The shares representing the capital social are fully subscribed and paid up..
ARTICLE 6. SHAREHOLDER RIGHTS
1. A share confers on its rightful holder the status of a shareholder and also the rights granted by law and these articles, in particular the following:
a) the right to participate in the distribution of the Company's profits and in the net assets resulting from liquidation;
b) a pre-emptive right on the issue of new shares or convertible debentures;
c) the right to attend and vote at general meetings in accordance with the provisions of these bylaws;
d) the right to challenge corporate resolutions; and
e) the right to information.
The scope of all rights of a shareholder is determined by law and the bylaws.
2. Shareholder will exercise their rights against the Company loyally and in accordance with the requirements of good faith.
3. The Company, in the manner governed by the legal and administrative provisions, will not recognise the exercise of voting rights deriving from a shareholder's interest to those who acquire shares therein in violation of mandatory legal rules, of whatever kind and degree, or the rules contemplated in these bylaws. Similarly, the Company will publicise the interests of shareholders in its capital, in accordance with the applicable regulations.
ARTICLE 7. CO-OWNERSHIP, USUFRUCT, PLEDGE AND OTHER RIGHTS IN SHARES
1. Each share is indivisible. Joint owners of a share must appoint a single person to exercise the shareholder's rights, and they will be jointly and severally liable to the Company for any obligations arising from their status as shareholders. The same rule will be applied in other cases of co-ownership of rights regarding the shares.
2. In the case of usufruct of shares, status as a shareholder resides in the bare owner, but the usufructuary in all cases will have the right to the dividends declared by the Company during the usufruct. Exercise of the other shareholder rights corresponds to the bare owner.
3
The usufructuary will be required to facilitate the exercise of these rights by the bare owner.
3. In the event of pledge of shares exercise of the shareholder's rights will correspond to the owner thereof. The pledgee will be required to facilitate the exercise of these rights.
If the owner fails to comply with the obligation to pay the pending amounts, the pledge creditor may itself perform this obligation or enforce the pledge.
4. In the case of other limited in rem rights in the shares, exercise of voting rights corresponds to the holder of the direct ownership.
ARTICLE 8. NON-VOTING SHARES
1. The Company may issue non-voting shares for a nominal amount of no more than one half of paid-up share capital.
2. Non-voting shares will give their holders the rights established in the issue resolution, in accordance with law and, if applicable, by way of the appropriate articles amendment.
ARTICLE 9. REDEEMABLE SHARES
1. On the terms established by law, the Company may issue redeemable shares for a nominal amount of no more than one fourth of share capital.
2. Redeemable shares will give their holders the rights established in the issue resolution, in accordance with law and, if applicable, by way of the appropriate articles amendment.
ARTICLE 10. REPRESENTATION OF SHARES
1. Shares will be represented by book entries and will be governed by the Securities Market Act and other provisions applicable thereto.
2. Maintenance of the book entry records for the Company will be by the entity or entities to which that function corresponds by law.
The entity responsible for maintaining the book entry records will advise the Company of transactions related to shares, and the Company well maintain its own records with the identities of the shareholders.
3. A person appearing as the owner in the entries of the entity responsible for maintaining the book entry records will be presumed to be the lawful owner, and therefore may demand that the Company make the payments to which a shareholder is entitled to it.
4. If formal status as a shareholder is in a person or entity acting as a trustee or in a comparable role, the Company may demand that it provide information regarding the actual owners of the shares, as well as transfers and encumbrances thereof.
4
ARTICLE 11. FREE TRANSFERABILITY OF SHARES
1. The shares and the rights incorporated therein, including pre-emptive rights, are transferable in all ways permitted by law.
2. Transfers of new shares may not be effectuated before the capital increase has been registered in the Mercantile Register.
3. The shares will be transferred by way of book entries.
4. The registration of the transfer in favour of the acquirer will have the same effects as the transfer of stock certificates.
5. The creation of limited in rem rights or any other encumbrance on the shares must be entered in the corresponding account in the book-entry records.
6. Entry of a pledge is the equivalent of transfer of possession of an ownership certificate.
ARTICLE 12. UNCALLED CONTRIBUTIONS
1. When there are shares that are partially paid up, the shareholder must pay at the time determined by the board of directors, within a maximum term of five years from the date of the resolution to increase capital. The form of said payment and other details of payment will be in accordance with the terms of the capital increase resolution.
2. Without prejudice to the legally-contemplated consequences of delay, any late payment of pending contributions will accrue interest in favour of the Bank at the legal default rate from the due date, without need of judicial or extrajudicial demand. The Company in addition may exercise such actions as it may have by law under such circumstances.
Section 3. Increase and reduction of capital
ARTICLE 13. CAPITAL INCREASE
1. An increase of capital may be undertaken by issuing new shares or by raising the par value of those existing. In either case the consideration may consist of monetary contributions, in-kind contributions, including setoff of credits, or transformation of profits or reserves already appearing in the Company's net assets. Also, a capital increase may be carried out in part against new contributions and in part by transforming profits or reserves.
2. Exclusion of pre-emptive rights by the general meeting must be resolved with the legally required majority. Pre-emptive rights will not arise for existing shareholders and holders of convertible debentures when the capital increase results from takeover of another company or all or a part of the assets and liabilities arising from the splitup of another company or conversion of debentures into shares.
3. When the capital increase has not been fully subscribed within the term set for that purpose, capital will be increased by the amount effectively subscribed, unless otherwise provided in the resolution.
5
ARTICLE 14. AUTHORISED CAPITAL
1. The general meeting, satisfying the requirements contemplated in applicable legislation, may delegate to the board of directors the authority to resolve, on one or more occasions, to increase capital, up to a specified amount, at the time and in the amount it decides and with authority to exclude or not exclude pre-emptive rights, without prior consultation with the general meeting, within the limits established by law.
Unless the delegation resolution otherwise provides, the board of directors will be authorised to issue voting or nonvoting common shares or redeemable shares.
2. The general meeting also may delegate to the board of directors authority to indicate the dates on which an already-adopted resolution to increase capital is to be effectuated in the resolved amount, and to fix the terms of that resolution in respect of all matters not provided for by the meeting, always within the maximum term contemplated by law.
ARTICLE 15. REDUCTION OF CAPITAL
1. A reduction of capital may be achieved by decreasing the par value of shares, by redeeming them or by combining them for exchange. The purpose of the reduction in any event may be reestablishment of the balance of capital and decreased equity of the Company resulting from losses, establishment or increase of the legal reserve or voluntary reserves, repayment of the value of contributions or forgiveness of the obligation to make pending contributions.
2. In the event of reduction of capital by repayment of the value of contributions, payment to the shareholders may be made wholly or partially in kind, provided that the conditions contemplated in section 2 of 0 below are satisfied.
ARTICLE 16. MANDATORY REDEMPTION
1. The general meeting may, in accordance with the provisions of applicable legislation, resolve to reduce capital to redeem a group of shares, provided that that group is defined on the basis of substantive, uniform and non-discriminatory criteria. In that case it will be required that the measure be approved by both a majority of the shares of the shareholders in the affected group and by a majority of the shares of the other shareholders remaining in the Company.
2. The amount to be paid by the Company may not be less than the value of the shares determined by a statutory auditor, other than the Company's auditor, appointed for that purpose by the Mercantile Register in the manner contemplated in applicable legislation.
Section 4. Issue of debentures and other securities
ARTICLE 17. ISSUE OF DEBENTURES
1. The Company may issue debentures in accordance with the terms established by law.
2. The board of directors will have authority to resolve to issue and arrange for admission to trading of debentures, as well as to resolve to grant guarantees for the debenture
6
issue, provided said securities are neither convertible into shares nor entitle the holder to share in the Company's profits.
3. The general meeting of shareholders will have authority to resolve to issue debentures that are convertible into shares or debentures that entitle the holder to share in the Company's profits.
The general meeting may delegate authority to the board of directors to issue debentures that fall within its authority according to the law. The board may exercise that authority on one or more occasions, over a maximum term of five years.
The general meeting also may authorise the board to determine the time the resolved issue is to occur, and to fix the other terms not contemplated in the meeting resolution.
ARTICLE 18. CONVERTIBLE AND EXCHANGEABLE DEBENTURES
1. Convertible and/or exchangeable debentures may be issued at a fixed (determined or determinable) exchange ratio or by reference to a variable. The issue resolution will determine whether the authority to convert or exchange lies in the debentureholder or the Company or, if applicable, the conversion will occur on a mandatory basis at a given time.
2. Shareholders’ pre-emptive rights involving the issuance of convertible debentures may be withheld under the terms provided by law.
ARTICLE 19. OTHER SECURITIES
The board of directors will have authority to issue the notes, warrants, preferred interests, subordinated debt or other securities different from those contemplated in the preceding articles, in compliance with the requirements established in the applicable regulations, provided said securities are neither convertible into share nor entitle the holder to a share in the Company's profits.
CHAPTER II. CORPORATE BODIES
Section 1. Corporate bodies and distribution of authority
ARTICLE 20. CORPORATE BODIES
The governing bodies of the Company are the general shareholders meeting and the board of directors.
ARTICLE 21. DISTRIBUTION OF AUTHORITY
1. The general meeting has authority to decide regarding all matters attributed to it by law or these bylaws. In particular, merely by way of example, it has authority:
a) to appoint and remove directors, and ratify or revoke temporary appointments of directors made by the board itself;
7
b) to appoint and remove the liquidators and auditors;
c) to approve the annual accounts, the allocation of results, and corporate management, and if applicable also to approve the consolidated annual accounts;
d) to resolve to distribute dividends;
e) to resolve to issue debentures and securities which fall within its authority according to the terms of the law;
f) to resolve to increase or reduce capital;
g) to resolve the merger, split-up, transformation, bulk transfer of assets and liabilities and transfer of registered office abroad;
h) to approve the regulation of the functioning of the General Meeting;
i) to resolve the amendment of the bylaws;
j) to authorise the board of directors to increase capital and issue debentures or other analogous debt instruments for which the general meeting has authority in accordance with the provisions of applicable legislation and these bylaws;
k) to authorise the acquisition of own shares;
l) to resolve to list the Company's shares on any organised secondary market;
m) to transfer essential activities until then undertaken by the Company itself to subsidiary companies, even if the Company maintains full ownership thereof. The essential nature of activities will be presumed when the volume of the transaction exceeds twenty-five percent of the total assets on the balance sheet;
n) to approve, if applicable, the acquisition, disposal or contribution to another Company of essential assets. The essential nature of the asset will be presumed when the amount of the transaction exceeds twenty-five percent of the value of the assets appearing on the last approved balance sheet;
o) to resolve the winding up of the Company, approve the final liquidation balance sheet as well as transactions the effect of which is equivalent to liquidation of the Company;
p) to decide on matters submitted to it by resolution of the board of directors;
q) to decide on the elimination of, or restrictions on, preferential subscription rights, notwithstanding the possibility of delegation to the directors on the legally established terms;
r) to approve the director remuneration policy, in accordance with the provisions of applicable law, as well as to decide on the application of remuneration systems involving the delivery of shares or rights in respect of such shares, as well as any other remuneration system that is indexed to the stock market value, regardless of the beneficiary of such systems; and
s) to issue, in accordance with the Corporations Act, instructions to the board of directors or submit to its authorisation the adoption by the board of directors of decisions or resolutions on certain management matters.
2. Powers not attributed to the general meeting by law or these bylaws rests with the board of directors.
8
Section 2. The general meeting of shareholders
ARTICLE 22. KINDS OF GENERAL MEETINGS
1. General meetings may be ordinary or extraordinary.
2. The ordinary general meeting necessarily meets within the first six months after the close of the financial year, to review corporate management, if applicable to approve the accounts for the preceding financial year and to resolve on allocation of profits, and if applicable to approve consolidated accounts, without prejudice to its competence to consider and decide regarding any other matter appearing on the agenda. The ordinary general meeting nonetheless will be valid even if called or held outside the aforesaid time limit.
3. Any meeting other than as contemplated in the preceding section will be considered to be an extraordinary general meeting.
4. All meetings, whether ordinary or extraordinary, are subject to the same rules of procedure and authority.
ARTICLE 23. CALL OF GENERAL MEETING
1. Call of the general meeting corresponds to the board of directors in accordance with the provisions of applicable legislation.
The notice of the call will be disseminated at least by way of publication in the Official Gazette of the Mercantile Register, on the Company's website (www.bankia.com), and on the website of the National Securities Market Commission, at least one month prior to the date set for the meeting. It will state the date by which a shareholder must have registered its shares in its name in order to participate in voting at the general meeting, in accordance with article 24 of these Bylaws, the place and manner of obtaining the full text of the documents and proposed resolutions, and the URL of the Company's website on which the information will be available. The notice will include the legally contemplated steps the shareholders must follow to participate and vote in the general meeting.
Extraordinary general meetings may be called with prior notice of at least fifteen days, provided that the preceding ordinary general meeting has so provided by resolution approved by two thirds of the subscribed voting capital.
2. Shareholders representing at least three percent of share capital may, only for ordinary general meetings, request that a supplement to the call of the meeting be published including one or more points on the agenda. For these purposes, the shareholder must indicate the number of shares it owns or represents. This right must be exercised by certifiable notice to be received at the registered office within the five days following publication of the call, the new points presented by the shareholders necessarily being accompanied by an explanation or, if applicable, a proposed resolution with an explanation. The supplement to the call must be published at least fifteen days before the scheduled meeting date.
3. Also, shareholders representing at least three percent of capital may, within the same term as required in the preceding subsection, present supported proposed resolutions regarding matters already included or that should be included on the agenda for the
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meeting called. The Company must ensure that these proposed resolutions and the attached documentation, if any, are circulated among the other shareholders.
ARTICLE 23. BIS. INFORMATION PRIOR TO GENERAL MEETING
From publication of the call to the holding of the meeting, the Company on its website will make available to the shareholders, inter alia, the following information:
a) Notice of call.
b) Total number of shares and voting rights on the date of the call, broken down by classes of shares.
c) Documents that must be presented to the general meeting, in particular the reports of directors, statutory auditors and independent experts.
d) Complete text of the proposed resolutions, regarding each and every one of the points on the agenda or, as regards those points that are of a merely informational nature, a report of the competent bodies, commenting on each of those points, including any proposed resolutions presented by the shareholders.
e) In the case of appointment, ratification or reelection of a director, his identity, CV stating the type of director, and the appointments and responsible management committee’s report or proposal. In the case of a legal person, the information must include information on the individual that is to be appointed for permanent exercise of the functions inherent in the position.
f) Forms that are to be used to vote through proxies or remotely.
ARTICLE 23 TER. RIGHT TO INFORMATION
1. Shareholders may ask directors for any information or clarification regarding the items of the agenda that they may deem necessary, as well as regarding the information provided by the Company to the CNMV, or submit in writing any questions that they may deem relevant up to the fifth day prior to the date scheduled for the meeting.
2. During the general meeting, the Company’s shareholders may orally request any information or clarification regarding the items of the agenda that they may deem necessary, as well as regarding the information provided by the Company to the CNMV. If the shareholders’ right cannot be satisfied at that moment, the directors must provide the information in writing.
3. Valid requests for information or clarification or questions submitted in writing, and the board of directors’ answers provided in writing, shall be included on the Company’s website.
ARTICLE 24. RIGHT OF ATTENDANCE
1. The holders of 500 or more shares registered in their names in the corresponding records five days in advance of the date a general meeting is to be held will be entitled to attend the meeting, whether it is an ordinary or an extraordinary general meeting.
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Holders of lower numbers of shares may grant a proxy to another person with the right to attend, or pool together with other shareholders who are in the same situation, until they reach at least that number, appointing a representative from amongst themselves. The group must be formed specifically for each general meeting of shareholders and be recorded in writing.
Shareholders in default on the payment of pending contributions will be entitled to attend general meetings, but will not be entitled to exercise their right to vote. The amount of their shares will be deducted from share capital for the purpose of computing the quorum.
2. To attend the general meeting it will be necessary to use the corresponding nominative attendance card, which must state the number of shares held and which will be issued by reference to the list of shareholders having that right.
3. Directors must attend the general meetings, without prejudice to their attendance not being necessary for valid holding of the meeting.
4. The chairman of the general meeting may authorise attendance at the meeting of any person he deems appropriate. The general meeting, however, may revoke that authorisation.
5. Shareholders who are entitled to attend may vote on the proposals concerning items on the agenda of any kind of general meeting in accordance with the provisions of these bylaws.
ARTICLE 25. PROXIES AND ONLINE ATTENDANCE AT GENERAL MEETING
1. Every shareholder may be represented at the general meeting by another person, even if not a shareholder, by complying with the requirements and formalities established in these bylaws and, if applicable, by law. Individual shareholders who are not in full exercise of their civil rights and shareholders that are legal persons may be represented by those exercising legal representation thereof, duly accredited. In any event, without prejudice to the right of a shareholder to appoint a proxy, replacement of the proxy by a third person is prohibited.
In addition, proxies may be granted by distance communication means that meet the requirements set forth in these Bylaws and the law.
2. In addition, any shareholder will be entitled to online attendance at general meetings by way of online resources duly guaranteeing the identity of the shareholder, as specified in article 31 below, on the terms of the general meeting regulations.
3. Proxies are always revocable. Attendance at the general meeting by the represented shareholder, whether personally or by that shareholder's having cast a remote vote, will constitute revocation of the proxy granted, whatever the date thereof.
4. When proxies are granted or notice thereof is given to the Company remotely, they will
only be valid if made:
a) by in-person or mailed delivery to the Company of the attendance card and the proxy, duly signed, or by other written means that, in the judgment of the board of
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directors stated in a resolution adopted for that purpose, allows due verification of the identity of the shareholder granting the proxy and of the proxy appointed, or
b) by way of electronic correspondence or communication with the Company, to which electronic copies of the attendance card and proxy are attached, specifying the proxy granted and the identity of the grantor of the proxy, and incorporating the electronic signature or other kind of identification of the shareholder granting the proxy, on the terms set by the board of directors.
5. Shareholders may establish and be part of Associations of Shareholders of the Company provided that they comply with all the legal requirements for their creation and operation.
ARTICLE 26. PLACE AND TIME OF MEETING
1. General meetings will be held in the place stated in the call, within the municipality in which the Company's registered office is located. Nevertheless, the meeting may be held in Madrid if so provided by the board of directors when issuing the call.
2. General meetings may be attended either by going to the place it is to be held or, if
applicable, to another place made available by the Company, as indicated in the call, with a link to the former by a videoconference system allowing recognition and identification of those in attendance, uninterrupted communication among those in attendance regardless of where they are, as well as addressing the meeting and casting votes. The principal meeting site must be located in the municipality specified in paragraph 1 of this article, which shall not be required for the other meeting sites. Those attending at any of the sites will, for all purposes related to the general meeting, be treated as having attended the same single meeting. The meeting will be deemed to have been held at the principal site.
3. If the call does not state the place the meeting is to be held, it will be understood that
the meeting will be held at the registered office.
ARTICLE 27. QUORUM FOR GENERAL MEETING
1. Except as provided in section 3 of this article 27, there will be a quorum for the general meeting, whether ordinary or extraordinary, on first or second call when the shareholders present or represented hold the percentage of voting capital established by law.
2. In particular, if the meeting is called upon to deliberate on amendments to the bylaws, including capital increases and decreases, on the transformation, merger, spin-off, bulk assignment of assets and liabilities and the transfer of the registered office abroad, on the issue of debentures that fall within the authority of the general meeting according to the terms of the law, or on the elimination of, or restrictions on, preferential subscription rights, it will be necessary, on first call, for shareholders representing at least fifty percent of the subscribed voting capital to be present. If there is not a sufficient quorum, the general meeting will be held on second call, it being sufficient that twenty-five percent of the aforesaid capital be in attendance.
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3. If, in order to adopt a resolution validly as regards one or more points on the agenda of the general meeting, the attendance of a specific quorum is required by applicable regulations or these bylaws, and that quorum is not achieved, the agenda will be reduced to the other points thereof not requiring the indicated quorum to validly adopt resolutions.
4. Without prejudice to the provisions of the preceding section, the general meeting will be understood to be validly held on a universal basis to consider any matter, without need of a prior call, provided that all share capital is present in person or by proxy and those attending unanimously accept the holding of the meeting.
The universal meeting may be held at any place within Spanish territory or abroad.
5. Absences occurring after a quorum has been established for a general meeting will not affect the holding thereof.
6. To validly establish a quorum for a meeting, even if it is held on a universal basis, it will not be necessary for the directors of the Company to attend, without prejudice to their duty as contemplated by law.
ARTICLE 28. GENERAL MEETING OFFICERS
1. The general meeting officers will be its chairman and secretary.
2. The general meeting will be chaired by the chairman of the board of directors.
3. The chairman will be assisted by the secretary of the meeting. The secretary of the board of directors will be the secretary of the general meeting.
4. The chairman will have authority to determine that there is a quorum for the meeting, lead the deliberations, resolve such doubts as may arise regarding the agenda, end the debate when he considers a matter to have been sufficiently discussed, declare the results of votes and, in general, all such authority as may be necessary for the best organisation and functioning of the general meeting.
ARTICLE 29. LIST OF ATTENDEES
1. Before addressing the agenda, the list of attendees will be prepared. It will state the names of the shareholders present and those represented and their representatives, as well as the number of shares with which they attend.
At the end of the list the number of shareholders present in person or by proxy will be stated, identifying those casting their votes remotely, as will the amount of share capital they represent, stating the amount of capital corresponding to shareholders entitled to vote.
For quorum purposes, non-voting shares will only be counted under the specific circumstances established by law.
2. The chairman of the general meeting may authorise such scrutineers as he deems to be necessary for preparation of the list of attendees. The chairman will appoint the scrutineers.
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3. If the list of attendees does not appear at the beginning of the minutes of the general meeting, it will be attached thereto in the form of an annex signed by the secretary, with the approval of the chairman.
4. The list of attendees may also be prepared as a computer file or added to computerised media. In such cases the media used will be specified in the minutes and the sealed container of the file or media will contain the appropriate identification signed by the secretary with the approval of the chairman.
5. In the case of a universal meeting, the list of attendees will be stated in the minutes, followed by the signature of each of them, after the date and place of the meeting and the agenda.
6. The list of those in attendance may be consulted during the meeting by any shareholder entitled to attend, without its intention to do so requiring delay or deferral of the normal conduct of the meeting, once the chairman has declared the meeting to have been legally constituted, and without a reading of the aforesaid list or delivery of copies thereof being required.
ARTICLE 30. DELIBERATIONS OF GENERAL MEETING
1. Once the list of attendees has been prepared, the chairman, if applicable, will declare the general meeting to be validly constituted and will determine whether it may consider all matters on the agenda or, otherwise, the matters in respect of which the meeting may deliberate and resolve.
2. The chairman will submit the matters on the agenda for deliberation as they appear thereon, and will lead the debate in order for the meeting to proceed in an orderly manner.
3. Any person entitled to attend may speak at least once regarding each of the points on the agenda, although the chairman of the general meeting may establish the order of speakers and at any time set the maximum time allowed thereto.
4. Once the chairman considers a matter to be sufficiently debated, he will submit it to vote.
ARTICLE 31. MANNER OF ADOPTING RESOLUTIONS
1. Each of the matters on the agenda will be voted on individually. Notwithstanding the foregoing, matters must be voted on separately if they are substantially independent of each other. In any event, even if they appear in the same point of the agenda, the following must be voted on separately: (i) the appointment, ratification, re-election or removal of directors and (ii) in the amendment of the bylaws, that of each article or group of articles that are independent of each other.
Aside from the aforesaid point, the chairman of the meeting may determine that proposals corresponding to various points on the agenda will be voted on together, in which case the result of voting will be understood to be individually reproduced for each proposal, if none of those in attendance states its intention to change its vote in respect of any of them. Otherwise, the minutes will reflect the changes of votes stated by each
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of those in attendance, and the result of the voting corresponding to each proposal as a result thereof.
2. The chairman will lead the meeting and will submit the matters on the agenda for deliberation as they appear thereon, and will lead the debate in order for the meeting to proceed in an orderly manner.
3. The chairman of the general meeting has authority to specify the system of voting he deems to be most appropriate, and lead the corresponding process. He may be assisted for that purpose by such scrutineers as he freely appoints. In particular, the chairman may decide that voting will be by a show of hands. If there is no objection, a resolution may be deemed to have been adopted by unanimous consent.
4. Voting will always be public.
5. The vote on proposals regarding points included in the agenda may be delegated by the shareholder by mail or electronic correspondence or by any other remote method of communication, provided the identity of the person delegating its voting right and the security of the electronic communications.
In order to cast votes by mail, shareholders must complete the corresponding section of the attendance card provided to them, and arrange for it to reach the Company's domicile before midnight of the third day prior the day set for holding the meeting on first call.
6. Without prejudice to the provisions of the preceding sections, resolutions may be adopted by the general meeting using any remote means of communication, provided that the identity of those voting and the integrity of the sense of their votes are duly guaranteed, and no shareholder opposes so proceeding. The Company may authorise remote attendance at the meeting by way of simultaneous remote resources and the issue of remote electronic votes during the holding of the meeting, in which case these matters will be governed by the provisions of the general meeting regulations.
The general meeting regulations may delegate the regulation of all necessary procedural matters to the board of directors, such regulation to respect the law, the articles and the meeting regulations.
7. Under the circumstances referred to in section 5 above, the directors may stipulate that the addresses and proposals of resolutions that, in accordance with the law, are intended to be submitted by the persons who will attend by online means must be submitted to the Company forty-eight hours before the meeting is held.
8. Answers to shareholders exercising their information right during the meeting, if it is not possible to meet the shareholder's request at that time, will be given in writing during the seven days following the end of the meeting.
9. Shareholders that are entitled to attend may vote on proposals concerning items on the agenda of any general meeting by way of:
a) in-person or mailed delivery to the Company of the attendance card and the proxy, duly signed, or by other written means that, in the judgment of the board of directors stated in a resolution adopted for that purpose, allows due verification of the identity of the shareholder casting the vote, or
b) electronic correspondence or communication with the Company, to which electronic copies of the attendance card and vote are attached, containing the
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electronic signature or other form of identification of the shareholder, on the terms set by the board of directors in a resolution adopted for that purpose to give this system of voting appropriate guarantees of authenticity and identification of the shareholder casting the vote.
10. To be valid, a vote cast using any of the aforesaid resources must be received by the Company at the corporate headquarters or, if applicable, at the address specified in the call of the general meeting, before midnight on the third day prior to the date set for holding the meeting on first call. In the resolution calling the meeting in question, the board of directors may reduce the aforesaid period, publicising it as it would the notice of the call.
11. Shareholders casting remote votes, on the terms indicated in this article, will be deemed to be present for purposes of the quorum for the meeting in question. As a result, appointments of proxies made by them before the vote will be deemed to be revoked, and proxies granted subsequently will be taken not to have been extended.
12. A remote vote referred to in this article will be invalidated by physical attendance of the shareholder that cast it at the meeting or transfer of the shares known to the Company.
13. The board of directors may develop the foregoing provisions, establishing the instructions, rules, measures and procedures for documenting the casting of votes and grant of proxies by remote means, in accordance with the state of the art and, if applicable, the regulations issued for this purpose and the provisions of these bylaws.
Further, the board of directors, to avoid possible duplication, may adopt the measures necessary to ensure that one casting a remote vote or remotely appointing a proxy is duly authorised to do so under the provisions of these bylaws.
The procedural rules adopted by the board of directors by virtue of the provisions of this section will be published on the Company's website.
14. The general meeting regulations may provide that the board of directors has authority, while respecting the law, to regulate the bylaws and the meeting regulations, as regards all necessary procedural matters, inter alia including the minimum time in advance of the meeting by which a connection must be established in order to consider a shareholder to be in attendance, the procedure and rules applicable for shareholders attending remotely to exercise their rights, the time in advance of constitution of the meeting by which any submissions and proposed resolutions those attending remotely wish to formulate must be sent, the identification requirements imposed on those attending remotely and the treatment thereof within the scheme for preparing the list of those in attendance.
ARTICLE 32. ADOPTION OF RESOLUTIONS
1. With the exception of matters for which the law establishes a qualified majority, the majority necessary to adopt a resolution, on both first and second call, will be a simple majority of the votes of shareholders present at the meeting, in person or by proxy, so the resolution will be deemed to have been adopted when there are more votes in favour than against from those present in person or by proxy at the general meeting.
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2. Those attending the general meeting will be entitled to one vote for each share they hold or represent. Non-voting shares will have this right under the circumstances contemplated by law.
A shareholder of the Company will be in a situation of conflict of interest and may not exercise the voting right corresponding to its shares when the purpose of the resolution to be adopted is:
a) to release an obligation of or grant a right to the aforesaid shareholder;
b) to provide the aforesaid shareholder with any kind of financial assistance, including extending guarantees in its favour; or
c) to excuse the aforesaid shareholder from the obligations deriving from the duty of loyalty legally established for directors.
3. Once the resolution has been submitted to vote and the votes have been tabulated, the chairman will declare the result, if applicable stating that the resolution has been validly adopted.
a) The resolutions adopted and the results of votes will be published on the Company's website on the terms contemplated by law.
b) For each resolution submitted to voting of the general meeting, the following must be determined: the number of shares in respect of which valid votes have been cast, the proportion of share capital represented by those votes, the total number of valid votes, the number of votes for and against each resolution and, if applicable, the number of abstentions.
ARTICLE 33. MINUTES OF GENERAL MEETING
1. The secretary of the meeting will prepare minutes of the meeting which, once approved, will be included in the corresponding minutes book.
2. The minutes must set forth the resolutions adopted, which will reflect the number of shares in respect of which valid votes have been cast, the proportion of share capital represented by those votes, the total number of valid votes, the number of votes for and against each resolution and, if applicable, the number of abstentions.
3. The minutes of a meeting may be approved by the meeting itself immediately thereafter or, otherwise, by the chairman and two scrutineers, one representing the majority and the other the minority, within fifteen days.
4. The board of directors may require the presence of a notary to prepare the minutes of the meeting, and will be required to do so in those cases in which it is so established by law. Notarial minutes need not be approved.
5. Any shareholder voting against a given resolution will be entitled to have its opposition to the adopted resolution noted in the minutes of the general meeting.
Section 3. Board of directors
ARTICLE 34. STRUCTURE OF ADMINISTRATION BODY
1. The Company will be administered by a board of directors.
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2. The board of directors will be governed by the legal regulations applicable to it and by these articles. Also, the board will approve board of directors regulations which will contain rules for the internal functioning and governance of the board, the positions therein and delegated, supervisory and control committees thereof, as well as the rules of conduct for their members. The board regulations will be based on good corporate governance practices in the business sector. The approval of the board of directors regulations and amendments thereof will be reported to the general meeting.
ARTICLE 35. ADMINISTRATION AND SUPERVISION AUTHORITY
1. The board of directors will have the broadest authority to administer the Company and, except for such matters as are reserved to the general meeting, in accordance with the provisions of applicable legislation and these articles of association, is the highest decision-making authority of the Company. The foregoing is without prejudice to the delegated and other authority given by these articles to the chairman of the board of directors.
2. The board will assume, without delegation, such authority as is legally reserved directly to it, and such other authority as may be necessary for responsible exercise of the general supervision function.
ARTICLE 36. POWERS OF REPRESENTATION
1. The power of representation of the Company, judicial and extrajudicial, corresponds to the board of directors, which will adopt its resolutions collectively and ordinarily will act through its chairman. The chairman also will hold power of representation of the Company. The board also may act through any other director to whom it delegates that authority.
2. The secretary of the board and, if applicable, the assistant secretary, will have the representation authority necessary to arrange for attestation as public documents and request registration of the resolutions of the general meeting and the board of directors.
3. The provisions of this article are without prejudice to any such other general and special delegations and grants of power of attorney as may be made.
ARTICLE 36 BIS. NON-DELEGABLE RESPONSIBILITIES OF THE BOARD
1. Without prejudice to the responsibilities acknowledged in these bylaws, the board of directors shall have the following non-delegable responsibilities:
a) The approval of the strategic or business plan, as well as the management objectives and annual budget, the investment and financing policy, the corporate social responsibility policy and the dividend policy, assuming responsibility for administration and management of the Company and overseeing the application of its strategic objectives, its risk strategy and its internal governance.
b) The determination of the general strategies and policies of the Company, in particular the policy for control and management of risk, including tax risk, and supervision of the internal reporting and control systems, as well as ensuring the
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integrity of the accounting and financial reporting systems, including financial and operational control and compliance with applicable legislation.
c) The determination of the corporate governance policy for the Company and the group of which it is the controlling Company; as well as regular supervision, control and evaluation of the effectiveness of the corporate governance system and the adoption of appropriate measures to correct any deficiencies; organisation and functioning of the board of directors, in particular approval and modification of its own regulations.
d) The approval of the financial information that, by reason of its status as a listed Company, the Company must publish periodically, supervising the process of disclosure of information and the communications related to the Company.
e) Making any kind of report legally corresponding to the board of directors, provided that the matter covered by the report is nondelegable.
f) The definition of the structure of the corporate group of which the Company is the controlling entity.
g) The approval of all kinds of investments and operations which, due to their high value or special characteristics, are strategic in nature or have high tax risk, unless their approval is the remit of the general meeting.
h) The approval of the creation or acquisition of holdings in special purpose vehicles or entities domiciled in countries considered to be tax havens, as well as any other transactions or operations of a similar nature which, due to their complexity, may undermine the transparency of the Company and its group.
i) The approval, after obtaining a report from the audit and compliance committee, of operations carried out with directors by the Company or companies in its group in which there can be a conflict of interest, or with shareholders who, either individually or together with others, hold a significant holding, including shareholders represented in the board of directors of the Company or of other companies in the same group or with persons related to them. Affected directors or directors representing, or who are related to, the affected shareholders must abstain from taking part in the deliberation and vote of the resolution in question. Only transactions simultaneously having the three following characteristics are exempt from this approval:
1. They must be carried out under standard-form contracts which apply en masse to a large number of clients.
2. They must be carried out at prices or rates which are established generally by the supplier of the good or service in question, and
3. Their value must not exceed one percent of the Company’s annual income.
j) The supervision of the actual operation of the committees created by it and of the actions of the delegated bodies as well as, when so envisaged by the law, of the officers appointed by it, in all cases including senior management.
k) The policy on treasury shares.
l) The calling of general meetings and preparation of the agenda and the proposal of resolutions.
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m) Decisions relating to directors’ remuneration, in accordance with the provisions of these bylaws, and with the remuneration policy, where applicable as approved by the general meeting.
n) The determination of the tax strategy of the Company.
o) The authorisation or waiver of the obligations deriving from the duty of loyalty as provided by law.
p) Formulation of the annual accounts and their presentation to the general meeting.
q) The appointment and removal of chief executive officer of the Company, as well as the establishment of the terms of the chief executive officer´s contract.
r) Appointment and removal of the executives reporting directly to the board or any of its members, as well as establishment of the basic terms of their contracts, including their remuneration.
s) The authorities the general meeting has delegated to the board of directors, unless expressly authorised by it to subdelegate them.
2. In the terms envisaged in the applicable law, in the event of a duly justified situation of urgency, decisions relating to the above matters may be taken by the delegated persons or bodies, and must be ratified by the first board of directors meeting held after adoption of the decision.
ARTICLE 37. NUMBER OF DIRECTORS
1. The board of directors will be comprised of a minimum of 5 and a maximum of 15 members.
2. The general meeting sets the number of board members within the range established in
the preceding paragraph. For this purpose it will act directly by setting that number by express resolution, or indirectly, by providing for vacancies or appointing new directors, within the maximum established in the preceding section.
ARTICLE 38. CATEGORIES OF DIRECTORS
1. The general meeting will see to it that the board of directors is so comprised that non-executive directors represent a broad majority over executive directors, and among the non-executive directors there is a reasonable number of independent directors. The general meeting also will see to it that the number of independent directors represents at least one half of all directors.
2. The provisions of the preceding section do not affect the independence of the general meeting, or decrease the effectiveness of the proportional system, which will be of mandatory application when there is grouping of shares as contemplated by law.
3. For purposes of the provisions of these bylaws, the terms non-executive director, proprietary director, independent director and executive director will have the meanings given thereto by applicable regulations.
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4. The directors will be liable to the Company, the shareholders and the creditors of the Company for any damage they cause through acts or omissions contrary to the law or these bylaws, or carried out in violation of the duties inherent in their office.
5. All the members of the board of directors that took the action or passed the resolution causing damage will be jointly and severally liable, except those who prove that, not having participated in adoption and implementation thereof, they were unaware of its existence or, if they were aware of it, did everything appropriate to avoid the damage or at least expressly opposed it.
6. The fact that the damaging resolution or action was adopted, authorised or ratified by the general meeting in no case will result in exoneration from liability.
ARTICLE 39. TERM OF OFFICE
1. Directors will serve for a term of four years and may be re-elected one or more times for periods of the same duration. The appointment of the directors will lapse when, the term having concluded, the following general meeting has been held or the legal term for calling the meeting that is to resolve on approval of the accounts for the preceding financial year has passed.
2. The appointment of directors appointed by co-option will be understood to have been made and they will remain in office up to the date of the first following general meeting, included, without prejudice to the authority of the general meeting to re-elect them. Also, if there is a vacancy after the general meeting is called and before it is held, the board of directors may appoint a director until the holding of the following general meeting.
ARTICLE 40. SUBJECTIVE CONDITIONS FOR BEING A DIRECTOR
1. In order to be appointed as a member of the board of directors it will not be necessary to be a shareholder. The members of the board of directors must satisfy the requirements of banking regulation to be considered to be honourable persons suitable for exercise of that function. In particular, they must be of high commercial and professional integrity, have knowledge and experience appropriate to the performance of their duties and be willing to exercise good governance of the Company. Supervening failure to satisfy those requirements will be grounds for removal of the director.
2. If a legal person is appointed as a member of the board of directors, it must designate a single individual to exercise the functions of a director. In this case both the individual and the legal person are required to fulfil the requirements of banking regulation established in the preceding paragraph. Supervening failure of the individual representative to satisfy these requirements will not be grounds for removal of the legal person that is a director, provided that the individual representing it is replaced within a term of ten days.
ARTICLE 41. MEETINGS OF BOARD OF DIRECTORS
1. The board of directors generally will meet once each month. It further will meet as often as called by its chairman, on his own initiative or on request of one of the independent directors, which may request inclusion of matters on the Agenda. In the latter case the
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chairman will call the extraordinary meeting within a maximum term of three business days after receipt of the request, to be held within the three following business days, including the agenda items to be considered at the meeting.
2. The board of directors will be called by individual notice, stating the agenda for the meeting in sufficient detail. This notice will be sent by fax, e-mail or letter to each of the directors, at least 5 days in advance of the date contemplated for the meeting, unless, in the judgment of the chairman, the urgency of the matters to be considered requires an urgent call, which will be made by telephone, fax, e-mail or any other remote means, sufficiently in advance to allow the directors to fulfil their duty to attend.
3. The board of directors may validly meet when a majority of its members attend the meeting, personally or by proxy, at the place contemplated in the call. The board also may validly meet without need of a call if the holding of the meeting is unanimously accepted by those present in person or by proxy.
4. Board of directors meetings may also be held by videoconference, multiple telephone conference or other such comparable means as may exist in the future, unless 4 directors state their opposition to using them. Under these circumstances resolutions will be deemed to have been adopted at the corporate headquarters.
5. The board of directors also may adopt its resolutions in writing (including by fax or e-mail with prior and subsequent sending of the originals by mail), without need of holding a physical meeting, if none of the directors opposes so proceeding.
ARTICLE 42. ADOPTION OF RESOLUTIONS BY BOARD OF DIRECTORS
1. With the exception of those matters for which the law establishes a qualified majority, resolutions of the board of directors will be adopted by absolute majority of the directors present at the meeting in person or by proxy. In the event of a tie, the chairman will have a casting vote.
2. Each board member has one vote.
3. The directors must personally attend meetings of the board. When they cannot do so personally, all directors may cast their votes and extend proxies to another director, although non-executive directors may only extend proxies to another executive director. Proxies will be granted on a special basis for the meeting of the board of directors in question. Notice thereof may be given in any of the ways contemplated in the section 2 of the preceding article.
4. The chairman, chief executive officer and secretary of the board will be permanently authorised, jointly and severally, to arrange for attestation as public documents of the resolutions of the board of directors, all without prejudice to the provisions of article 36.2 of these bylaws and the express authorisations contemplated in the applicable regulations.
ARTICLE 43. BOARD OF DIRECTORS MINUTES
1. The minutes of the board of directors meeting will be prepared by the secretary of the board and, in his absence, by the assistant secretary, if any. In their absence the minutes
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will be prepared by the person appointed by those in attendance as the secretary for the meeting.
2. The minutes will be approved by the board itself, at the end of the meeting or at the immediately following meeting.
ARTICLE 44. POSITIONS ON AND COMMITTEES OF BOARD OF DIRECTORS
1. The board of directors will, after obtaining a report from the appointments and responsible management committee, appoint its chairman, the term of office of which will be indefinite for so long as the chairman remains a director, with no limits on reelection.
The chairman of the board of directors, in addition to having the power of representation referred to in article 36, will be the executive chairman of the Company, and will have the authority granted thereto for that purpose by the board of directors, in particular authority to propose appointment of the top level executives of the Company, and to authorise any other appointments within the Company. The authority delegated to the chairman may be granted by the board of directors by way of power of attorney.
The chairman of the board of directors will be the chief executive of the Company and will have the maximum authority necessary for exercise of that position, without prejudice to the authority, if any, corresponding to the chief executive officer, having the following authority, in addition to the other authority granted in these bylaws:
a) to see to overall compliance with the bylaws and implementation of the resolutions of the general meeting and the board of directors,
b) to exercise top-level oversight of the Company and all of its departments,
c) to head the Company's management team, always in accordance with the decisions and criteria set by the general meeting and board of directors within the scope of their respective authorities,
d) together with the chief executive officer, to handle matters related to ordinary management of the Company,
e) to propose to the board of directors, after obtaining a report from the appointments and responsible management committee, the appointment and removal of the chief executive officer,
f) to call and chair the meetings of the board of directors, setting the agenda and directing discussions and deliberations,
g) to chair general meetings of shareholders,
h) to ensure that directors receive sufficient information in advance to deliberate on the points of the agenda, and
i) to encourage debate and the active participation of the directors during meetings, safeguarding their right to freely choose their position.
When the chairman of the board is the chief executive of the Company, the board of directors may appoint, from among the independent directors, on proposal of the appointments and responsible management committee, a lead independent director who will gather all questions and concerns communicated thereto by the non-executive
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directors, and may request call of the board of directors and inclusion of points on the agenda. In particular, in addition to other functions that rest with said director by law, the lead independent director will chair the board of directors in the absence of the chairman, will voice the concerns of the non-executive directors, organising the possible common positions of the independent directors, and serving as an intermediary or spokesman for such common positions; maintain contact with investors and shareholders to know their points of view and in order to form an opinion on their concerns on the terms set out in the Corporate Policy on information, communication and contacts with shareholders, institutional investors and voting advisors approved by the entity, in particular, in relation to the corporate governance of the Company; coordinate the chairman succession plan; and manage the evaluation of the chairman's performance of his functions.
The term of office as the lead independent director will be three years, with no successive reelection. Status as the lead independent director will cease by expiration of the term for which said director was appointed, when the director ceases to be a director, when said director loses status as an independent director, or when so resolved by the board of directors upon proposal of the appointments and responsible management committee.
2. Independently of the provisions of section 1 above, the board may appoint a chief executive officer, granting thereto such authority as it deems to be appropriate, to assist and report to the executive chairman regarding the progress of business and the matters within its competence.
3. The granting to the chairman, the chief executive officer or any other member of the board of permanent executive authority, general or by sector, other than the collective supervision and decision-making inherent to a directorship, may be made by virtue of structural delegation, by general powers of attorney or by other contractual documents. The members of the board granted such authority will be deemed to be executive directors, in any event under the higher-ranking management of the executive chairman.
4. The assigning or delegating resolution will determine the scope of the authority given to the chief executive officer, the remuneration corresponding thereto in this regard and any other terms and conditions of the relationship, which will be incorporated in an appropriate contract.
5. Appointment of the chief executive officer will be for an indefinite term, for so long as the chief executive officer remains a director.
6. The board of directors will, after obtaining a report from the appointments and responsible management committee, appoint a secretary and, optionally, an assistant secretary, capable of performing the duties inherent in those positions. The respective appointments may be of persons who are not directors, in which case they will act with voice but not vote. The assistant secretary will replace the secretary in cases of absence, unavailability, incapacity or vacancy.
7. The board of directors may create and maintain an executive committee comprised of members of the board of directors. It must create an audit and compliance committee, an appointments and responsible management committee, a remuneration committee, risk advisory committee and a board risk committee, with decision-making authority.
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The structure, functions and operating rules of these committees will be governed, to the extent not covered in these bylaws, by the board of directors regulations.
8. The board of directors also may create other committees, with such authority as the board of directors may determine.
9. The board of directors annually will evaluate its performance and that of its committees and, based on the results, will propose an action plan correcting the deficiencies identified.
ARTICLE 45. EXECUTIVE COMMITTEE
1. An executive committee may be established, composed of a minimum of five and a maximum of seven directors. In any event, the number of members of the executive committee will be determined either directly by express resolution or indirectly by way of filling vacancies or appointment of new members within the established maximum.
2. The adoption of resolutions permanently delegating any authority of the board of directors to the executive committee and appointing members of the permanent executive committee will require the favourable vote of at least two thirds of the members of the board of directors.
3. The executive committee will have permanently delegated to it such legally delegable authority of the board of directors as it resolves to delegate to it.
4. Resolutions of the executive committee will be adopted by absolute majority of the directors that are members of the committee, present in person or by proxy at the meeting, except for resolutions to delegate authority, which will be adopted by the legally required majority.
In the event of a tie, the chairman will have a casting vote.
5. The board regulations will develop the rules governing the executive committee contemplated in this article.
ARTICLE 46. AUDIT AND COMPLIANCE COMMITTEE
1. The audit and compliance committee will be composed exclusively of non-executive directors, the majority independent, with a minimum of three and a maximum of five, all of the foregoing without prejudice to attendance, when so expressly resolved by the members of the Committee, of other directors, including executive directors, senior managers and any employee. In any event the number of members of the audit and compliance committee will be determined either directly by express resolution or indirectly by way of filling vacancies or appointment of new members within the established maximum.
2. The members of the audit and compliance committee will be appointed by the board of directors taking into account the knowledge, aptitude and experience in accounting, auditing or both areas of the directors and the tasks of the committee; the members of the committee, as a whole, must possess the relevant technical knowledge of the banking sector.
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3. The audit and compliance committee will be chaired by an independent director who, in addition, has knowledge, aptitude and experience in accounting, auditing or risk management. The chairman of the audit and compliance committee must be replaced every four years, and may be reelected after the term of one year elapses since he left office.
4. The authority of the audit and compliance committee will be as provided by law, as well as the responsibilities and authority contemplated in the board regulations, or such others as the board of directors may resolve.
5. The audit and compliance committee will meet as often as it is called by resolution of the committee itself or its chairman, and at least four times per year. Any member of the Company's management team or personnel that is requested to do so must attend its meetings and provide his or her cooperation and access to the information available to him or her. The statutory auditor also may be required to attend. One of its meetings must necessarily be used to evaluate the efficiency of and compliance with the Company's governance rules and procedures, and prepare the information the Board must approve and include in the annual public documentation.
6. There will be a quorum for the audit and compliance committee with the attendance, in person or by proxy, of at least half of its members. It will adopt its resolutions by absolute majority of the members of the committee in attendance at the meeting, in person or by proxy. In the event of a tie, the chairman will have a casting vote. The members of the committee may extend proxies to other members. The resolutions of the audit and compliance committee will be maintained in a minutes book, each entry in which will be signed by the Chairman and the secretary.
7. The board regulations will develop the rules governing the audit and compliance committee contemplated in this article.
ARTICLE 47. APPOINTMENTS AND RESPONSIBLE MANAGEMENT COMMITTEE
1. The appointments and responsible management committee will be composed of non-executive directors and a majority of independent directors, with a minimum of three and a maximum of five, all of the foregoing without prejudice to attendance, when so expressly resolved by the members of the committee, of other directors, including executive directors, senior managers and any employee. In any event, the number of members of the appointments and responsible management committee will be determined either directly by express resolution or indirectly by way of filling vacancies or appointment of new members within the established maximum.
2. The members of the appointments and responsible management committee will be appointed by the board of directors, based on the knowledge, ability and experience of the directors and the responsibilities of the committee.
3. The appointments and responsible management committee will be chaired by an independent director appointed by the board of directors. The chairman of the committee must be replaced every four years, and may be reelected one or more times for terms of the same length.
4. The appointments and responsible management committee will have general authority of proposal and reporting regarding appointments and removals of directors and senior
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managers, those provided by law, and the responsibilities and authority regulated in the board regulations, or such others as the board of directors may attribute thereto.
5. There will be a quorum for the committee when the majority of the directors that are a part thereof are in attendance, in person or by proxy. In the event of a tie, the chairman will have a casting vote.
6. The board regulations will develop the rules governing the appointments and
responsible management committee contemplated in this article.
ARTICLE 47 BIS. REMUNERATION COMMITTEE
1. The remuneration committee will be comprised of non-executive directors and a majority of independent directors, with a minimum of 3 and a maximum of 5, all of the foregoing without prejudice to the attendance, when so expressly agreed by the members of the committee, of other directors including executive directors, senior executives and any employee. In any event the number of members of the remuneration committee will be determined directly by way of establishment of that number by express resolution, or indirectly by way of filling vacancies or appointment of new members within the established maximum.
2. The members of the remuneration committee will be appointed by the board of directors, taking into account the directors’ knowledge, skills and experience and the committee’s duties.
3. The remuneration committee will be chaired by an independent director appointed by the board of directors. The chairman of the committee must be replaced every four years, and may be re-elected one or more times for terms of the same length.
4. The remuneration committee will have the authority provided by law, as well as the responsibilities and authority regulated in the board regulations, or such others as the board of directors may attribute thereto.
5. There will be a quorum for the committee when the majority of the directors that are a part thereof are in attendance, in person or by proxy. It will adopt its resolutions by absolute majority of the members of the committee, present at the meeting in person or by proxy. In the event of a tie, the chairman will have a casting vote.
6. The board of directors regulations will implement the rules governing the remuneration committee envisaged in this article.
ARTICLE 47 TER. RISK ADVISORY COMMITTEE
1. The risk advisory committee will be composed of a minimum of three and maximum of five directors, who may not be executive directors, without prejudice to attendance, when so expressly resolved by the members of the committee, of other directors, including executive directors, senior managers and any employee. In any event, the number of members of the risk advisory committee will be determined either directly by express resolution or indirectly by way of filling vacancies or appointment of new members within the established maximum.
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2. The members of the risk advisory committee must have the appropriate knowledge, ability and experience to fully understand and control the risk strategy and risk tolerance of the Company. At least one third of its members must be independent directors. In any event, the chairman of the committee will be an independent director. The chairman of the committee must be replaced every four years, and may be reelected one or more times for terms of the same length.
3. The members of the risk advisory committee will be appointed by the board of directors, taking into account the directors’ knowledge, skills and experience and the committee’s duties.
4. The risk advisory committee will have the authority provided by law, as well as the responsibilities and authority regulated in the board regulations, or such others as the board of directors may attribute thereto.
5. There will be a quorum for the committee when the majority of the directors that are a part thereof are in attendance, in person or by proxy. In the event of a tie, the chairman will have a casting vote.
6. The board regulations will develop the rules governing the risk advisory committee contemplated in this article.
ARTICLE 48. BOARD RISK COMMITTEE
1. The board risk committee will be responsible for establishment of and supervision of compliance with the risk control mechanisms of the Company, and naturally will be the body responsible for approving the most significant transactions and establishing the overall limits so that lower-ranking bodies may approve the others, without prejudice to the supervisory authority legally corresponding to the audit and compliance committee and to the risk advisory committee.
2. The board risk committee will be comprised of a minimum of 3 and a maximum of 7 directors. The chairman of the committee will be a director that is a member thereof appointed by the Company's board of directors. In any event the number of members of the board risk committee will be determined directly by way of establishment of that number by express resolution, or indirectly by way of filling vacancies or appointment of new members within the established maximum.
3. There will be a quorum for the committee when the majority of the directors that are a part thereof are in attendance, in person or by proxy. It will adopt its resolutions by absolute majority of the members of the committee, present at the meeting in person or by proxy. In the event of a tie, the chairman will have a casting vote.
4. The board risk committee will have operational authority and, therefore, may adopt the corresponding decisions within the scope of authority delegated by the board.
5. The board risk committee will have the specific delegated authority contemplated in the delegation resolution and the board regulations.
6. The board risk committee, as the body responsible for overall risk management, will evaluate reputation risk within the scope of its activities and decision-making authority.
7. Also, copies of the minutes of meetings of this committee will be made available to all directors.
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ARTICLE 49. REMUNERATION OF DIRECTORS
1. The position of director is remunerated.
2. The remuneration of directors will consist of a fixed periodic amount for attendance at meetings of the board of directors and its committees, without prejudice to reimbursement of the corresponding expenses. The maximum amount of annual remuneration of all directors in their capacities as such must be approved by the general meeting and will remain in effect until modification thereof is approved. The fixing of that amount, its distribution among the various directors and the frequency of receipt thereof will rest with the board of directors. For this purpose, the board of directors will take account of the functions and responsibilities given to each director, the director's membership on board committees and the other objective circumstances deemed to be relevant.
3. Directors performing executive functions within the Company, whatever the nature of their legal relationship therewith, will further be entitled to receive remuneration for the performance of these functions, to be determined by the board of directors on proposal of the remuneration committee, in accordance with the bylaws and the remuneration policy approved by the general meeting, comprised of (a) a fixed part, appropriate to the services and responsibilities assumed; (b) a variable part, correlated with some indicator of the performance of the director or the business; (c) an assistant part, covering the appropriate insurance and welfare systems; (d) an indemnification in the event of separation or any other form of termination of the legal relationship with the Company not owing to breach attributable to the director; and (e) the monetary amounts deriving from exclusivity, post-contractual non-competition and minimum term or loyalty clauses, if any, appearing in the contract. The aforesaid remuneration will be included in a contract to be entered into between the director and the Company, which must be approved by the board of directors with the favourable vote of two thirds of its members, and must be attached as an annex to the minutes of the meeting. The affected director must refrain from attendance, deliberation and participation in voting. The director may not receive any remuneration for the performance of executive functions the amounts or categories of which are not contemplated in the contract.
Determination of the amount of the remuneration items comprising the fixed part, the manner of configuring and indicators for calculation of the variable part, the assistance provisions, and the indemnification or the criteria for calculation thereof, also corresponds to the board of directors.
In any event, the remuneration of members of the management bodies of the Company will be in accordance with the provisions regarding this matter contained in corporate and banking regulation.
4. Non-executive directors of the Company who receive any remuneration by reason of membership on any management body of the entity that is the majority shareholder of the Company1, or have an employment or senior management contract with that entity, will not be entitled to receive any remuneration by reason of their positions as directors of the Company, except for reimbursement of their expenses.
1 Specifically, BFA Tenedora de Acciones S.A.U.
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In addition, executive directors of the Company who receive any remuneration by reason of performance of executive functions for the entity that is the majority shareholder of the Company will not be entitled to receive any remuneration for their executive functions within the Company, except for reimbursement of their expenses.
The executive directors of the Company, if any, will not be entitled simultaneously to receive remuneration in the form of per diems by reason of their membership on any management body of the entity that is the majority shareholder of the Company.
5. Additionally, directors performing advisory functions other than the supervision and collegial decision-making inherent in their positions as directors, whatever the nature of their relationship with the Company, will be entitled to receive such employment or professional remuneration, fixed or variable, in cash or in kind as, by resolution of the board of directors of the Company, is appropriate for the performance of such functions.
6. The Company will secure civil liability insurance for its directors on the usual terms commensurate with the circumstances of the Company.
7. In addition, independently of the remuneration provided for in the preceding paragraphs, it is envisaged that remuneration schemes may be implemented that are indexed to the stock market price of shares or involve delivery of shares or options on shares to directors. These cases shall require a resolution of the general meeting, which must include the maximum number of shares that can be allocated to this remuneration scheme each financial year, the exercise price or the calculation system for the exercise price of the share options, the value of the shares taken as reference, if applicable, and the term of duration of the remuneration plan.
Also, upon fulfilment of the legal requirements, similar remuneration schemes may be established for personnel (whether or not management personnel) of the Company.
8. The board will arrange for director remuneration to be moderate and consistent with the Company's profits. In particular, it will see to it that the remuneration of external directors is sufficient to compensate them for the dedication, qualification and responsibility required to serve in the position.
9. The general meeting of the Company, at least every three (3) years, as a separate point on the agenda, will approve the director remuneration policy, which will be adapted as applicable to the remuneration system set forth in the bylaws, on the terms contemplated by law. The proposal of the aforesaid remuneration policy must attach a report of the remuneration committee.
In addition, on an annual basis the remuneration policy will be subject to central and independent internal evaluation, to verify compliance with the remuneration procedures and guidelines adopted by the board of directors.
The board of directors of the Company periodically will review and adopt the general principles of the remuneration policy and will be responsible for supervising its application.
ARTICLE 50. TRANSPARENCY OF REMUNERATION SCHEME
1. The board of directors annually must prepare and publish a report on director remuneration, including the remuneration they receive or are to receive in their
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capacity as such and, if applicable, for the performance of executive functions, making it available to the shareholders upon call of the ordinary general meeting so the meeting may vote thereon, on an advisory basis.
In any event the report at a minimum will include complete, clear and understandable information on the Company's director remuneration policy applicable for the year in course. It also will include the overall summary of how the remuneration policy was applied during the closed financial year, as well as details of the individual remuneration earned in all categories by each of the directors during that financial year.
This report must be a separate point on the agenda. The content of the report will be regulated in the board regulations.
2. If the annual report on director remuneration is rejected by the consultative vote of the ordinary general meeting, the remuneration policy applicable for the following year must be submitted to approval of the general meeting prior to its introduction, even if the aforesaid term of three (3) years has not elapsed.
3. The remuneration received by each director will be individually reported in the annual report, stating the amount corresponding to each category of remuneration. The remuneration corresponding to executive functions assigned to the executive directors of the Company will also be stated in the report, individually and for each of the categories.
Section 4. Report on corporate governance and website
ARTICLE 51. ANNUAL CORPORATE GOVERNANCE REPORT
1. The board of directors will prepare an annual report on corporate governance with special attention to (i) the ownership structure of the Company; (ii) the functioning of the general meeting, with information regarding the conduct of the meetings that are held; (iii) related party transactions of the Company with its shareholders and their directors and executives and intra-group transactions; (iv) any restriction on transferability of securities and any restriction on voting rights, (v) risk control systems, including tax risks; (vi) the structure of administration of the Company; (vii) the degree of following the recommendations on corporate governance or, if applicable, an explanation of the failure to follow those recommendations and (viii) will include a description of the principal characteristics of the internal control and risk management system by reference to the process for issuing financial information. As well as any other information the board deems to be of interest.
2. The annual corporate governance report will be made available to shareholders on the Company's website not later than the date of publication of the call of the ordinary general meeting that is to resolve on the annual accounts corresponding to the financial year referred to by the indicated report.
ARTICLE 52. WEBSITE
1. The Company will have, for the purposes envisaged in the applicable, laws, a website (www.bankia.com) through which its shareholders, investors and the market will be
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generally advised of material or significant matters related to the Company, and the notices legally required to be published.
2. Without prejudice to such additional documentation as is required by applicable regulations, the Company's website at a minimum will include the information and documents set forth in the board regulations.
3. On the Company's website, upon call of general meetings, there must be an electronic shareholder forum, to which both individual shareholders and such voluntary associations as they may establish on the terms contemplated by law may have appropriately secure access, to facilitate their communication prior to the holding of general meetings. The electronic shareholder forum regulations may be developed by the general meeting regulations which, in turn, may authorise the board of directors to regulate all necessary procedural aspects.
4. The average term for payment to suppliers of the Company will be published on the Company's website. If that average period is more than the maximum established in the default regulations, the measures to be applied in the following year to reduce it to the maximum will be published.
CHAPTER 3. MISCELLANEOUS
Section 1. Annual accounts
ARTICLE 53. FINANCIAL YEAR AND PREPARATION OF ANNUAL ACCOUNTS
1. The financial year will correspond to the calendar year, beginning on 1 January and ending on 31 December of each year.
2. Within a maximum term of three months after the close of each financial year, the board of directors will prepare the annual accounts, the management report, the proposal for allocation of profits and, if applicable, the consolidated accounts and management report.
3. The board of directors will arrange for definitive preparation of the accounts in a manner that will not result in qualifications by the statutory auditor. Nevertheless, when the board believes it must maintain its position, it will, through the chairman of the audit and compliance committee, publicly explain the substance and scope of the difference and, also, will arrange for the statutory auditor also to state its comments in this regard.
4. The annual accounts and management report of the Company must be reviewed by the statutory auditor, appointed by the general meeting prior to the end of the financial year to be audited, for a specified term that may not be less than three or more than nine years after the beginning date of the first financial year to be audited. The auditor may be reelected by the general meeting for successive periods of up to three years after the end of the initial term.
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ARTICLE 54. APPROVAL AND FILING OF ANNUAL ACCOUNTS
1. The board of directors will prepare the annual accounts, which will be submitted for approval of the general meeting of shareholders.
2. Once the annual accounts have been approved, the general meeting will resolve regarding allocation of results for the financial year.
If the general meeting resolves to distribute dividends, it will determine the time and form of payment. It may also delegate this determination to the board of directors. In that case, the meeting or, if applicable, the directors may resolve to distribute interim dividends for the financial year the accounts of which have been submitted for approval on the terms legally contemplated.
The general meeting may resolve that the dividend will be fully or partially paid in kind, provided that the assets or securities distributed are uniform (absent unanimous consent) and are not distributed at a value less than that appearing on the balance sheet of the Company.
3. Within the month after approval of the annual accounts, the directors will present, for filing with the Mercantile Register of the registered office, certification of the resolutions of the general meeting approving the annual accounts and allocating results, attaching a copy of each of those accounts and copies of the management report and auditor's report.
ARTICLE 55. IN-KIND DIVIDENDS
The general meeting may resolve that the dividend will be fully or partially paid in kind, provided that:
(i) the assets or securities distributed are uniform;
(ii) they are admitted to trading on an official market (when the resolution is effective) or the Company duly guarantees that liquidity will be obtained within a maximum term of one year; and
(iii) they are not distributed at a value less than that appearing on the balance sheet of the Company.
Section 2. Winding up and liquidation of the Company
ARTICLE 56. WINDING UP OF THE COMPANY.
The Company will be wound up in the cases and subject to the requirements contemplated in applicable legislation.
ARTICLE 57. LIQUIDATORS
1. The Company having been wound up, all members of the board of directors the appointments of which are current and registered in the Mercantile Register by law will
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become liquidators, unless the general meeting has appointed other liquidators in the winding up resolution.
2. If the number of directors is not odd, the youngest director will not become a liquidator.
ARTICLE 58. REPRESENTATION OF WOUND UP COMPANY.
In the event of winding up of the Company, the power of representation will be in the liquidation body, comprised of the liquidators described in article 57 above.
ARTICLE 59. PAYMENT OF LIQUIDATION SHARE
The liquidation share will be paid, in whole or in part, in assets or rights originally contributed by each shareholder, on the terms established by the general meeting.
ARTICLE 60. REMAINING ASSETS AND LIABILITIES
If, the Company having been extinguished and its entries in the Mercantile Register having been cancelled, new corporate assets or liabilities appear, the provisions of applicable legislation will apply.
Section 3. Notices
ARTICLE 61. NOTICES
Without prejudice to the provisions of these articles regarding proxies, remote voting and simultaneous online attendance at meetings, notices and reports, whether mandatory or voluntary, among the Company, the shareholders and the directors, whoever the sender and addressee may be, may be given electronically and online, unless an express exception is made by law, in any event respecting the guarantees of security and rights of shareholders, for which purpose the board of directors may establish the appropriate technical mechanisms and procedures, which will be publicised by way of the website.
TRANSITIONAL PROVISION
Directors appointed before 1 January 2014 may complete their current terms even if they exceed the maximum duration set forth in article 39 of the bylaws.
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