Parity law published: deadlines for company boards

Spain’s Official State Gazette (BOE) published Organic Law 2/2024 of 1 August on balanced representation of women and men on 2 August 2024. It takes effect twenty days after publication, that is, on 22 August. Congress had completed its passage on 23 July. What was a draft bill in March 2023 is now a law with a timetable, and it transposes Directive (EU) 2022/2381 on gender balance on the boards of listed companies.

What it requires of boards

The law amends the Capital Companies Act. Listed companies must have a board with at least 40% of the under-represented sex, and the minimum number needed may not exceed 49% of members. If a vacancy breaks the percentage, it must be restored when the replacement is co-opted and, definitively, at the first general meeting afterwards. The same 40% applies to senior management: if it is not reached, the notes to the annual accounts must explain why and what is being done to reach it.

If a listed company does not meet the target, it must adjust its selection processes: clear criteria set before the process begins, an objective comparison of candidates and, where candidates are equally qualified, preference for the person of the under-represented sex unless there are justified exceptional reasons. An unsuccessful candidate can ask for the reasons, and if a claimant of the under-represented sex sues and alleges equal qualifications, it is for the company to provide an objective and reasonable justification.

The deadlines

The 35 listed companies with the largest market capitalisation, measured at the closing price on the day the law takes effect, 22 August 2024, must comply from 30 June 2026. For all other listed companies the date is 30 June 2027. The EU directive also sets 30 June 2026 as the deadline and lets each Member State choose between 40% of non-executive directors and 33% of all directors; the Spanish law is more demanding, because it asks for 40% of the whole board.

The law also covers public-interest entities, as defined by the Auditing Act (among others, banks and insurers), that exceed 250 employees and either €50 million in turnover or €43 million in assets. For them, the board and senior management must reach 33% of the under-represented sex on 30 June 2026 and 40% on 30 June 2029. In companies controlled by a family, executive and proprietary directors may be left out of the calculation.

What else changes, and what to review

Failure to meet the obligations on the 40% board target and on publishing the information is a serious offence under the Securities Markets Act; the CNMV, the securities regulator, is competent to investigate and sanction and, together with the Institute for Women, is responsible for monitoring and supporting compliance. Each year, listed companies must publish in their sustainability report data on the presence of the under-represented sex on the board, and the CNMV will publish the list of those that declare they have met the target.

The law goes beyond companies: it requires balanced representation in electoral lists, the Government and constitutional bodies; professional associations must reach 40% on 30 June 2029, and from 30 June 2028 the law also applies to trade unions, employers’ associations and foundations.

For an affected company, it is worth starting with the current picture: how many board and senior-management posts each sex holds, when terms expire and which posts come up for renewal before June 2026 or 2027. A family business with listed shares should look at how shareholder agreements and the family protocol, which often reserve seats for the family, fit with the new requirement. Companies outside the law’s scope can use these deadlines as a benchmark for their own governance. Ask your corporate adviser how it applies to your case.

The percentage is reached at each board renewal, not in the final year.