ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra
• that any of the shareholders increases the qualified participation to the extent that the percentage of voting rights or share capital is equal to or greater than 20%, 30% or 50%; or • by virtue of the acquisition, that the entity may be controlled or become a subsidiary. Qualified shareholding ( participació qualificada ) means any participation that, directly or indirect - ly, represents 10% or more of the share capital or voting rights of the banking entity. A share - holding is also deemed to be qualified if, with - out reaching the aforementioned percentage, it allows significant influence to be exercised over the entity. It is presumed that a natural or legal person can exercise a significant influence when, among other things, it has the power to appoint or remove a member of the board of directors. No specific restrictions on foreign ownership apply to banking entities. 4. Governance 4.1 Corporate Governance Requirements Pursuant to Law 7/2024, banking entities must have robust corporate governance arrange - ments, which include the following: • a clear organisational structure with well- defined, transparent and consistent lines of responsibility; • effective processes to identify, manage, moni - tor and report the risks to which they are or might be exposed; • adequate internal control mechanisms, including sound administration and account - ing procedures; and • remuneration policies and practices that are consistent with and promote sound and effective risk management.
Notwithstanding this, the aforementioned arrangements, processes and mechanisms shall be comprehensive and proportionate to the nature, scale and complexity of the risks inherent in the business model and the entity’s activities. Accordingly, the board of directors of Andorran banking entities is obliged to define the entity’s risk appetite and approve the relevant risk man - agement policies and periodically monitor its compliance, and to adopt adequate internal policies and procedures. As far as organisational requirements are con - cerned, Andorran banking entities must imple - ment a compliance function, a risk management function and an internal audit department. The compliance function is in charge of the supervision, monitoring and verification of effec - tive compliance with legal provisions and pro - fessional standards by employees and financial agents, in order to protect clients and minimise compliance risk. Moreover, in order to guarantee that the compliance function works appropriate - ly, the entities must ensure that they have ade- quate authority and both technical and human resources, and must appoint a person to be in charge of the compliance function, in addition to avoiding participating economically in the ser - vices or activities they are controlling. The risk management function carries out the following activities: • advising senior management on the manage - ment risk policies and the determination of the level of risk tolerance; • introducing, applying and maintaining man - agement risk procedures; and • monitoring the measures adopted to reduce or mitigate risk exposure.
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