A Company law directive establishes minimum requirements to facilitate the exercise of shareholder rights at a general meeting of listed companies, particularly on a cross-border EU basis. It takes account of the possibilities offered by modern technology.
The Directive applies to all companies with registered offices within the EU and shares admitted for trading in a regulated market.
States may exempt UCITS undertakings the sole purpose is the collective investment of the capital provided by the public and cooperative societies.
In relation to information to be given prior to the general meeting, companies must
- issue the convocation no later in 21 days before the date of the general meeting
- Include essential information in the convocation including date and location of the meeting, proposed agenda, description of voting and participation procedures etc.
- publish on the company’s internet site the convocation full text of draft resolutions and essential practical information (total number of shares, voting rights, documents to be submitted, comment against each agenda item, voting forms, if applicable.
Shareholders either individually or collectively must be able to put items on the agenda which will result in a revised agenda and submit draft resolutions. The right may be limited to shareholders having a minimum holding of 5 percent of the company’s capital. The state must set a single deadline by which these rights must be exercised if they are to be exercised.
Shareholders may ask questions and put items on the agenda and the company is obliged to answer them. Rights are subject to necessary measures being taken to identify the shareholder and ensure the good order of the meeting. Shareholders’ participation may not be subject to any limitation down to the record date. Persons or shareholders on the record date are entitled to vote at the meeting.
States may stipulate a single record date applying to all listed companies They may exempt companies who issue registered shares who are able to identify all their shareholders on the date of the meeting. The record date must not be earlier than 30 days prior to the general meeting and must be at least 8 days before the convocation of the meeting.
States must abolish restrictions on shareholder participation by electronic means at a general meeting. Shareholders may vote by proxy. A proxy may be issued to a natural or legal person to participate in the meeting and exercise the shareholder’s rights on their own name.
States must abolish restrictions regarding the eligibility of persons to be appointed proxies, except for requirements relating to legal capacity. States may impose restrictions or obligations in the event of potential conflicts of interest between the shareholder and the proxy holder. The number of proxy holders and period of appointment may be restricted.
States must authorize shareholders to appoint proxies by electronic means. States may not submit the validity or proxy to any requirement other than the fact that it should be in writing.
Where national law requires prior disclosure of certain information when exercising the right to vote, that information may not in the case of a shareholder acting in a professional capacity for a client, exceed what is strictly necessary to identify the client the number of various rights, shares with voting rights.
States must authorize companies to offer their shareholders the option of voting by correspondence prior to the meeting. Companies must account for the exact number of votes for each resolution. If no shareholder requests a count, states may allow companies only to count the number of votes required to obtain the majority in order to pass the resolution. States must publish the results of voting at general meetings on their internet site no later than 15 days after the meeting is held.
Directive (EU) 2017/828 amending Directive 2007/36/EC establishes rules promoting the exercise of shareholder rights at general meetings of companies with registered offices in the EU and the shares of which are admitted to trading on a regulated market in the EU.
The 2017 revision (Directive (EU) 2017/828) aims to encourage long-term shareholder engagement to ensure that decisions are made for the long-term stability of a company and take into account environmental and social issues.
The revised directive:
- facilitates shareholder identification and information flows between the shareholders and the company;
- improves the oversight of directors’ remuneration;
- regulates related party transactions*; and
- introduces greater transparency.
A company must give shareholders information on general meetings, including 21 days’ notice, and the date, location, agenda, voting and participation procedures must be listed on its website.
Companies must also provide other information such as:
the total number of shares and voting rights;
documents to be submitted;
a draft resolution for each agenda item of the meeting; and
forms to be used to vote by proxy (when a shareholder authorises another person or firm to represent them).
Shareholders have the right to:
put items on the agenda of general meetings and to propose resolutions (if they have a 5% holding in the company’s capital);
ask questions related to items on the agenda that the company is obliged to answer; and
participate and vote without limitations other than the qualifying date set by a company for owning shares.
EU countries must abolish any restrictions on shareholders participating at meetings through electronic means, and to accept proxy appointments via electronic means. Companies must also normally count the exact number of votes for each resolution and publish the results within a maximum of 15 days.EU countries may opt to set shorter deadlines.
Say on directors’ pay
Shareholders will have the right to vote on director remuneration policy at least every 4 years.
The vote may be binding or advisory, at the choice of the EU country.
The policy should support company strategy. It should describe the fixed and variable components of directors’ pay, including the main characteristics of pension and payments linked to the termination of a contract.
In the case of variable remuneration, director performance should be assessed on both financial and non-financial criteria, where applicable . The policy should state whether clawback or any deferral or holding period applies.
Shareholders will also have the right to vote on annual remuneration reports that provide information on individual directors’ pay during the previous financial year. EU countries may allow small- and medium-sized enterprises to have a discussion at the general meeting as an alternative to a vote.
The remuneration policy and the reports will also have to be publicly disclosed.
Identification of shareholders
Companies have the right to identify their shareholders and obtain information on shareholder identity from any intermediary who holds that information. Intermediaries (such as banks) have to transmit such information without delay.
EU countries may implement a threshold of a minimum holding of 0.5% of shares or voting rights before a company can request shareholder identification.
Facilitation of shareholder rights
New rules aim to make it easier for shareholders resident in another EU country to participate in general meetings and vote.
The exercise of shareholder rights, including the right to participate and vote in general meetings has to be facilitated by intermediaries. Intermediaries also have to give shareholders all the information from the company that allows shareholders to properly exercise their rights and transmit to the company the information received from shareholders in relation to the exercise of their rights.
Related party transactions
For any material transaction (to be defined by each EU country) between a listed company and a related party:
- the transaction must be publicly announced;
- depending on the EU country, an independent report may have to be published assessing whether the transaction is fair and reasonable from the company’s perspective and for the other shareholders;
- the transaction must be approved by shareholders or the board.
EU countries may also require shareholder approval.
Transparency for institutional investors and proxy advisers
Institutional investors and asset managers must publish a policy on shareholder engagement, or explain why they have chosen not to do so. They also have to disclose information annually on how they have implemented this policy, in particular how they voted at significant votes.
Institutional investors are required to explain how the main elements of their equity investment strategy are consistent with the profile and duration of their liabilities and how those elements contribute to the medium to long-term performance of their assets.
Asset managers must disclose to institutional investors how their investment strategy and its implementation contribute to the medium to long-term performance of the assets of the institutional investor or of the fund.
Additional transparency requirements for institutional investors and asset managers aim at promoting the development of longer-term investment strategies and committing the asset managers to act in the best medium- to long-term interest of the institutional investor and its final beneficiaries.
Proxy advisors (providing research, advice and recommendation on how to vote) are subject to transparency requirements. They have to report on the application of the code of conduct which they apply or explain to the public why they do not apply such a code.
Implementing Regulation (EU) 2018/1212 lays down minimum requirements for:
transmitting information; and
facilitating the exercise of shareholders’ rights.
Directive 2007/36/EC has applied since 3 August 2007. The amended rules of Directive (EU) 2017/828 have applied since 9 June 2017 and had to become law in the EU countries by 10 June 2019.
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