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Rights of shareholders in listed companies

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Rights of shareholders in listed companies

SUMMARY OF:

Directive 2007/36/EC – Listed companies' shareholders' rights

SUMMARY

WHAT DOES THE DIRECTIVE DO?

It establishes rules to help exercise shareholders’ rights at general meetings of companies that

have their registered office in an EU country and

are listed on an official stock exchange.

It also aims to take account of the possibilities presented by modern technologies.

KEY POINTS

Companies must give their shareholders certain information regarding general meetings. Notice of the meeting must be given at least 21 days in advance, and essential information (date, location, agenda, voting description and participation procedures) has to be communicated on its website.

They must also provide other information such as:

the total number of shares and voting rights,

documents to be submitted,

a draft resolution for the meeting, and

forms to be used to vote by proxy (when one shareholder authorises another to represent them).

At the meeting, shareholders have the right to:

put items on the agenda (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 record date*.

With regard to voting, EU countries must abolish any restrictions on shareholder participation at meetings through electronic means, and authorise shareholders to appoint (and revoke) their proxy holder, which can be an individual or a group, by electronic means.

Companies must also account for the exact number of votes for each resolution. However, if no shareholders request an account, EU countries may allow companies only to account for the number of votes required to obtain the required majority in order to pass a resolution. Companies must publish voting results no more than 15 days after the meeting.

In 2014, the European Commission presented a proposal to amend this directive in order to tackle corporate governance shortcomings related to listed companies and their shareholders. It is still under discussion in the European Parliament and the Council of the EU.

FROM WHEN DOES THE DIRECTIVE APPLY?

The directive entered into force on 3 August 2007. EU countries had to incorporate it in national law by 3 August 2009.

BACKGROUND

The origins of this directive lie in the 2003 Commission Communication entitled ‘Modernising Company Law and Enhancing Corporate Governance in the European Union’. It proposed initiatives to improve the rights of shareholders in listed companies to resolve the issue of long-distance voting.

KEY TERM

*Record date: a specific date established by a company where a shareholder must have officially owned shares in order to be eligible to participate and vote in general meetings.

ACT

Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies (OJ L 184, 14.7.2007, pp. 17–24)

The successive amendments and corrections to Directive 2007/36/EC have been incorporated in to the original document. This consolidated version is of documentary value only.

RELATED ACTS

Communication from the Commission to the Council and the European Parliament - Modernising Company Law and Enhancing Corporate Governance in the European Union - A Plan to Move Forward (COM(2003) 284 final of 21.5.2003)

Proposal for a Directive of the European Parliament and of the Council amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement and Directive 2013/34/EU as regards certain elements of the corporate governance statement (COM(2014) 213 final of 9.4.2014)

last update 26.11.2015

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