Shareholder rights directive

KEY POINTS

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 Member States must abolish any restrictions on shareholders participating in meetings through electronic means and on accepting 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. Member States may opt to set shorter deadlines.

Directive (EU) 2017/828 amends the 2007 directive, adding additional rights as follows.

• Say on directors’ pay.
  • Shareholders have the right to vote on director remuneration policy at least every four years.
  • The vote may be binding or advisory, at the choice of the Member State.
  • The policy should support company strategy. It should describe the fixed and variable components of directors’ pay, including the main characteristics of pensions 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. Member States 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 that holds that information. Intermediaries (such as banks) have to transmit such information without delay.
  • Member States 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 residing in another Member State 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 Member State) between a listed company and a related party
    • the transaction must be publicly announced;
    • depending on the Member State, 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. (Member States may also require shareholder approval).
• Transparency for institutional investors, asset managers 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 that they apply or explain to the public why they do not apply such a code.
• European single access point.
  • Amending Directive (EU) 2023/2864 inserts an article in Directive 2007/36/EC that requires Member States, from 10 January 2030, to ensure that, when making public any regulated information, undertakings submit that information at the same time to the relevant collection body for the purpose of making it accessible on the European single access point, set up under Regulation (EU) 2023/2859.
• Implementing Regulation (EU) 2018/1212 lays down minimum requirements for:
  • identifying shareholders;
  • transmitting information; and
  • facilitating the exercise of shareholders’ rights.