Introduction
Background
Manner of convening general meetings
Timing for convening general meetings
Proxy forms
Proxies
Postal voting
Voting results
Introduction
The Swedish Parliament has approved new rules which mainly apply to the general meetings of listed companies. A number of regulatory changes have been made, including changes relating to:
- what a notice to convene a general meeting must include;
- how and when certain documents must be made available; and
- how voting results must be presented.
The amendments aim to simplify matters for listed companies and their shareholders. However, it is feared that they may ultimately give rise to an increased administrative burden in relation to general meetings.
Background
The EU Shareholders' Rights Directive (2007/36/EC) was implemented into Swedish law on January 1 2011. Older provisions still apply to general meetings convened in 2011 in the event that articles of association from January 1 2011 are contrary to law.
The legislative amendments relating in particular to Chapter 7 of the Companies Act regarding general meetings were made in light of recent changes in the ownership of listed companies. Increasingly, the ownership of major listed companies is characterised by institutions such as equity and pension funds which are globally active. An important aim of the changes has been to facilitate the processes by which such owners exercise their ownership role in companies. Thus, the recent legislative amendments primarily relate to Sweden's approximately 225 listed companies. Despite the fact that the Companies Act already largely complied with the directive, a number of changes have been made.
The amendments regarding to the manner of convening general meetings will force at least listed companies to change their articles of association.
Manner of convening general meetings
In addition to what was necessary for the implementation of the directive, the provision that required listed companies to announce a notice to attend the general meeting in one national daily newspaper has been removed (Chapter 7(56)(a)). The company must instead publish information that the notice has been issued and provide some information about the upcoming event, including the option for shareholders to access the entire notice on the company's website, details on the shareholders' right to request information at the meeting and information about the company's holding of own shares (Chapter 7(63)). Thus, companies cannot omit newspaper publishing entirely, but the information that must be published has been limited which should thereby decrease the costs involved.
The requirement that listed companies must send a notice by mail if a meeting is to address issues of changes in the articles of association or liquidation has also been removed (Chapter 7(23)).
Other public – but not listed – companies have been given the opportunity to adopt the above provision in their articles of association (Chapter 7(56)). It seems likely that most – if not all – will do so.
Like many of the legislative changes discussed below, one consequence of the amendments is that listed companies are from now on required to have a website. However, this obligation was already in place under the stock exchanges' self-regulation and most companies have such a website in any case.
Timing for convening general meetings
For listed companies, the notice to attend an extraordinary general meeting other than one on which an amendment to the articles of association will be addressed shall be issued no later than three weeks prior to the meeting, rather than two weeks as previously (Chapter 7(55)(a)). However, four weeks still apply for general meetings on which amendments to the articles of association shall be addressed.
In connection with the above, listed companies must now make certain documents available on the company's website at least three weeks prior to the meeting - compared with the previous provision that the documents should be available at the company and at least two weeks prior the meeting (eg, see Chapter 12(14), Chapter 13(39)(a) and Chapter 14(46)(a)).
Proxy forms
If the company is a Central Securities Depository (CSD) company, the proxy form may now be valid for a period not exceeding five years from the date of issuance – this period was previously one year (Chapter 7(3)).
Proxies
A shareholder in a CSD company may now appoint two or more proxies – previously, only one was permitted – where each proxy may exercise the rights pertaining to a percentage of shares that is specified in the mandate (Chapter 7(3)).
Postal voting
Postal voting can from now on be used by all of Sweden's approximately 360,000 limited liability companies.
A company that wishes to utilise the option to allow postal voting can either state in its articles of association that shareholders always get to vote by post or that the board shall be entrusted to decide whether that opportunity will be offered before every general meeting (Chapter 7(4)(a)).
It is hard to tell whether or to what extent the option to allow postal voting will be exercised by companies. While the change will help shareholders to exercise their rights, the administrative burden on the company will at the same time increase. A number of questions have also intentionally been left unanswered by the legislature. For example, how will the chairman act if events at the general meeting force a change to the addressed matter, thus making it uncertain whether the 'yes' or 'no' of a postal vote also applies to such a change? The easiest way to eliminate such potential uncertainty would be to disallow postal voting altogether.
Voting results
Under the new rules, at the request of a shareholder prior to the vote, a listed company must record the full details of the result of the voting held during the general meeting (Chapter 7(68)).
The legislature states in the preparatory work of the bill that it is aware of the fact that the changes will lead to an increased administrative burden for many listed companies. However, it presents no real remedy on how to resolve this scenario. For smaller meetings in which the number of participants is less than 100, a head count is plausible. However, some general meetings usually have more than 500 attendees and many of those present are proxies for a number of different shareholders and have mixed voting instructions for each of the different issues on the agenda. The preparatory work suggests that voting be handled by electronic means, but this will still pose problems with proxies who represent more than one shareholder.
It should become apparent in the next few months how the practical aspect of presenting detailed voting results will be handled, but it is easy to conceive that all of the simplifications aimed at by the recent amendments will be more than negated by the unclear nature of the new rules relating to voting results. Thus, while the new rules were intended to simplify matters for listed companies and their shareholders, they may well ultimately give rise to a disproportionate administrative burden resulting from general meetings.
For further information on this topic please contact Bo Thomaeus at Gärde Wesslau Advokatbyrå by telephone (+46 8 587 240 00), fax (+46 8 587 240 01) or email ([email protected]).