A new EU directive which aims to encourage shareholder engagement and increase transparency has made its way through the legislative process and will need to be implemented in the UK by June 2019.

Back in 2007 an EU directive was introduced seeking to enhance and improve corporate governance for European companies whose shares are traded on a regulated market. The directive principally focused on introducing a variety of rights for the benefit of shareholders - these included conduct of general meetings, shareholder voting and proxy appointments. It aimed to ensure that such meetings were on the whole more transparent to shareholders.

The directive, known as the Shareholder Rights Directive, was implemented by the UK in August 2009 through various amendments to the Companies Act 2006. Since its implementation the European Commission published proposals for amending the Shareholder Rights Directive with an aim to address the perceived lack of shareholder engagement and failings in corporate governance transparency. The amending directive seeks (amongst other things) to introduce:

  • improved links between the pay and performance of directors
  • shareholder rights for a vote on a company's remuneration policy for its directors which may at the member state's discretion be either advisory or binding
  • improved transparency of related party transactions, including a right for shareholders to vote on such transactions
  • new measures for intermediaries to facilitate the exercises of shareholders' rights including the right to participate and vote in general meetings

The presidents of the European Parliament and Council formally signed and approved the directive on 17 May 2017. The directive will come into force in the EU on 9 June 2017 and all member states have to implement its provisions into national law by 10 June 2019.

As the second anniversary of the United Kingdom triggering Article 50 of the Treaty on the European Union occurs prior to this date, it remains to be seen whether the UK government will in fact implement the amending directive into domestic legislation.