With the current focus on the implementation of the 2006 Act, it is easy to overlook the progress through the European Parliament of the European Commission's Directive on Shareholders' Rights (the Directive). In 2003 the European Commission (the Commission) published an Action Plan on company law and corporate governance for consultation. One of the aims of the Action Plan was to strengthen shareholders' rights by facilitating the exercise of voting rights at general meetings, (particularly by shareholders who are not based in the same EU Member State as the company whose shares they hold).

Since then, the Directive has evolved through drafts and consultations and was finally adopted by the European Parliament on 15 February 2007. The Directive (which only applies to companies whose shares are traded on a regulated market and whose registered office is in a Member State) includes provisions requiring:

?? the notice period for a general meeting to be 21 days save where companies provide for electronic voting, in which case they may call EGMs on 14 days' notice;

?? that shareholders be allowed to participate in meetings by electronic means subject to any constraints necessary to ensure the identification of the shareholder and the security of the electronic communication;

?? that shareholders be afforded rights to ask questions at or before general meetings (subject to national laws designed to ensure the orderly conduct of such meetings).

The Directive also paves the way for Member States to limit shareholders' rights to add items on the agenda at general meetings by only allowing the opportunity to exercise this right in relation to AGMs. Where there is a minimum threshold (expressed in terms of a shareholder holding a minimum percentage of shares) before shareholders can exercise the right to add items to the agenda or table draft resolutions, this minimum threshold cannot exceed 5 percent.

On 2 May 2007 the Commission launched a third consultation exercise in order to assess if any further measures were needed to complement the proposed Directive. The paper, which reflects questions raised over the last two years during the preparation of the Directive, considers whether:

?? there is a need for action in relation to the language of meeting documents;

?? depositaries should only be permitted to vote shares upon the instructions of the depositary receipt holders;

?? stock lending needs to be addressed at EU level;

?? the duties of intermediaries in the voting process need addressing;

?? further EU action in relation to the breakdown of voting rights would be premature given the obligations that have already been imposed by the Transparency Directive; and

?? it is necessary to have any specific rules for management companies of investment schemes concerning the exercise of voting rights.

Responses are sought to the third consultation by 27 July 2007.

It is expected that the Directive will be adopted formally by the EU Council and Commission shortly. In that event, certain of the changes contemplated by the 2006 Act may need to be revisited (for instance in relation to the notice periods for the calling of general meetings which are intended to be altered under the 2006 Act and which do not match exactly with the provisions anticipated under the Directive).