In November 2009, we reported on RiskMetrics' proposed voting policy on notice periods for general meetings of UK and European listed companies.
By way of reminder, RiskMetrics Group is one of the leading US corporate governance advisers to the institutional investor community and their draft policy proposed that investors be recommended to vote against authorities sought by UK and European listed companies to hold general meetings on 14 days' notice, unless there is sufficient justification put forward in the shareholders' circular seeking such authority.
Under UK law, companies listed on the main market of the London Stock Exchange are permitted to hold general meetings (other than annual general meetings) on 14 days' notice provided that (amongst other things) they have passed an enabling special resolution at (or since) the last AGM.
RiskMetrics has now published its 2010 European Corporate Governance Policy Updates. In relation to notice periods for general meetings, RiskMetrics now advises that a recommendation to approve an enabling authority to convene general meetings on less than 21 days' notice would be on the basis that companies would generally be expected to take advantage of this flexibility only in limited circumstances, for example, to keep a period of uncertainty about the company's future to a minimum. Capital raisings and other price sensitive transactions are given as examples of where short notice would be appropriate. Accordingly, RiskMetrics will generally recommend that investors vote in favour of a resolution to approve an enabling authority if "the company discloses that the shorter notice period of between 20 and 14 days would not be used as a matter of routine for such meetings, but only when the flexibility is merited by the business of the meeting". However, if a company with such an enabling authority has not limited its use to such time sensitive matters and has failed to provide a clear explanation for this, RiskMetrics will consider a recommendation to vote against the enabling authority for the following year.
In its policy note, RiskMetrics advises that it applies the voting policy of the National Association of Pension Funds (NAPF) in the UK. We understand that NAPF will be publishing an update to its voting guidelines dealing with this issue in early 2010.
View the RiskMetrics' European Policy Update (30 page pdf).