The European Commission has announced and published details of its Action Plan and related FAQ on European Company law and Corporate Governance. The Action Plan outlines future initiatives aimed at making sure that European companies are competitive and sustainable. The Commission has said that their analysis and consultations over the last two years* clearly indicate that further improvements can be made, by encouraging and facilitating long-term shareholder engagement, by increasing the level of transparency between companies and their shareholders and by simplifying cross-border operations of European companies. In total there are 16 different actions to be taken by the Commission. Some of these will be proposals for new legislation; others could require recommendations and corporate governance codes or an information campaign, but the Commission has indicated that all are priority actions.
Key elements of the action plan:
- Increasing the level of transparency between companies and their shareholders in order to improve corporate governance.
This will include in particular:
- Increasing companies' transparency as regards their board diversity and risk management policies;
- Improving corporate governance reporting;
- Better identification of shareholders by issuers; and
- Strengthening transparency rules for institutional investors on their voting and engagement policies.
- Initiatives aimed at encouraging and facilitating long-term shareholder engagement, such as:
- More transparency on remuneration policies and individual remuneration of directors, as well as a right by shareholders to vote on remuneration policy and the remuneration report;
- Better shareholders' oversight on related party transactions, i.e. dealings between the company and its directors or controlling shareholders;
- Creating appropriate operational rules for proxy advisors (i.e. firms providing services to shareholders, notably voting advice), especially as regards transparency and conflicts of interests;
- Clarification of the 'acting in concert' concept to make shareholder cooperation on corporate governance issues easier; and
- Investigating whether employee share ownership can be encouraged.
- Initiatives in the field of company law to support European businesses and encourage their growth and competitiveness:
- Further investigation on a possible initiative on the cross-border transfer of seats for companies;
- Facilitating cross-border mergers;
- Clear EU rules for cross-border divisions;
- Follow-up of the European Private Company statute proposal with a view to enhancing cross-border opportunities for SMEs;
- An information campaign on the European Company/European Cooperative Society Statute; and
- Targeted measures on groups of companies, i.e. recognition of the concept of the interest of the group and more transparency regarding the group structure.
In addition, all major company law Directives will be merged into a single instrument. This would make EU company law more accessible and comprehensible and reduce the risk of future inconsistencies.
* The background to this is the publication in 2011 of a Green Paper on the EU Corporate Governance framework (IP/11/404) in which the Commission commenced a process designed to examine and evaluate the effectiveness of the current corporate governance framework for European companies. Earlier this year, the Commission also conducted an on-line public consultation on the future of European company law (IP/12/149)