In this article, we take a look at recent key developments concerning the proposed directive (Amending Directive) to amend the Shareholder Rights Directive (2007/36/EC) (SRD).
What is the SRD?
The SRD seeks to improve corporate governance in companies which have their registered office in a Member State and whose shares are admitted to trading on EU regulated markets by enabling, amongst other matters, the exercise of voting rights and rights to information across borders.
The Amending Directive proposes various amendments to the SRD in order to enhance and harmonise the corporate governance of these companies across the EU. The new measures have a particular focus on encouraging a 'long-termist' view amongst shareholders and increasing transparency.
What are the key proposals?
In summary, the proposals provide for:
- the disclosure of, and shareholder influence over, directors' remuneration;
- the increased transparency of proxy advisers in relation to their voting recommendations;
- the increased transparency of voting and engagement policies of asset managers and institutional investors;
- the identification of a company's shareholders by requiring that intermediaries must offer companies the right to have their shareholders identified and must facilitate the exercise of shareholders' rights; and
- the improvement of shareholders' oversight of a company's related party transactions.
What are the latest developments?
On 3 April 2017, the Council of the EU announced that it had adopted without debate the Amending Directive (which had previously been adopted by the European Parliament on 14 March 2017). Click here to read the latest text of the Amending Directive.
On 5 April 2017, ESMA published a report on shareholder identification and communication systems to assist the European Commission in preparing implementing acts to specify minimum requirements on the process, format and timeline for shareholder identification and transmission of information as required by the Amending Directive. Click hereto read the report.
What happens next?
The Amending Directive is expected to be published in the Official Journal in mid 2017 and will enter into force on the twentieth day following its publication. As it is not a regulation, it will not have direct effect in Member States and, therefore, it must be transposed into national law. Member States will have two years from the publication in the Official Journal to implement the measures. However, if the UK leaves the European Union before the implementation deadline in mid-2019, the measures will not apply to UK listed companies - unless the UK Government chooses to implement the measures into national law so that they are applicable 'post Brexit'. Most of the proposals will have limited impact on UK listed companies, as there are already similar provisions in place in the UK. Consequently, we will need to wait and see whether the Government will pursue implementing measures in the next two years prior to the UK leaving the EU.