Shareholder Rights Directive
Directive on the rights of shareholders
The 2008 financial crises highlighted shortcuts in the relationships between investors and issuers. Issues like short term investment, lack of transparency for all stakeholders activities were considered as some of these weaknesses.
In response, SRD II aims to encourage long-term investment by the shareholders and to increase transparency between investors and corporations.
It amends Directive 2007/36/EC which deals with the rights of shareholders to improve the governance of corporations listed on the European Union stock exchanges and strengthens their competitiveness and viability in the long term. It supervises the exercise of certain shareholders' rights on shares with voting rights particularly at General Meetings (GM). Its objective is the companies admitted for trading on a regulated market established or operating in the European Union and whose registered office is in a Member State. It puts emphasis on non-resident shareholding which represents 44% of shares listed in the EU.
The Directive deals with different iisues that can be summarized under two main topics :
Interaction between issuer and shareholder: SRD II:
- Gives the possibility for an issuer to identify its shareholders,
- imposes to intermediaries to send shareholders information issued by an issuer to exercise its rights
- to facilitate the exercise of shareholders' rights;
Transparency: SRD II:
- Reinforces transparency of voting,
- increases the commitment of the institutional investors and asset managers and transparency regarding investment policy of asset managers and potential conflict of interests that could result from services’ or products offering to the company;
- the disclosure of the company's remuneration policy offering shareholders the possibility to vote ex ante and ex post for or against it;
- increases transparency and independent opinion on the related parties' transactions, and imposes shareholders’approval of largest transactions;
- imposes to proxy advisers to details their methods such as voting methods, exchanges with companies staffing of advisers”team and to make statement of any conflicts of interest;
Published on 2017, May the 17th and entered into force on 2017June the 10th, the Directive has been completed by implementing acts published on 2018, September the 3rd. It leads to a dual calendar with a deadline for transposition of the Directive before 2019, June the 10th (covering mainly transparency provisions) and adaptation to the minimum requirements provided by implementing acts (covering mainly interaction provisions) by 2020, September the 3rd.
The fact to hold securities in scope of the Directive leads to an extraterriotoriality effect for intermediaries and shareholders of third countries.
The Directive and its implementing acts lead the European securities industry to draft new non binding standards to process shareholders identification (Shareholders Identification Task Force), to issue information from the issuers (Golden Operational Task Force, on going work) and to update former General Meeting Standards of the Joint Working Group on General Meetings (General Meetings Task Force).