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Rights of shareholders in listed companies

Shareholders in listed companies need to be able to effectively exercise their rights throughout the entire European Union. With this in mind, this Directive stipulates the common requirement standards regarding the rights of shareholders in listed companies whose shares carry general meeting voting rights.

ACT

Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies.

SUMMARY

This Directive establishes the minimum requirements to facilitate the exercise of shareholders’ rights at general meetings of listed companies, particularly on a cross-border basis. It also aims to take account of the possibilities presented by modern technologies.

The Directive applies to all companies with their registered office in a Member State of the European Union and shares admitted to trading on a regulated market*. Nevertheless, Member States may exempt from this Directive undertakings for collective investment in transferable securities (UCITS), undertakings whose sole purpose is the collective investment of capital provided by the public and cooperative societies.

As regards information to be communicated prior to the general meeting, companies must:

  • Issue the convocation no later than the twenty-first day before the day of the general meeting;
  • Include essential information in the convocation (date, location of general meeting, proposed agenda, description of voting and participation procedures, etc.);
  • Publish on the company's internet site the convocation , the full text of draft resolutions and essential practical information (total number of shares and voting rights, documents intended to be submitted, or a comment against each agenda item, voting forms, if applicable).

Shareholders, either individually or collectively, must be able to put items on the agenda, which will result in a revised agenda, and to submit draft resolutions. This right may nevertheless be limited to shareholders having a minimum holding of 5% of the company's capital. The Member State also needs to set a single deadline by which these rights should be exercised.

Shareholders may ask questions related to items on the agenda and the company is obliged to answer the questions. However, these rights are still subject to the necessary measures being taken to identify the shareholder or to ensure the good order of the general meeting.

As a result of this Directive, shareholders' participation and voting at the general meeting may not be subject to any particular limitation other than the record date. People who are shareholders on the record date are entitled to vote at the meeting. Each Member State stipulates a single record date applying to all the listed companies registered on its territory, although they may exempt companies who issue registered shares and who are therefore able to identify all their shareholders on the date of the meeting. The record date may not be earlier than 30 days prior to the date of the general meeting and must be at least 8 days after the date for the convocation of the meeting.

Voting methods

Member States must abolish any restrictions on shareholder participation at general meetings by electronic means.

Each shareholder may vote by proxy, by issuing a proxy to any natural or legal person to participate at the general meeting and to exercise the shareholder’s rights in their own name. Member States shall abolish any restriction regarding the eligibility of persons to be appointed as proxy holders, except for requirements pertaining to legal capacity. However, Member States may impose certain restrictions or obligations in the event of potential conflicts of interest between the shareholder and the proxy holder. The number of proxy holders and the period of their appointment may also be restricted.

Member States must authorise shareholders to appoint (and revoke) their proxy holder by electronic means. Member States may not submit the validity of a proxy to any requirement other than the fact that it should be made in writing.

When national law requires prior disclosure of certain information when exercising the right to vote, that information may not, in the case of shareholders acting in a professional capacity for a client, exceed what is strictly necessary to identify the client and the number of various shares with voting rights held by the client.

Member States must authorise companies to offer their shareholders the option of voting by correspondence prior to the general meeting.

Companies must account for the exact number of votes for each resolution. However, if no shareholders request an account, Member States may allow companies only to account for the number of votes required to obtain the majority in order to pass a resolution. Companies must publish the results of voting at general meetings on their internet site no later than 15 days after the meeting is held.

Background

In its 2003 Communication entitled "Modernising Company Law and Enhancing Corporate Governance in the European Union -A Plan to Move Forward" [COM (2003) 284 final], the Commission proposed initiatives to improve the rights of shareholders in listed companies and to resolve the issue of cross-border voting. Directive 2004/109/EC provided responses regarding information that issuers need to disclose to the market. This Directive aims to improve investor protection by making it easier for them to access information and to exercise their rights, especially on a cross-border basis.

Key terms in the act

  • Regulated market: a multilateral system, operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments.

REFERENCES

Act

Entry into force

Timescale for transposition into Member States

Official Journal

Directive 2007/36/EC [adoption: codecision COD/2005/0265]

3.8.2007

3.8.2009
(Art.10(3): 3.8.2012)

OJ L 184, 14.7.2007

Last updated: 14.04.2008
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