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Corporate governance: Commission proposals to make it easier for shareholders to exercise their rights within the EU

Commission Européenne - IP/06/10   10/01/2006

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IP/06/10

Brussels, 10 January 2006

Corporate governance: Commission proposals to make it easier for shareholders to exercise their rights within the EU

The European Commission has presented a proposal for a Directive to facilitate the cross-border exercise of shareholders' rights in listed companies, through the introduction of minimum standards. The proposed Directive seeks to ensure that shareholders, no matter where in the EU they reside, have timely access to complete information and simple means to exercise certain rights – notably voting rights – at a distance.

Internal Market and Services Commissioner Charlie McCreevy said: “Shareholders need to be able to get relevant information on time and vote without encountering unnecessary obstacles, wherever they are in the EU. Otherwise they can't exercise their influence properly and make sure that management is acting in their best interests. Our proposals will introduce a range of key minimum standards to make this happen – using modern, reliable technology. All this will help to strengthen the role of shareholders and spread EU investing.”

On average, about one third of the share capital of EU listed companies is held by non-residents. Key obstacles to voting faced by non-resident shareholders include share blocking, insufficient or late access to information, and overly burdensome requirements on distance voting.
Two public consultations were launched in September 2004 and May 2005. Respondents to both consultations supported the introduction of minimum standards at EU level for the organisation of General Meetings and the exercise of shareholders’ rights. Results of this consultation are available at:

http://ec.europa.eu/internal_market/company/shareholders/index_en.htm

After having carried out a comprehensive impact assessment the Commission proposes the following minimum standards which would eliminate the main obstacles in the cross-border voting process and enhance certain other rights of shareholders:

  • General Meetings should be convened with at least one month's notice. All relevant information should be available on that date at the latest, and posted on the issuer's website. The meeting notice should contain all necessary information.
  • Share blocking should be abolished and replaced by a record date which should be set no earlier than 30 days before the meeting.
  • The right to ask questions should be accessible to non-residents. The maximum shareholding thresholds to benefit from the right to table resolutions should not exceed 5%, in order to open this right to a greater number of shareholders while preserving the good order of general meetings.
  • Proxy voting should not be subject to excessive administrative requirements, nor should it be unduly restricted. Shareholders should have a choice of methods for distance voting.
  • Voting results should be available to all shareholders and posted on the issuer's website.

Background

The Commission’s May 2003 Action Plan to modernise company law and enhance corporate governance (IP/03/716, MEMO/03/112) contains a set of initiatives aimed at strengthening shareholders' rights, reinforcing protection for employees and creditors, increasing the efficiency and competitiveness of European business and boosting confidence on capital markets.

Public consultation on the Action Plan as a whole, which ended in mid-September 2003, showed a strong consensus behind the main measures. This exercise on minimum standards for shareholders’ rights is the sixth consultation arising from the Action Plan.


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