How is the Shareholder Rights Directive changing?
Proposed amendments to the original 2007 EU Shareholder Rights Directive (SRD) were published in April 2014. The broad objective is to foster a climate of transparency and encourage long-term shareholder engagement, through the introduction of minimum standards in certain areas.
What do the proposals cover?
The amendments are wide-ranging, but include notable measures looking at:
- shareholder controls on pay policy
- company disclosures on directors' pay and related-party transactions
increased transparency of proxy advisors and asset managers/owners.
An EU right for companies to find out who their shareholders are has also been tabled, alongside possible new obligations on how company information is communicated to shareholders and how rights are exercised, where a requirement to provide a vote confirmation service is under consideration.
What will happen next?
During 2015 we should expect to see the proposals refined and finalised as they pass through the EU legislative process. Whilst it is too early today to be certain of the impact, we will keep you updated.
The proposals need to be viewed in the context of a wider debate taking place in the market about the better enfranchisement of investors holding shares through an intermediary or across borders. Shareholder associations are taking a particularly active stance in this area and it will be interesting to see how this debate evolves.
Introducing the Small Business, Enterprise and Employment Bill (SBEE)
We expect the UK SBEE to become law before the end of the current parliament. It contains a range of measures that will impact UK issuers, most notably through changes to the Companies Act.
What do the changes include?
- A requirement for companies to maintain a register of 'Persons with Significant Control' (the 'PSC Register').
- A ban on the issuance of bearer shares (and the conversion to registered form of any existing bearer shares).
- Limitations on the use of corporate directors.
- The introduction of an 'Annual Confirmation Statement' which replaces the annual return.
What will happen as a result of these changes?
The impact of these measures will vary depending on a company's own individual circumstances. Factors such as a company's listing status, the presence of a 'significant controller', whether they issue shares in bearer form, or their use of corporate directors - perhaps in connection with the administration of subsidiary companies in the group - will determine the impact on a case-by-case basis.
Once passed into law, we expect the various elements of the proposals to take effect in tranches over a period from June 2015 (assuming the law receives Royal Assent on time) to October 2016).
The bill's progress can be tracked on the UK Parliament website. If there are aspects of the proposals you'd like to discuss further, please let us know.