As you may recall, under proposals for the UK to withdraw from the EU, the UK announced its intention to transpose the revised Shareholder Rights Directive (SRD II) into UK law and regulation. Last year saw the introduction of rules relating to proxy advisor, asset owner and asset manager transparency. There were also several other aspects, including minor amendments to remuneration reports and policies. To a large extent, the UK was already compliant with many of these, particularly those regarding remuneration reporting. 

This September will see the introduction of Chapter Ia of SRD II across European member states. The chapter is concerned with ensuring the facilitation of issuer and shareholders’ rights by enabling:
    • companies to identify their shareholders; and
    • requiring the transmission of information between the company and its shareholders.

These elements were subject to delayed implementation as a consequence of additional technical standards that needed to be defined. But as the transposition deadline of 3 September 2020 falls before the end of the negotiated Brexit transition period, implementation of this chapter is still required. 

What’s in and what’s out?

As with the initial transposition, many of the final requirements of the Directive do not require any action. This is either because we already have equivalent measures in place or, following an analysis by the Department of Business, Energy & Industrial Strategy and their engagement with market participants including ourselves, they have been deemed inapplicable to the UK market. 

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    Identification of shareholders

    Not being introduced. In the UK, the shareholder is already identified as they must be recorded on the Register of Members under existing provisions within the Companies Act 2006 and the Uncertificated Securities Regulations 2001.

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    Transmission of information

    Not being introduced. A clear exemption within the Directive exists where issuers already communicate directly with their shareholders, as is the case under UK company law obligations.

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    Facilitation of rights

    This will see new requirements introduced to the Companies Act and are detailed below.

Facilitating Shareholder Rights

This aspect of the Directive (Article 3c) seeks to ensure issuers, their agents and intermediaries enable shareholders to exercise their rights. As the Directive respects national definitions of a shareholder, it does not consider beneficial ownership arrangements. In the UK legal framework, the company has a direct link to its shareholder (the member on the register) and that shareholder already has the rights to participate and vote in company general meetings. Therefore, the role of the intermediary to facilitate the exercise of the shareholder rights is not engaged.

The Companies (Shareholders' Rights to Voting Confirmations) Regulations 2020, published in July 2020, created two new additions to the Companies Act 2006 that are explained below. 

These additions to the Companies Act 2006 apply to traded companies only – i.e. those listed on a regulated market. This therefore excludes companies listed on AIM.  

Electronic receipts during a poll (s. 360AA)

Where a poll is being conducted by electronic means, such as using handsets or virtual meeting applications, then a receipt confirming that the vote has been cast must be provided as soon as practicable to the individual who cast the vote. 

This requirement is only applicable where voting is either taking place at the meeting or in advance of it as per s. 322A. It is not applicable where shareholders are lodging proxy appointments prior to the meeting, as these are not legally considered a vote until cast by the chairman, third party proxy or their legal representative at the meeting. 

Note, it is standard practice for the systems currently being used in such circumstances to instantly confirm that the vote has been cast. 

Vote confirmations following a poll (s.360BA)

This aspect of the updated legislation is often referred to as providing for ‘post-meeting vote confirmations’ and should enable shareholders to be able to determine whether or not their vote has been recorded at the meeting in line with their instruction. In the UK the obligation to provide a vote confirmation will only apply to meetings where a poll has been conducted. 

The ability to request a confirmation is available to all shareholders, whether their shares are held via the CREST system or in certificated form. That being said, we anticipate that the majority of requests will come from shareholders representing institutional investors. 

The Directive allowed member states to set a deadline by which confirmation requests could be made, and within the UK this deadline has been defined as 30 days following the date of the meeting

Issuers or their agents must provide to the shareholder the confirmation “as soon as reasonably practicable and in any event by the end of the period of 15 days beginning with whichever is the later of the first working day after..." either the poll is declared or the request for a confirmation has been made. 

It was originally understood that Euroclear would be enhancing the CREST system to allow members of the system to make confirmation requests and receive responses, however based on a recent operational bulletin we now understand that no such enhancements will be in place by 3 September. 

We are working with voting agents, custodians and other registrars to develop appropriate market guidance, systems and processes to handle requests for confirmations in time for the September deadline. 

While the obligation for providing vote confirmations is the responsibility of the issuer, it’s likely that we as your registrar will be best placed to deal with the requests. In the event that you manage your meeting without our assistance, from September you will be obliged to satisfy any requests received directly. Whilst there is no legal obligation to do so, issuers may want to detail in their notice of meeting the mechanism by which a vote confirmation can be requested. 

If you need any more information on these requirements, please contact your client manager or email our UK industry team. We will keep you informed as the market guidance and processes for managing vote confirmations are agreed in the coming weeks.