Brussels, 10/01/2006 (Agence Europe) - Speaking to the Press on Tuesday, Charlie McCreevy said that at present around a third of the share capital of EU listed companies was held by non-residents with many obstacles preventing them from exercising their rights. The European Internal Market Commissioner presented a draft Directive to facilitate the cross-border exercise of the right to vote of shareholders in listed companies with their headquarters in a Member State of the European Union. He identified obstacles faced by non-resident shareholders, such as “share blocking” before a company General Meeting, insufficient access to information about the General Meeting overly burdensome requirements on distance voting and insufficient use of new technologies. “There is no reasonable justification for these obstacles”, declared Mr McCreevy, for whom the introduction of minimum standards at EU level was necessary. The proposal covers all European companies listed on the Stock Exchange, although Member States can extend the measures to non-listed companies. The proposal makes no distinction between types of shareholder, and so is concerned with both private and institutional shareholders. The only exclusion concerns pooled investment organisations for which specific rules will apply.
The abolition of share blocking, which exists in some countries like Greece, Poland and the Czech Republic, and which prevents the sale of shares during a certain period prior to the General Meeting, is one of the principal measures proposed. This element is seen as a great obstacle by the majority of stakeholders consulted, said Pierre Delsaux, Director of Financial Services at the European Commission (see EUROPE 9095), adding that it was hoped to replace it with a record date system, which would require shareholders to prove that they still held the shares on a given date before the General Meeting. The legislative proposal does not specify the same time delay across the whole of the EU, but one to be decided by the Member State, not exceeding, however, thirty days before the General Meeting. This registration system would allow it to be determined which shareholders had the right to vote at the General meeting.
The proposal requires that sufficient notice be given prior to General Meetings. The minimum proposed is thirty days, in line with the wishes of the majority of stakeholders consulted. Additionally, any papers to be presented at the general Meeting should be made available to shareholders within the same time delay, thereby allowing them to make a reasoned opinion and to take part in the vote no matter where they live. These papers should also be published on the company's internet site, said Mr Delsaux.
Non-resident shareholders should be able to take advantage of simplified voting procedures, without having to attend the General Meeting - proxy voting or in absentia voting. The Commission also wishes to remove all legal barriers to electronic participation in General Meetings. It feels that it would not be desirable at present to impose on companies covered by the Directive the implementation of electronic voting procedures, but Member States will not be empowered to prevent companies wishing to offer their shareholders such an opportunity from doing so. After votes have been cast, the results should be put on-line on the listed company's internet site within fifteen calendar days of the General Meeting.
Member States will have to meet the new minimum standards from 1st January 2008. When questioned, Mr McCreevy hesitated about giving an exact date. “As soon as possible” he hoped, but he added that he thought the Directive would be controversial. The legislative proposal is subject to the co-decision procedure.
British Conservative Malcolm Harbour welcomed the proposal. He felt that these measures would increase the activities of shareholders who have portfolios elsewhere in Europe, although he nonetheless thought that similar results could be achieved without imposing common standards. When the proposals come before Parliament, Mr Harbour will seek to make them more flexible for companies.
The Commission proposal is part of the Community's May 2003 action plan on the modernisation of company law and enhancement of corporate governance, the priorities of which are currently out for consultation (see EUROPE 8467 and 9095).