By Chris Jones - 10th January 2006
Brussels has proposed a set of minimum standards that it hopes will bolster the rights of European shareholders.
The new rules, proposed by Internal Market Commissioner Charlie McCreevy, will give greater rights to shareholders with investments in countries other than their own.
“Shareholders need to be able to get relevant information on time and vote without encountering unnecessary obstacles, wherever they are in the EU,” said McCreevy.
“Otherwise they can't exercise their influence properly and make sure that management is acting in their best interests.”
“Our proposals will help to strengthen the role of shareholders and spread EU investing.”
The Irish commissioner explained that around one third of the share capital of EU listed companies is held by non-residents, and that they often face obstacles in exercising their rights as shareholders.
These include share blocking – an obligatory ban on trading ahead of shareholders’ meetings – as well as poor access to information and burdensome requirements on distance voting.
McCreevy’s proposals will oblige listed companies to give at least a month’s notice ahead of their general meetings and ensure that shareholders have all relevant information in time.
Extraordinary General Meetings related to takeover bids can be called at 14 days notice, however.
The new rules will also make share blocking illegal, replacing it with a record date which Brussels suggests should be set no earlier than 30 days before the meeting.
Countries will be allowed to choose exactly how early to set the record date within this 30 day period, but it must be the same for all listed companies.
The proposals would also give non-resident shareholders the right to ask questions, and allow all investors holding at least 5 per cent of the company’s shares to “keep management and executives on their toes”, according to McCreevy.
The rules on proxy voting will also be simplified, with a choice of methods offered for distance voting.
The commissioner stressed that many member states already have standards that go further than those set out in the proposals, but said that it was important to have a set of minimum criteria throughout the European single market.
“I don’t believe that these proposals are at odds with individual initiatives in certain member states,” McCreevy said.
“Member states have a wide margin of flexibility in order to avoid turning companies’ AGMs into disorderly circuses, such as the introduction of a deadline within which questions ahead of the meeting have to be asked, in order to allow the company time to prepare the replies.”
McCreevy is hoping for rapid approval of the proposals from the European Parliament and member states, but declined to comment on when he expected them to pass into law.
But there is unlikely to be much opposition, with two consultations by the commission showing widespread support for the proposals.
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