Revised Shareholders’ Rights Directive published
On 20 May 2017, the revised Shareholders' Rights Directive (the “Directive”) was published in the official journal of the European Union. The purpose of the Directive is to encourage active and transparent engagement by shareholders of EU listed companies. The Directive will enter into force two years after its publication in the official journal and must have been implemented by the EU Member States into national legislation by then.
The financial crisis has shown that many shortcomings in corporate governance of listed companies have contributed to the financial crisis, outlined in the Directive and the Directive is intended to redress this situation and contribute to the sustainability of companies.
Some of the changes already apply under Dutch law, such as the obligation of EU listed companies to identify their shareholders and the right of shareholders to vote on the remuneration policy.
The following changes still need to be implemented in Dutch law:
- Listed companies shall establish a remuneration policy and draw up a remuneration report which is clear and understandable. This is already required in the Netherlands, but some of the requirements under the Directive are of a more far-reaching nature.
- Listed companies shall submit the remuneration policy to a vote by the general meeting at every material change and in any case at least every four years.
- The annual general meeting shall have the right to hold an advisory vote on the remuneration report of the most recent financial year. The company shall explain in the following remuneration report how the vote by the general meeting has been taken into account. However, for small and medium-sized companies as defined, respectively, in Article 3(2) and (3) of Directive 2013/34/EU, Member States may provide, as an alternative to a vote, for the remuneration report of the most recent financial year to be submitted for discussion in the annual general meeting as a separate item of the agenda. The company shall explain in the following remuneration report how the discussion in the general meeting has been taken into account.
- Material transactions with related parties must be approved by the general meeting or by the administrative or supervisory body of the company according to procedures which prevent the related party from taking advantage of its position and provide adequate protection for the interests of the company and of the shareholders who are not a related party, including minority shareholders. Member States may provide for shareholders in the general meeting to have the right to vote on material transactions with related parties which have been approved by the administrative or supervisory body of the company.
- When votes are cast electronically an electronic confirmation of receipt of the votes must be sent to the person that casts the vote.
- Institutional investors and asset managers shall either comply with the requirements (i) to develop and publicly disclose an engagement policy that describes how they integrate shareholder engagement in their investment strategy or (ii) to, on an annual basis, publicly disclose how their engagement policy has been implemented, including a general description of voting behaviour, an explanation of the most significant votes and the use of the services of proxy advisors or publicly disclose a clear and reasoned explanation why they have chosen not to comply with one or more of those requirements.
- Proxy advisors must publicly disclose reference to a code of conduct which they apply and report on the application of that code of conduct and if they do not apply a code of conduct, they shall provide a clear and reasoned explanation why this is the case.
- Listed companies must publicly announce material transactions with related parties no later than at the time of the conclusion of the transaction, identifying the related party, the date and the value of the transaction and any other information that is necessary to assess the fairness of the transaction, provided that such transactions are not performed in the ordinary course of business and not concluded on standard market terms.
Sandy van der Schaaf