The 2007 Shareholder Rights Directive (SRD) was amended in 2017 by SRD II with the objective of encouraging shareholder engagement, increasing transparency and improving corporate governance.
Issuers and their agents will have to standardise meeting announcements and voting procedures. Institutional investors and asset managers will need clearer engagement strategies and policies that are aligned with their long-term goals. Proxy advisors will have to disclose a code of conduct, show how they arrive at voting recommendations and explain how they prevent conflicts of interest.
SRD II encourages increased dialogue as companies will have to seek shareholder approval regarding directors’ remuneration and transactions with related parties. However, SRD II also addresses the processes supporting this dialogue by imposing standards of communication on the intermediaries in the custody chain. Custodians will have to improve the transmission of information to facilitate the exercise of shareholder rights. SRD II is particularly aimed at improving dialogue where ownership is cross-border.
SRD II scope is extensive
It extends to companies which have their registered office in a Member State and whose shares are traded on a regulated market situated or operated within a Member State. However, the custody chain for these companies may extend beyond the EU and European Economic Area (EEA) countries and hence SRD II may have an extra-territorial impact on intermediaries and shareholders located outside the EU and the EEA SRD II amends the 2007 SRD which replaced the First Company Law Directive and brought in minimum periods for meeting notifications, electronic voting, disclosure thresholds and rules regarding tabling motions, asking questions, the use of proxies and the advice of results.
For an overview of SRDII and its implementing regulation, please refer to our SRDII handbook
- Shareholder Rights Directive II: What does it mean for issuers, investors and intermediaries?
- Podcast on SRD II
- Shareholder Rights Directive II – Pricing Disclosure
- Shareholder Rights Directive II – Financial Intermediaries
- Shareholder Rights Directive II – Institutional Investors