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ACTION REQUESTED
[18874]
May 24, 2005
TO: INTERNATIONAL COMMITTEE No. 11-05
RE: EU CONSULTATION PAPER ON SHAREHOLDER RIGHTS
The EU Commission has issued a second consultation paper on shareholders’ rights and
cross-border voting, a copy of which is attached. The Commission’s consultation paper seeks
comments on specific measures that may be proposed by the Commission, especially with
respect to cross-border voting. This memorandum briefly describes the Commission’s
proposals.
Before proposing various minimum standards, the Commission first discusses the scope
of the measures that the Commission will ultimately take with respect to shareholder rights and
then discusses a fundamental change of the Commission’s approach to the directive.
First, the Commission intends to propose a directive on shareholder rights that would
apply primarily to listed companies. The Commission, however, does not intend to apply the
directive to listed collective investment undertakings that fall within the scope of the UCITS
Directive or represent an equivalent undertaking. The Commission seeks comment whether the
EU level measure should only apply to listed companies and should exclude UCITS.
Second, in an earlier consultation, the Commission considered introducing the concept
of the “ultimate investor” who would be entitled to control the voting rights attached to its
shares of a company. The purpose of introducing the concept was to provide the rights and
benefits of shareholders to the ultimate investor that may hold the shares through a chain of
intermediaries and may not legally be the shareholder of record. In this consultation paper, the
Commission changes its approach. This consultation paper states that work on the definition of
the ultimate investor should be pursued at a later time, unless commenters overwhelmingly
believe otherwise.
The Commission also seeks comment on various minimum standards that it intends to
propose with respect to:
• Stock lending;
• Depositary receipts;
2
• Pre-general meeting communications (including notice periods, content of
notices, dissemination and language of meeting notices and materials);
• Shareblocking;
• Shareholder rights in relation to the general meeting (including electronic
participation at general meetings, right to ask questions, right to add items to the
agenda and table resolutions, voting by mail, and proxy voting);
• Intermediaries in the cross-border voting process; and
• Communication after the general meeting.
The proposal addresses a number of obstacles to cross-border voting identified as
priorities by the Institute and its members. Among other things, it would (1) provide minimum
notice periods for shareholder meetings, (2) eliminate shareblocking, (3) allow proxy voting and
voting by correspondence (particularly by electronic means), and (4) permit intermediaries to
cast split votes.
The Institute intends to submit comments on the Commission’s consultation paper.
Responses to the consultation paper must be submitted to the Commission no later than July 15,
2005. If you have specific concerns with the consultation paper that you would like the
Institute to address, please contact me at (202) 326-5826 or podesta@ici.org by June 15, 2005.
Mary S. Podesta
Senior Counsel
Attachment (in .pdf format)