©2005 Investment Company Institute. All rights reserved. Information may be abridged and therefore incomplete.
Communications from the Institute do not constitute, and should not be considered a substitute for, legal advice.
[19013]
July 12, 2005
TO: INTERNATIONAL COMMITTEE No. 14-05
INTERNATIONAL INVESTING SUBCOMMITTEE No. 4-05
RE: DRAFT ICI LETTER ON EU CONSULTATION PAPER ON SHAREHOLDER RIGHTS
As we previously informed you,1 the European Commission has published for comment
its second consultation paper on shareholder rights and cross-border voting. The Institute has
prepared a draft comment letter on the consultation paper. The most significant aspects of the
draft letter are summarized below and a copy of the draft letter is attached.
Comments on the consultation paper are due to the Commission no later than July 15,
2005. If you have any comments on the draft letter, please contact the undersigned by phone
at 202-371-5408 or by e-mail at aburstein@ici.org no later than July 14.
Persons Entitled to Control Voting Rights
The draft letter strongly supports the introduction of a legal entitlement for the
“ultimate investor” to control the voting rights attached to the shares in which he/she has
invested. The draft letter states that while the proposal in the consultation paper to define the
“ultimate investor” as “the legal or natural person that holds a securities account for its own
account” could be a good first step in strengthening rights for shareholders, the Commission
should continue to examine other ways to ensure that the “ultimate investor” receives control of
the voting rights to which he/she is entitled.
Shareblocking
The draft letter strongly supports the Commission’s proposal to abolish provisions
making the right to vote in a General Meeting conditional, or allowing the right to vote to be
made conditional, on the immobilization of the corresponding shares for any period of time
prior to a meeting. The draft letter also strongly supports the Commission’s proposal to require
a record date system where the right to vote at a General Meeting will be made conditional
upon qualifying as a shareholder on a given date prior to the relevant meeting.
1 Memorandum to International Members No. 17-05 [18885], dated May 24, 2005.
2
Voting In Absentia
The draft letter supports the proposed minimum standards that would ensure that
shareholders of listed companies have the possibility to vote by correspondence and that
Member States remove existing requirements, and not impose new requirements, on companies
that would hinder or prohibit voting by electronic means at General Meetings. Similarly, the
draft letter supports the proposed minimum standards to further facilitate the use of proxy
voting across Member States.
Depositary Receipts
The draft letter strongly supports explicitly recognizing holders of depositary receipts as
holding the rights attached to the underlying shares and prohibiting EU-listed companies from
entering into depositary agreements that specifically exclude or limit voting rights of depositary
receipt holders. The draft letter therefore supports the proposed minimum standard that
holders of depositary receipts will alone have the right to determine how the voting rights
attached to underlying shares represented by depositary receipts are exercised.
Communication of Information of General Meetings
The draft letter supports the Commission’s proposals on communicating information on
General Meetings that seek to ensure that shareholders, no matter where they are based, are in a
position to make informed decisions. Most significantly, the draft letter supports the
establishment of notice periods for convening a General Meeting; proposed minimum
standards relating to the contents of the notice of the General Meeting; and the establishment of
minimum standards that would require Member States to ensure that issuers post on their
websites information regarding shareholders’ rights in relation to voting and with regard to the
General Meeting.
Shareholders’ Rights in General Meetings
The draft letter supports the establishment of minimum standards relating to
shareholder rights with respect to participation in the General Meeting, most significantly,
proposed minimum standards on the way shareholder questions should be filed and dealt with
at General Meetings and on the maximum shareholding threshold that Member States could
impose for shareholders to table resolutions and place items on the General Meeting agenda.
The draft letter recommends, however, that this threshold be based on the “voting share
capital” of the issuer as opposed to the issuer’s “share capital” to avoid having non-voting
shares interfere with the application of the standard.
Ari Burstein
Associate Counsel
Attachment (in .pdf format)