Shareholders' Rights Directive

- Strengthening shareholder participation rights and increasing transparency between companies and investors

What is the goal of the Shareholders Rights Directive?

The Shareholder Rights Directive pursues the overall objective of strengthening and expanding the shareholder's direct participation rights. The prerequisite for the efficient participation of the shareholder is an automated, as far as possible electronic communication between issuers (e.g. invitation to the AGM, communication of corporate actions, etc.) and the shareholder (participation in the AGM, communication of decisions of corporate actions). 

The obligation of a resolution in the AGM on the remuneration policy of the Management Board and Supervisory Board to be published, the annual compensation report as well as the significant Related Party Transactions (RPTs) will increase shareholders' participation rights.

If the shareholder participates only indirectly via an institutional investor (insurance or pension scheme) or an investment management company, they will in future be required to publish information on their investment strategies and their participation policy. If these companies or shareholders transfer their voting rights to a voting manager, they are obliged to submit to a code of conduct based on the principle of "comply or explain" and to grant greater transparency in methodology and working methods.

Download SRD II PDF
German

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English

Background

  • Different regulations at EU level
  • Issuers do not know their shareholders
  • Insufficient communication between issuers and shareholders
  • Low exposure of institutional investors
  • Strong influence of proxy advisors with simultaneous lack of transparency
      Affected parties

      • EU listed companies
      • Shareholders
      • Intermediaries
      • Institutional investors and asset managers
      • Voting advisor

          Strategic challenges for depositaries

          With the requirement of the most automated, electronic straight through processing (STP) possible, the expansion of the circle of relevant actors on the one hand and the amount of required data on the other hand require new processes and thus new responsibilities.

          Closely linked with this is the analysis of whether this is possible with the existing system landscape or whether technologically new communication channels (internal and external) must be created. Of critical importance is the time factor or the processing speed of the information regarding the adherence to very tight information periods in the communication with the shareholder. For this reason, digitization of communication with the issuer, the shareholders, the institutional investors, the capital collection agencies and the voting authorities is required in parallel.

          Finally, the extension of implementation at EU level requires an analysis of the extent to which the impact on the communication channels in intra-European countries is affected. It is to be expected that, analogous to the Implementing Regulation (EU) 2018/1212, the essential aspects will be gradually concretised in the coming years and provided with timelines for implementation.

          Important content and timelines of the EU Implementing Regulation 2018/1212 on the Shareholders Rights Directive for intermediaries

          Identification of shareholders

          • In order to enable direct communication between the issuer and the shareholder, it is necessary that the issuers know their shareholders.
          • Therefore, all companies located in the EU will have the right to request information about their shareholders from intermediaries.

          Transmission of information

          • Intermediaries are obliged to comply with the issuer's identification requests in a timely and standardized manner or to forward them to subsequent intermediaries in a timely manner.
          • Intermediaries must ensure that all further information from companies is forwarded in good time to the shareholder.
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          Exercise of shareholder rights

          • Intermediaries must take precautions so that shareholders themselves can exercise their rights or a designated third party.
          • At the request of the shareholder, a response must be given to the shareholder that his vote has been effectively recorded and counted by the company.
          As a first step, the implementing regulation specifies minimum requirements regarding uniform formats about the identification of the shareholders, the transmission of information to the shareholders and the facilitation of the exercise of shareholder rights. Communication between the respective issuers, custodians and other relevant stakeholders should, as far as possible, be in electronic and machine-readable form in order to facilitate intra-European interoperability and fully automated resolution. The ordinance must be transposed into national law by 10 June 2019 at the latest and will become legally binding throughout the EU as from 3 September 2020.

          Operational challenges of the implementing regulation

          In the Annex to the Implementing Regulation, down to the field level, the content and formal requirements for information that are at least necessary for the communication between the issuer and the shareholder (e.g. AGM process) are defined concretely. The challenge within the bank will be to aggregate the required data from the different internal systems, to identify possible missing information and then to obtain it from external sources. Legislators deliberately leave market participants with the definition of their own standards and deadlines for data transmission. It merely requires that they are based on an ISO standard or similar industry standards. Since these must be coordinated across the EU, the complexity and thus the effort to create a uniform standard increases. This complicates holistic strategic planning. In addition, for the key players (issuer and shareholder) who do not have an appropriate infrastructure, electronic communication platforms must be established and linked to enable a consistent bilateral STP from the issuer to the shareholder along the securities custody chain.

          Why NEXGEN Business Consultants?

          Analysis and inventory

          Based on years of experience in the implementation of regulatory requirements and the associated expertise, we have developed an analysis methodology that enables us to efficiently identify new requirements and implement them immediately. In addition, we are also able to perform optimizations of existing setups.

          In addition, we have extensive expertise in European reporting requirements and in in-depth settlement and product experience.

            Project steering and controlling  

            We place our clients at the centre of our activity through our efficient, fast and solution-oriented action. Here we pay particular attention to professionalism and consistency during the realization. Successfully carried out projects, high expertise and targeted training of our consultants are our basis to successfully complete projects in a structured and transparent manner.

              High quality and sustainability  

              We operate in a highly professional market environment in which we convince our clients through sustainable competence, continuous willingness to change and high service quality. Our quality standards ensure the highest level of service quality. We not only want to satisfy our clients, but to inspire them in the long term.

                Sladjan Seferovic

                Managing Partner

                Tel.: +49 179 948 876 57
                E-Mail: sladjan.seferovic@nexgenbc.com

                Markus Trosse

                Senior Manager

                Tel.: +49 151 576 423 78
                E-Mail: markus.trosse@nexgenbc.com

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                We are at your disposal for a conversation. Contact us!

                Download SRD II PDF
                German

                Download SRD II PDF
                English

                Disclaimer   

                The greatest care has been taken in the preparation of the content, but changes, errors and omissions are reserved. The statements made are based on judgments, historical data and legal assessments at the time of preparation of the content. All information is given without guarantee for the correctness and completeness of the content. The transfer of the content is only for the internal use of the recipient. The treatment does not constitute any legal or investment advice. This must be done individually taking into account the circumstances of the individual case.