Your Ultimate Guide to the Shareholder Rights Directive II

From 2019, SRD II (Shareholder Rights Directive II) will have a far-reaching impact on the investment industry. And yet, however noble or necessary its aims are, many companies are still uncertain about what SRD II is, let alone what they can do to ensure they comply with – even thrive in the wake of – the new laws it’ll bring into force.
So you can better understand SRD II – particularly the implications for issuers, investors, intermediaries and other parties – we’ve put together a fairly thorough, if plainly worded, guide to get you started.

Here’s what SRD II is all about . . .

So SRD II, which is also known as the EU Shareholder Rights Directive 2017 (or Shareholder Rights Directive 2017), amends a number of provisions made by the earlier Shareholder Rights Directive of 2007 (let’s call that SRD I). SRD II aims to improve SRD I.
The European Commission (EC) drafted SRD II, but the final version is a result of negotiations and consultations between member states and the European Parliament. Each member state will transpose SRD II into local law and companies (e.g. issuers) and other institutions (e.g. intermediaries and institutional investors) will be required to fully comply by September 2020 at the very latest.

Though SRD II captures all EU member states, at this point some of SRD II’s requirements will be implemented earlier than others – which means there’s no single blanket implementation date – so it’s important to know what needs implementing when. That said, the aim of the directive, at least in general terms, seems pretty clear enough.

SRD II aims to make it easier for shareholders to exercise their rights, especially across different markets or countries, encouraging the use of modern technology to aid communication between companies, their shareholders and the intermediaries between them.

But even at the highest level – and without going into too much detail – it’s also clear the requirements will put more pressure on existing processes – including associated systems and procedures – many that haven’t been updated for years. This suggests new platforms and technologies may not only help upgrade existing processes to meet new SRD II demands, but could also be the most efficient and effective means of complying with them.

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Some cut-out-and-keep takeaways

Before we go into more depth, it’s worth noting a few salient points, if only to ensure you have some handy (and actionable) things to take away when you consider your options. Let’s count them down for you.

FOUR key talking points . . .

  1. SRD II will largely impact three groups . . .
    • Companies with registered offices, and shares admitted to trading, in the EU.
    • All intermediaries in such companies’ custody chain (even if based outside the EU).
    • And institutional investors/asset managers investing in shares traded in a regulated market.
  2. SRD II overcomes some SRD I shortcomings like . . .
    • A lack of long-term focus when investing.
    • Ineffective company-shareholder communication (esp. cross-border).
    • No transparency or opportunity to vote on directors’ pay.
    • Lack of oversight of a company’s transactions with directors, senior management, etc.
    • And SRD I’s openness to interpretation and lack of measures to monitor.
  3. In-scope companies can ID shareholders holding min. 0.5% of share capital.1
  4. And penalties for not complying with SRD II are to be set by each member state.

THREE steps to get ready . . .

  1. Make sure you understand how you and your company will be impacted by SRD II. This is important as issuers will be affected differently than intermediaries, who will in turn be affected in a different manner than institutional investors. If you aren’t the best person in your company, make sure this article reaches that person or team and ensure that they’re aware of SRD II and the requirements on your company.
  2. Ensure that you understand the interpretation and impact of each EU member state that you operate in. The interpretations of SRD II, as well as the penalties imposed, are likely to differ in each member state. Make sure you understand how each of the states that you operate in differs.
  3. Start to prepare a workable action plan, documentation and training for your company, and seek external advice if the knowledge is not available.

TWO dates to remember . . .

  1. The basic SRD II deadline is 10 June 2019. At this point, each EU member state is required to have interpreted and implemented the majority of the requirements under SRD II.
  2. Three articles require implementing by 4 September 2020. They deal with shareholder identification (Article 3a), transmission of information (Article 3b) and facilitating the exercise of shareholder rights (Article 3c).

ONE last thing to note…

Don’t be complacent! Many SRD II obligations may require considerable manual resources or technologies or software to manage. The timeline might seem distant and the dates
abstract, but they’ll come soon enough. So don’t wait till the last minute or after the deadline to start understanding what you need to do. With these takeaways in mind, let’s go into some of the details now!

If you aren’t the best person in your company to understand the impact of SRD II, make sure this article reaches the right person or team so they can make themselves aware of the requirements for your company.

Key dates on the SRD II timeline

The general timeline for SRD II features five key dates (figure 1). When an EU directive or regulation comes into force, those affected have two years to apply them. During that time, a few big milestones will come to pass. But even before any of this, it’s worth reminding ourselves what the purpose of SRD I was to begin with . . .

 

Figure 1: Key SRD II dates and big milestones

What was SRD I for?

SRD I sought to improve shareholder information and shareholder participation in company meetings. Officially called the Shareholder Rights Directive (2007/36/EC), it was formalised on 11 July 2007 and gave EU member states two years to incorporate it into local law. 2

In the UK, SRD I was transposed (implemented) into the Companies (Shareholders’ Rights) Regulations 2009 (SI 2009/1632) (2009 Regulations).3
Anyway, SRD I tried to improve the transparency of shareholder information so companies could identify their owners, including those with borrowed voting rights, short-term interest, and incentives for long-term investment.

SRD I improved participation rights in company meetings like annual, ordinary and extraordinary general meetings (AGMs, OGMs, and EGMs, respectively). It advocated for “timely” access to all relevant information and the ability (for shareholders) to exercise their international voting rights by proxy. Among other hurdles to voting, this removed share blocking at a market level (often cited as an obstacle to voting by proxy, as shareholders who wanted to vote were’t able to sell shares in the weeks coming up to a meeting), and it gave shareholders the right to ask questions at GMs.

Proxy voting is essential, not least because it’s difficult for investors with shares in hundreds or thousands of companies to physically attend all meetings. So proxy voting enables investors to vote on meeting items or minutes remotely and ahead of time.

What challenges are there?

Though proxy voting does mean shareholders needn’t physically attend meetings, it disadvantages them in other ways. One example is time: proxy voting severely limits the amount of time investors get to research the meeting agenda and cast their vote. Once a listed company or issuer announces a meeting, say, meeting details are digested and interpreted through a variety of financial intermediaries before reaching the shareholder.

But once the shareholder receives that information, they’ve only got a limited amount of time to absorb it, give their opinion and finally cast a vote, which then has to travel back through the same intermediary chain before it reaches the issuing company. This takes time, of course, so intermediaries set artificial voting deadlines, sometimes up to 6 days before the issuer deadline, to make sure voting can be completed.

So let’s say an AGM is set for 7 March. This means investors have to cast their votes to an artificial deadline of, say, 1 March. Now, SRD II says the last intermediary in the chain must offer a deadline of no later than three days before market. But the infrastructure change required to meet this is likely to come at a cost for intermediaries, which could be passed on to shareholders. That’s just one major challenge. Which begs a major question…

SRD II aims to improve the flow of information across the whole proxy chain, from issuer to investor and back: a better flow of information offers greater transparency during voting and across the custody chain.

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Why do we need Shareholder Rights Directive II?

Well, SRD I was a positive step-change for shareholders and companies alike. At best, it secured minimum rights for investors, ensuring they had some access and time to process meeting and corporate event information. SRD I also promoted proxy voting so investors could vote remotely, across borders and in different markets (within the EU).

But there were a number of persistent high-level issues that needed addressing like…

  • Reducing investment strategies and tactics focused on short-term investment.
  • A lack of overview and influence over directors’ pay.
  • Limited oversight of company-director (-senior management) transactions.
  • Over-complicated company-shareholder interactions (particularly cross-border).
  • And a lack of monitoring with no penalties for non-compliance.

What’s more, some of the need for SRD II stems from the 2008 financial crisis, where it became clear that new guidance might be beneficial, whether to address things like short term investing, which became more common, or to discourage corporate tax avoidance.

So the European Commission revised SRD I. And SRD II aims to promote long-term shareholder engagement and monitor company performance, for example. SRD II actually ensures all companies have to offer the opportunity for shareholders to vote on executive pay. It further advocates voting on environmental, social and governance (ESG) matters and other activities that encourage more interest in long-term performance of a company.

SRD II also aims to improve the flow of information across the whole proxy chain, from issuer to investor and back. This wasn’t a feature of SRD I, which led to unnecessarily opaque system. A better flow of information will offer greater transparency during voting and across the custody chain in general.

Between issuer and investor, the current proxy-voting chain is complex…

SRD II suggests using technology could both improve the speed and efficiency of communication between the chain of intermediaries and minimise errors.

What’s SRD II in a nutshell?

The EC proposed the changes to SRD I in April 2014, and the new amendments were published on 20 May 2017: that’s SRD II (Directive 2017/828). Most provisions (except Articles 3a, 3b and 3c) must be incorporated or transposed into the law of each member state by 10 June 2019. (Articles 3a, 3b and 3c have till 4 September 2020.) SRD II’s main aims are captured in the table below.

You can see that SRD II applies to shareholders (institutional investors and asset managers), companies (issuers) and financial intermediaries involved in the shareholder industry. It’s worth noting, too, that Shareholder Rights Directive II allows member states to exercise some discretion in implementation.

For example, under EU Shareholder Rights Directive 2017, companies have the right to identify their shareholders. But member states may choose to limit the rights of companies located in their jurisdiction to the identification of shareholders who hold 0.5% or more of their shares. Some member states may choose to set a lower threshold or not set one at all. In fact, member states may choose to add requirements as part of their transposition (something often referred to as “gold-plating”).

Under SRD II, notifications of shareholder events like meetings should be given in a timely manner, accurate and presented in a standardised format so they’re less likely to be misinterpreted.

Notification of shareholder events

Notifications of shareholder events, such as meetings, should be given with enough time that investors are given the opportunity to research the options. In addition to this the notification of shareholder events should be accurate and presented in a standardised format so that they will be less likely to be misinterpreted.

Vote confirmation

When votes are cast electronically, shareholders should get confirmation after the meeting that their votes have been received and counted.

Shareholder identification

Issuers or companies have the right to get the details of shareholders to directly engage with them. Depending on how each member state implements SRD II, this may only apply to shareholders with a 0.5% stake (or more) in a company’s stock value.

Vote on pay

Voting on directors’ salaries and remuneration must take place during the AGM.4

Transparent investment: institutional investors

Every year, institutional investors should establish and publish an engagement and voting policy, including details on how they implement it. They must also publish how their equity strategies align with the profile and the duration of their liabilities, particularly long-term liabilities, and (if outsourcing) how they incentivise and monitor asset managers to do the same.

Transparent investment: asset managers

Every year, asset managers must set and publish an engagement and voting policy, and disclose how they implement the policy. They must also disclose to institutional investor clients how their equity strategy aligns with long-term liabilities.

Transparency of proxy advisers

SRD II requires member states to set up a code of conduct for proxy advisers. Proxy advisers should establish accurate, reliable voting recommendations, and they’ll need to publish details of their compliance with their code of conduct.

Transparency of costs and charges

Intermediaries will be required to publicly disclose any charges they apply for services they provide.5

Transaction approval

Some transactions, including those between a company and its affiliates or between two affiliates of the same holding company, must be approved at the AGM.

Custodians and intermediary involvement

Custodians and other intermediaries involved in shareholding and proxy voting will need to participate in and facilitate SRD II where necessary. This includes things like helping to identify shareholders.

What’s the impact to shareholding?

Better transparency is widely welcomed by those who wish to see more transparency in an industry built on an inherently opaque system. There is concern, though, that the requirement for increased transparency throughout the shareholding industry could add pressure to a structure that isn’t currently set up to handle it.

Now, SRD II advocates the use of technology. But without reviewing the intermediary architecture for distributing information, the changes required by SRD II are likely to add costs and inefficiencies to the process. With the appropriate technological infrastructure, the process could be made effective and efficient for all. But without robust and embedded technology, it’s hard to see how the application of SRD II won’t add more work to all parties involved. With added workload, there are a number of potential outcomes.

One is that member states choose to transpose SRD II in a more lenient manner so the burden on companies in the industry is lessened. This isn’t an ideal and would undoubtedly weaken the impact and effect SRD II is designed to have.

Another is that the additional load is borne by intermediaries that already operate within the shareholder ecosystem (companies such as issuer agents, vote advisory agents and custodians operating between issuers and investors). The additional processing they’ll be required to undertake will likely be at the cost of additional time and expense. The expense is likely to be passed onto investors and issuers, while the additional handling time is likely have the largest impact at peak periods during the proxy-voting season.

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Can EU countries interpret SRD II?

To some degree, yes. To better explain this, though, let’s take a look at the difference between EU regulations and EU directives (table 1 below captures a few these) and then at how they apply to the shareholding industry.

Table 1: EU regulations and EU directives

EU regulations

EU directions

Regulations set minimum requirements that must be adhered to, so there’s less leeway for interpretation compared to directives.

Directives set goals that all member states must achieve but are free to decide how they wish to transpose them into law.

Regulations have binding legal force in every member state and enter into force on a set date in all member states.

Directives give member states a certain amount of flexibility in how they adopt and apply the rules into their legal systems.

Different member states will have different interpretations of a directive, some of which may be more lenient than others.

The difference between directives and regulations is relevant in this case. For instance, alongside Shareholder Rights Directive II, a further law was passed in the form of the Commission Implementing Regulation (EU) 2018/1212, which supplements the requirements under SRD II by setting out more detailed rules specifying certain format and content requirements. The additional law means there should be a greater degree of uniformity of implementation across member states than if SRD II were the only
binding document.

The implementation regulation was finalised on 3 September 2018. It details the minimum implementation requirements for many aspects of SRD II, such as identifying shareholders, sharing information, the format of that information and reporting formats
member states should employ.

There are a number of articles in the Shareholder Rights Directive II whose interpretation will come down to each member state. One key example is the penalties imposed for noncompliance. Each member state must determine its own rules to measure non-compliance and associated penalties.

There are a number of articles in Shareholder Rights Directive II whose interpretation will come down to each member state. Penalties imposed for non-compliance is just one example.

Taking a closer look at SRD II . . .

The full version of SRD II can be read in English here (or Google Directive (EU) 2017/828). It consists of four articles (outlined in table 2 below). In general, the articles numbered “3x” (like Article 3b) relate to the interactions between companies and shareholders and the transparency between investors and intermediaries. Articles numbered “9x” (like Article 9b) relate to directors’ salaries and remuneration policies.

Table 2: Articles outlined in SRD II

Article 1

Amendments to Directive 2007/36/EC

Sets out the Amendments to SRD 1

Articles to be inserted in Directive 2007/36/EC

Article 3a

Identification of shareholders

Companies have the right to identify their shareholders. Member states may choose to limit the rights of companies located in their jurisdiction to the identification of shareholders who hold 0.5% or more of the company’s shares.

Article 3b

Transmission of information

Intermediaries shall transmit information, without delay, from the company to the shareholder or to a third party nominated by the shareholder.

Article 3c

Facilitation of the exercise of shareholder rights

This outlines the requirements for confirmation of shareholder entitlement by intermediaries.

Article 3d

Non-discrimination, proportionality and transparency of costs

Intermediaries shall disclose publicly any applicable charges for each service provided.

Article 3e

Third-country intermediaries

States that the requirements in Chapter 3 apply to intermediaries even if they do not have their registered or head office in the union.

Article 3f

Information on implementation

Authorities shall inform the Commission of difficulties in enforcement or non-compliance with the provisions of this Union or third-country intermediaries.

Article 3g

Engagement policy

Institutional investors and asset managers shall comply with the requirements or publicly disclose a clear and reasoned explanation why they have chosen not to comply. The requirements include:

  • An engagement policy that describes how they integrate shareholder engagement in their
    investment strategy.
  • On an annual basis, and publicly disclosed, 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 advisers.

Article 3h

Investment strategy of institutional investors and arrangements with asset managers

Institutional investors shall publicly disclose how their investment strategies are consistent with the profile and duration of their liabilities, in particular long-term liabilities, and how they contribute to the medium- to long-term performance of their assets. Where an asset manager invests on behalf of an institutional investor, the institutional investor publicly discloses the following information regarding its arrangement with the asset manager including:

  • How the asset manager is incentivised to align its investment strategy with the
    institutional investor, in particular long-term liabilities.
  • How that arrangement incentivises the asset manager to make investment decisions based
    on assessments about medium to long-term financial and non-financial performance of
    the investee company.
  • How the method and time horizon and payment of the asset manager are in line the
    institutional investor.
  • How the institutional investor monitors portfolio turnover costs incurred by the asset
    manager.
  • And the duration of the arrangement with the asset manager.

Article 3i

Transparency of asset managers

Asset managers shall disclose annually to the institutional how their investment strategy complies and contributes to the medium- to long-term performance of the assets of the institutional investor or of the fund.

Article 3j

Transparency of proxy advisors

Proxy advisers shall publicly disclose reference to a code of conduct that they apply and report on. Proxy advisers publicly disclose at least all the following information in relation to the preparation of their research, advice and voting recommendations:

  • The methodologies and models they apply.
  • The main information sources they use.
  • The procedures put in place to ensure quality of the research, advice and voting
    recommendations and staff qualifications.
  • How they take national market, legal, regulatory and company-specific conditions
    into account.
  • The voting policies they apply for each market.
  • Dialogues with the companies which are the object of their research, advice or
    voting recommendations.
  • And the policy regarding the prevention and management of potential conflicts
    of interests.

Article 3k

Review

The European Commission is to submit a report to the European Parliament and the Council on the implementation of Articles 3g-3i by 10 June 2022.

Article 9a

Right to vote on the remuneration policy

Companies shall establish a remuneration policy for the directors that shareholders have the right to vote on at the general meeting.

Article 9b

Information to be provided in and right to vote on the remuneration report

The company shall draw up a clear and understandable remuneration report to individual directors, including all benefits, during the most recent financial year.

Article 9c

Transparency and approval of related party transactions

Member states shall define material transactions taking into account:

  • The influence that the transaction information may have on the economic decisions
    of shareholders of the company.
  • And the risk that the transaction creates for the company and its shareholders who
    are not a related party.

Article 14a

Committee procedure

Use of European Securities Committee by the Commission.

Article 14b

Measures and penalties

Member states may set effective, proportionate and dissuasive measures and penalties against those who fail to comply.

Article 2

Transposition

Member states shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 10 June 2019.

Article 3

Entry in force

The date on which the Directive enters into force.

The full version of the Commission Implementing Regulation can be found here (or Google search for “Commission Implementing Regulation (EU) 2018/1212)”. It’s made up of 11 Articles (which we outline in table 3 below).

Table 3: Commission Implementing Regulation Articles

Article 1

Definitions

A summary of definitions that apply for the purposes of the regulation.

Article 2

Standardised Formats

The formats, interoperability and language requirements of the regulation.

Article 3

Shareholder Disclosure

The minimum requirements and format for intermediary disclosure of shareholder ID.

Article 4

Transmission of Meeting Notice

The minimum requirements and format for the announcement of general meetings.

Article 5

Confirmation of Entitlement

The requirements for confirmation of shareholder entitlement by intermediaries.

Article 6

Notice of Participation

Intermediary requirements for the transmission of meeting announcements.

Article 7

Vote Confirmation

The minimum information and data elements for confirming votes recorded by the issuer.

Article 8

Corporate Event Announcement

Issuer\intermediary requirements\data point for corporate event transmission.

Article 9

Deadlines

Notification and deadline requirements specification for shareholder\corporate events.

Article 10

Security Requirements

The minimum security requirements for issuers, intermediaries or nominated 3rd parties.

Article 11

Entry into Force and Application

The regulation shall be in force and applicable in all member states on 3 September 2020.

Shareholders rights means shareholders can request confirmation of their rights from the last intermediary (any intermediary who provides the securities accounts in the chain of intermediaries for the shareholder). If voting is electronic, the person who cast the vote must receive electronic confirmation from the company that votes were received and counted.

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What requirements does the regulation specify?

Some of the areas where the implementation of SRD II is specific include the following:

Types of information shared

  • Shareholder identification means that after the Shareholder Rights Directive 2017 has been implemented, companies will be able to identify shareholders who own at least 0.5% (this will depend on the implementation of each member state, and companies may have the right to identify shareholders who own a lower percentage). The implementing regulations set the format for the request and formalises the response sent by the intermediaries.
  • Shareholders rights means shareholders can request confirmation of their rights from the last intermediary (any intermediary who provides the securities accounts in the chain of intermediaries for the shareholder). If voting occurs electronically, the shareholder or proxy voter must receive electronic confirmation from the company to state that votes have been received and counted.

Deadlines for the shared information

  • Companies/issuers must notify intermediaries in a timely manner, i.e. no later than the same business day, in the event of a general meeting being announced.
  • Companies/issuers must also confirm receipt of electronic votes to the shareholder immediately after the vote is cast.
  • Companies /issuers must provide confirmation of recording and counting of votes no later than 15 days after the request or general meeting, unless the information is already available.
  • Intermediaries must transmit information or an information request from an issuer to the next intermediary in the chain no later than by the close of the same business day.
  • Intermediaries must ensure that shareholders will have sufficient time to act upon receipt of the information. The last intermediary in the chain must confirm the shareholder’s entitlement to participate in a corporate event such as a general meeting.
  • Intermediaries must send information “without delay” while ensuring that compliance procedures, record dates and issuer deadlines are met.

Information format

  • The regulation sets standard formats with minimum requirements for transmission of information under SRD II. This is to enable efficient, fast and reliable processing of information between companies and their investors via the chain of intermediaries.
  • Information from the issuer and between intermediaries must be in electronic and machine-readable formats using internationally applied industry standards.

Languages requirements

  • Information from the issuer or company must be in the same language that the issuer publishes its financial information in and a language used as standard in international finance (e.g. English).

Some questions answered . . .

The EC proposed the changes to SRD I in April 2014, and the new amendments were published on 20 May 2017: that’s SRD II (Directive 2017/828). Most provisions (except Articles 3a, 3b and 3c) must be incorporated or transposed into the law of each member state by 10 June 2019. (Articles 3a, 3b and 3c have till 4 September 2020.) SRD II’s main aims are captured in the table below.

You can see that SRD II applies to shareholders (institutional investors and asset managers), companies (issuers) and financial intermediaries involved in the shareholder industry. It’s worth noting, too, that Shareholder Rights Directive II allows member states to exercise some discretion in implementation.

For example, under EU Shareholder Rights Directive 2017, companies have the right to identify their shareholders. But member states may choose to limit the rights of companies located in their jurisdiction to the identification of shareholders who hold 0.5% or more of their shares. Some member states may choose to set a lower threshold or not set one at all. In fact, member states may choose to add requirements as part of their transposition (something often referred to as “gold-plating”).

If you operate in the shareholding industry and are based or interact with companies based in the EU, then SRD II may have an effect on you. Shareholder Rights Directive II is likely to have the largest impact on: companies with their registered offices in the EU and whose shares are admitted to trading in the EU, all intermediaries in the custody chain of such companies (even where based outside the EU) and institutional investors/asset managers investing in shares traded in a regulated market.

In effect, both. How this works will become clearer with time and as member states announce their interpretations of SRD II.

The intermediary chain refers to companies in the shareholding industry that provide services such as administration of shares, safekeeping of shares or maintenance of securities accounts on behalf of shareholders. Here’s a list.

  • The first intermediary is the intermediary that is nominated by the company or issuer and that maintains all the share records of the company or holds all those shares on behalf of the shareholders of the company.
  • The last intermediary is defined as any intermediary that is nominated by the shareholder or investor and that manages the shares records on their behalf.
  • There are other intermediaries who lie between the first and the last intermediary, and sometimes it may not be clear where a company lies in the chain between an issuer and an investor. A company that is the last intermediary in one case, for instance, could sit in the middle of the chain in another. Wherever an intermediary might sit, this should be taken into account.

Shareholders rights means shareholders can request confirmation of their rights from the last intermediary (any intermediary who provides the securities accounts in the chain of intermediaries for the shareholder). If voting is electronic, the person who cast the vote must receive electronic confirmation from the company that votes were received and counted.

Many of the areas contained in the Shareholder Rights Directive II are already covered by UK law, but some UK legislative changes would be required to implement it. The FCA has released a consultation paper on its proposed implementation of SRD II, but it has stated that if the UK departs the EU prior to the implementation date without an implementation period, it won’t proceed with its proposals and expects the government to decide on how to proceed. However, as some of the provisions have extraterritorial effect, Brexit does not necessarily mean all UK entities won’t be required to comply with SRD II.

It’s unlikely. The deadline for transposition into EU member state law is 10 June 2019. It’s expected that EU counties will be publishing their interpretations from the start of 2019.

The new directive will impose additional monitoring and compliance on companies that are in scope of the directive in the shareholding industry. The exact outcomes aren’t fully known yet, but the additional administrative burden will likely have an impact on how issuers, intermediaries and investors operate.

SRD II suggests technology can help manage compliance requirements and facilitate communication. One such technology definitely worth considering is ProxymitySM – the proxy-voting platform Citi developed to connect issuers directly with investors. The beauty of Proxymity is that it not only simplifies proxy-voting by transmitting critical meeting information, votes and vote confirmations between parties without error in real-time, but it also helps resolve many of the challenges of SRD II compliance in the
process. To find out how Proxymity can help you comply and meet your proxy-voting needs, whether you are an investor, intermediary or issuer, email info@proxymity.io or visit www.proxymity.io.

Endnotes
  1. The required threshold prior to shareholder identification is open to a degree of interpretation. As a result, it may vary from member state to member state.
  2. You can look it up here.
  3. When the EU approves a directive, each country implements it into law in the way that makes most sense for that market.
  4. When it comes to voting on pay, it’s worth noting and differentiating between the requirements to: establish a remuneration policy, which must be submitted to a vote every four years (member states can decide if the vote is binding or advisory); and submit a remuneration report to an advisory vote on an annual basis. There are some follow-on requirements if the votes fail.
  5. Member states may opt to prohibit intermediaries charging for certain services.

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This article has been prepared for information and discussion purposes only. It does not constitute investment, tax or legal advice by Citi or any of its officers, directors, employees or agents and should not be relied upon for those purposes. You should consult with appropriate professional advisers for these specific matters. This communication is not a complete overview of the subject matter. It does not constitute an offer, an invitation to offer or a solicitation or recommendation to enter into any transaction, nor is it an unofficial confirmation of the terms of any proposal. The subject matter of this communication is described in summary form only and may maintain material omissions. For a more detailed explanation of the subject of this communication, please contact your own legal advisers. Professional legal advice should be obtained before taking or refraining from taking any action as a result of the contents of this communication. Regulation in this area is subject to change and development as regulators and the industry interpret new laws and regulation. You and your legal counsel are encouraged to actively review and monitor regulations applicable to you.

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