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Shareholders’ Rights Directive affects also CSD

The amendment of Shareholders’ Rights Directive (SHRD) entered into force in the beginning of June. EU Member states have up to two years to incorporate the new provisions into domestic law.

Encouraging shareholder engagement
The objective of the directive is to encourage long-term shareholder engagement and to enhance transparency between companies and investors. The new directive affects, inter alia, the following matters:

• remuneration of directors
• identification of shareholders
• exercise of shareholders’ rights
• transmission of information between the company and its shareholders
• transparency for institutional investors, asset managers and proxy advisors
• related party transactions

The impact between CSD and company
The detailed procedural requirements concerning identification of shareholders and facilitation of shareholders’ rights will have the biggest impact in the relationship between the CSD and the company.

- The new directive strengthens companies’ right to identify their shareholders and to obtain information regarding shareholder identity from the holding chain. Similarly, the holding chain will get an obligation to facilitate the exercise of the rights by the shareholder, such as the right to participate and vote in general meetings. In this context, the holding chain will have an obligation to transmit information between a company and its shareholders, says Tomi Immonen, Legal Counsel of Euroclear Finland.

- On the basis of the directive, the European Commission will adopt implementing acts to specify the details of the practical procedures, such as the types and formats of the requests by companies and the information to be transmitted by the holding chain as well as the deadlines to be complied with. Based on the previous implementing acts, it’s expected that the requirements will be very detailed – this will have the biggest impact in practice, continues Immonen.

New requirements will enter into force gradually during the years of 2019 and 2020. Euroclear Finland monitors closely the preparation of the implementing acts by the European Commission and the domestic law.

 

The original article was publsihed on our Newsletter 2-2017 - Focus on changing legislation (29.6.2017)

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