Final SRD II measures – what do UK companies need to do?
An overview of what is changing for UK companies as a result of implementation of the final SRD II measures.
The Shareholder Rights Directive II (SRD II) amends the Shareholder Rights Directive to strengthen shareholder engagement and increase transparency.
SRD II came into force on 09 June 2017 and most of its provisions had to be implemented into national law by 10 June 2019. See SRD II: overview for more information.
What is coming into effect in September 2020?
New measures must be implemented by Member States by 3 September 2020 that:
allow companies to request information from intermediaries so that they can identify their shareholders, but Member States can exclude very small shareholders (those holding less than 0.5%); and
require intermediaries to:
transmit information without delay between companies and shareholders;
facilitate the exercise of shareholder rights; and
publicly disclose any charges for providing these services take effect.
Which companies does this apply to?
Companies which have their registered office in a Member State and whose shares are admitted to trading on a regulated market situated or operating within a Member State.
In the UK, these measures apply to companies whose shares carry voting rights and are admitted to trading on a regulated market within the EEA -- defined as a "traded company" in the Companies Act 2006.
What is changing in the UK for traded companies?
SRD II provides that:
when votes are cast electronically, an electronic confirmation of receipt of votes must be sent to the person that casts the vote, and
after a general meeting, the shareholder (or nominated third party) must be able to obtain confirmation that their votes have been validly recorded and counted by the company, unless the information is already available. Member States may set a deadline for requesting this confirmation which cannot be longer than three months from the date of the vote.
An implementing regulation (EU 2018/1212) (Implementing Regulation) sets out the minimum requirements for the voting receipt (Table 6) and the confirmation of the recording and counting of votes (Table 7).
The only changes that have been made are that:
a traded company must provide a confirmation of receipt of the votes that are cast on a poll electronically (section 360AA). This applies to votes cast on or after 3 September 2020.
a shareholder can request information from the traded company to enable them to determine that their vote has been validly recorded and counted (section 360BA). This applies to votes cast at a general meeting which takes place on or after 3rd September 2020. The deadline for the shareholder to request this information is 30 days from the date of the general meeting.
These new Companies Act 2006 sections were introduced by the Companies (Shareholders' Rights to Voting Confirmations) Regulations 2020, published on 9 July 2020. These regulations transpose into UK law certain provisions of Article 3c (facilitation of the exercise of shareholder rights) of SRD II.
Traded companies will have to use the forms for voting receipt and confirmation of the recording and counting of votes set out in the Implementing Regulation as that has direct effect.
Why is nothing else changing for traded companies?
Nothing else is changing for traded companies as, in the UK, the shareholder is the person registered as the member in the company's register of members required to be held by a company under section 113 of the Companies Act 2006 for certificated shares.
For companies with uncertificated shares there is an equivalent obligation under regulation 20 of the Uncertificated Securities Regulations 2001 (USR) where the company must keep an "issuer register of members" and a "record of uncertificated shares" being a record of entries in the "Operator register of members".
A traded company can therefore already identify its shareholders from these registers and the shareholder already has rights to participate and vote at meetings without involving intermediaries.
The Companies Act 2006 already requires companies to transmit the information it is required to provide to the shareholder, to enable the shareholder to exercise rights such as the right to receive notice of meetings (section 310) and a copy of the company's annual accounts and reports (section 423). The Companies Act 2006 also allows shareholders to transmit information to the company related to the exercise of the rights flowing from their shares, for example, the shareholder's appointment of a proxy (section 327) and vote in advance of a general meeting (section 322A).
What are the changes for intermediaries?
See our article "Final SRD II measures - what do they mean for intermediaries?"
