News

September 2009

Shareholder Rights Directive

Following the introduction of new procedures for shareholder meetings under the Companies Act 2006 (the “Act”), further amendments to such procedures have been introduced by the Shareholder Rights Directive (2007/36/EC) (the “Directive”). The Directive aims to improve the participation of shareholders in company meetings, and companies should ensure that they adhere to the new rules when giving notice of and holding meetings. It is likely that companies will wish to amend their Articles of Association in order to remove provisions inconsistent with the new provisions.

The Directive applies in addition to the provisions of the Act in relation to company meetings, although the Directive only applies to ‘traded companies’ – companies which are traded on an EEA regulated market. This definition does not include companies listed on the Alternative Investment Market.

General Meeting Notice Periods

The minimum notice period for general meetings has been extended to 21 clear days, rather than 14 clear days as had previously been allowed under the new Act. However, a company may reduce the required notice period to 14 days if shareholders pass a resolution at their AGMs every year, allowing the shortening of the general notice period, and provided the company allows shareholders to vote at such meetings via electronic means.

Supplementary Information Required in Notices of Meetings

All notices of meetings must now contain further information in any notice of meeting. The information which must be provided is as follows:

• Details of a website where other information is available;
• Details of how to attend, vote and the right to ask questions (see below) at the meeting;
• If a notice is sent out 6 weeks or more before the date of the meeting, the right of shareholders to requisition a resolution at the meeting (as described above).

In addition to this, traded companies must also publish information on a website prior to a meeting taking place, such as details of the company’s share capital. Any results of a poll taken at a meeting must also be published on a company’s website.

Shareholder Requisition Rights

Members of a traded company who own at least 5% of the voting rights may requisition a general meeting, halving the previous threshold of 10%. Shareholders holding at least 5% of the voting rights, or 100 members, can also requisition that a certain matter is considered at an AGM.

Right to Ask Questions

A new statutory right has been created under the Act which gives shareholders the right to ask questions which the company must answer. A company may refuse to answer a question, but only if one of the exceptions apply, which include it being undesirable to do so in the interests of the Company, if the answer has already been given on a website in the form of an answer to a question or if to answer the question would interfere with the business of the meeting.

Voting at Meetings

Proxies:

A proxy who has been appointed as proxy on behalf of more than one shareholder can exercise one vote on a show of hands, unless he has been instructed to vote by members in different ways. If this occurs the proxy may use one vote for and one against the resolution.

Corporate Representatives:

A corporate representative is able to vote in different ways provided they do so in respect of different shares. If a number of corporate representatives are appointed for one member they may only exercise the same voting rights as the shareholder. Therefore the appointment of multiple corporate representatives will not improve the voting rights of corporate members.

Electronic Meetings and Advance Voting:

All companies, both private and public, are now able to hold meetings in a manner which allows for participation of those not present, by way of advance e-voting.

Chairman’s Casting Vote:

The chairman of a traded company may no longer have a casting vote in the event of shareholder deadlock.

Appointment of Proxies

Traded companies now have a duty to provide an email address to which forms appointing a proxy can be sent. The address of such a notice must be provided either in the instrument for proxy or on the same website as that which is used to provide information in relation to the company, as described above.

Record Dates for Voting

Under the Directive all traded companies must specify a date by which a person must be entered on the register of members of the company, in order for the member to be able to vote at a meeting. The record date cannot be set more than 48 hours before the time of the meeting.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information please contact: