_In the context of the COVID-19 pandemic, voices emerged advocating the postponing of the implementation of the Shareholders’ Rights Directive II (SRD II) Implementing Regulation (EU) 2018/1212 (the ‘SRDII Implementing Regulation’). Indeed, the European Banking Federation, the Association for Financial Markets in Europe and the Securities Market Practice Group argued that the implementation of SRDII Implementing Regulation before the announced deadline of 3 September 2020 would cause serious complications for listed companies due to the disruption caused by the COVID-19 pandemic and therefore that the deadline should be postponed by one year.
However, the European Commission, in its response letter refused such argument, pointing out that, by 3 September 2020 listed companies impacted by the SRDII Implementing Regulation will have had two years to adapt to the new regulation, which was issued on 3 September 2018. The implementation date therefore remains unchanged and SRDII Implementing Regulation will be applicable as from 3 September 2020.
The SRDII Directive and the SRDII Implementing Regulation
Considering the confirmed deadline, the key aspects of the SRDII Implementing Regulation should be kept in mind. The SRDII Implementing Regulation aims at laying down minimum requirements in relation to the provisions of Directive 2007/36/EC of the European Parliament and of the Council as regards shareholder identification, the transmission of information and the facilitation of the exercise of shareholders rights (the ‘SRDII Directive’).
The SRDII Directive gives listed companies the right to identify their shareholders and requires intermediaries to cooperate in this identification process. It is also intended to improve the communication of listed companies with their shareholders, especially concerning the transmission of information throughout the chain of intermediaries. The SRDII Directive also requires intermediaries to facilitate the exercise of shareholders' rights. These rights include the right to participate in -and vote at- general meetings, the right to receive profit distributions or to participate in other corporate events.
The SRDII Implementing Regulation’s main purpose is to avoid discrepancies in the implementation of the SRDII Directive between the Member States of the European Union. It also aims at facilitating the implementation of shareholder's rights in cross-border cases, by establishing common ground rules. The SRDII Implementing Regulation provides for minimal requirements concerning the request for disclosure of information relating to shareholders and the response to be transmitted. It also defines strict transmission delays for the transmission of information on corporate events and shareholders' decisions.
The SRDII Implementing Regulation states that the rules provided are to be considered minimal requirements and states that 'intermediaries and other market players are encouraged to further self-regulate these formats according to the needs of different markets. They could also endeavor to further standardise the messages referred to in the [SRDII Implementing Regulation] and any other type of message necessary to facilitate the exercise of shareholders' rights, and to adopt new technologies likely to enhance transparency and confidence.'
The Law transposing the SRDII Directive
The SRDII Directive has been transposed into Luxembourg law by way of a law of 1 August 2019, amending the law of 24 May 2011 concerning the exercise of certain rights of shareholders to general meetings of listed companies (the 'Law').
Concerning the identification of the shareholder, the Law provides that listed companies may solicit any intermediary in the chain of intermediaries (including the financial intermediaries in charge of the accounts, the central securities depository or other service providers) to obtain without delay all useful information on the identity of the shareholders. The information on the shareholder includes the identity of the shareholder and its number of shares in the company.
Concerning the transmission of information, the Law indicates that a complete and timely communication of information for the shareholders must be made by the listed company or by the intermediary in the form of a link on the company's website or by the direct transmission of information to the shareholders.
One of the other objectives of the Law is to facilitate the holding of shareholders’ meetings. For that purpose, obligations concerning the convening of shareholders at the general meeting, inclusion of items on the agenda and draft resolutions and the right to ask questions were reaffirmed by the Law.
Concerning the participation in the shareholders' meeting and the voting rights, according to the Law, shareholders of listed companies must receive confirmation of receipt from the company of electronical votes. The shareholder may also request confirmation that its vote has been recorded and taken into account by the listed company if this information is not already available.
The Law also provides for several transparency measures, such as the obligation for intermediaries to publicly disclose the fees applicable to services linked to the identification of shareholders and the facilitation of voting rights and the transmission of information or in matters of institutional investors, asset managers and voting advisers.
As far as the compensation of the directors of a listed company is concerned, the Law establishes the 'Say on Pay' principle, according to which listed companies must establish a compensation policy to contribute to the business strategy, interests and long-term sustainability of the company, which must be clear and understandable and indicate, amongst others:
- The different components of the compensation;
- The conditions for the establishment of the compensation;
- The clear and detailed criteria for the allocation of variable compensation;
- Information on possible deferral periods and on the possibility for the listed company to request the return of variable remuneration; and
- In the case of share-based compensation, the applicable vesting periods and the retention periods
In relation thereto, according to the Law, shareholders of listed companies have the right to approve at meetings general such compensation policy before its implementation at least every four years and upon any material change. The shareholders also have the right to receive every year a report in relation to the compensation of the directors. The remuneration policy, once approved by the general meeting of shareholders, must be made public on the company's website and remain accessible to the public.