Today, there is EU legislation stating that shareholders in listed companies themselves or by proxy shall have the right to participate at the general meetings, ask questions, draft resolutions, making motions and vote. The companies must publish voting results on their website. These rules apply to Norway, and are implemented in the Public Limited Liability Companies Act (allmennaksjeloven). The EU legislation can be found in directive 2007/36/EC, called the Shareholders’ Rights Directive and abbreviated SRD.
The EU has recently decided to amend this directive to increase shareholders’ long-term influence on listed companies. There will be new requirements making shareholders better able to exercise their rights, to enable transparency between companies and investors, and to increase shareholders’ influence on the companies in certain areas. The amendments can be found in directive 2017/828/EU which is known as SRD II.
The directive’s requirements do only apply to listed companies. Further the directive applies only if the company’s registered office is within a member state, and the shares are admitted to trading on a regulated market situated or operating within a member state. Whether market practice also for instruments outside the scope of the directive may be influenced remains to be seen. The amendments must be implemented in the EU member states by June 2019. It is not known when the directive will be implemented in Norwegian law.
Shareholders must be able to exercise their rights
The directive requires that national law ensure that shareholders may exercise their rigths in a practical manner also when instruments are held through a holding chain. Since the financial markets are operated differently from country to country, the directive gives the Member States discretion to decide how the requirements will be implemented in national law, including company law. Relevant rights, except rights linked to the general meeting, include the right to receive dividends and other payments, exercise subscription and exchange rights, accept take-over bids, and participate in restructuration.
In order for the shareholders of a company to exercise rights attached to shares held through one or more custodians, the company must
• identify their shareholders (possible exceptions for shareholders holding less than 0.5 % of voting rights),
• send information about the rights to the shareholders, and,
• ensure that shareholders may exercise the rights themselves or by proxy.
These requirements imply that CSDs, banks, investment firms and other intermediaries must contribute to identify shareholders, transmit information about the rights to the shareholders, and assist in the exercise of the rights. Information shall be transmitted in a standardized and timely manner through the chain of custody. The formats and requirements to these standardized messages shall be finalized within September 2018.
Transparency from institutional investors and asset managers
The directive requires transparency from institutional investors and asset managers. The transparency requirements shall contribute to show how the exercise of shareholders rights contributes to the medium to long-term performance of the companies the institutional investors and asset managers has invested in. They should also disclose how this engagement policy has been implemented, including their voting behavior and an explanation of the most significant votes. The institutional investors and asset managers must also disclose information on the use of advisors giving voting recommendations (proxy advisors).
These rules are, i.a., relevant for life insurance companies, pension funds, management companies and investment firms providing portfolio management.
The shareholders’ rights to influence directors’ remuneration and related party transactions
To ensure the shareholders’ interests regarding the remuneration of directors, the directive requires that the shareholders have the right to vote on the remuneration policy at the general meeting. The policy should meet certain requirements and should be publicly available at the company’s website. To ensure companies’ and shareholders’ interests in connection to related party transactions, such transactions shall be approved by the general meeting or approved by an administrative body/supervisory body according to procedures which prevent a related party from taking advantage of its position and provide adequate protection for the interests of the company and of shareholders who are not connected to the related party.