3 answers to 3 questions: revisions to the Shareholder Rights Directive

The European Union is preparing to update the rules governing shareholder participation in the governance of public companies. The changes may affect cross-border voting, the operations of financial intermediaries, the exchange of corporate information and the procedures for exercising investors’ rights. For businesses, this means they will need to assess their existing corporate procedures and the associated legal risks in advance. ELI Swiss provides advisory and corporate services to companies operating within the European legal framework and monitors regulatory changes that may affect governance structures and relations with shareholders.

What changes might be made?

The final text of the amendments has not yet been published. It is therefore too early to discuss new mandatory rules. At this stage, the focus is on discussing the direction of possible reform, rather than on approved regulations. One of the key issues remains the functioning of the chain of intermediaries. When shares are held through international financial structures, information passes through several intermediaries. Each stage can cause delays, incur additional costs or pose a risk of data loss. The update to the Directive may provide for more harmonised procedures for the transmission of corporate information and shareholders’ instructions. Particular attention is being paid to cross-border voting. The European Commission is assessing how effectively the current mechanisms enable investors to participate in general meetings of companies registered in other EU Member States. Possible changes may aim to simplify the verification of shareholders’ rights and enhance the reliability of voting through intermediaries. The issue of the digitalisation of corporate processes is also being considered. This concerns not only electronic voting, but also the standardisation of data formats, deadlines for the transmission of information, and methods of interaction between issuers, investors and financial institutions. Another area relates to the activities of proxy advisers and the practice of active investor engagement in corporate governance.

How the amendments might affect companies and investors

For public companies, a potential update to the rules could lead to a review of internal procedures. The changes may affect the preparation of general meetings, the identification of shareholders, the disclosure of corporate information, and dealings with banks, depositaries and other intermediaries. Companies working with investors from several countries may need to adapt their existing processes to new pan-European standards. This applies not only to legal documents. Internal data-sharing systems, procedures for handling requests and mechanisms for verifying voting results may also be subject to review. For shareholders, the proposed reform should make it easier to participate in corporate decision-making. Clearer procedures could reduce reliance on national differences and minimize technical barriers to cross-border securities ownership. At the same time, greater transparency may increase the burden on market participants. Companies and intermediaries may face additional requirements regarding the documentation of transactions, data retention and disclosure of information.

Why did the European Commission decide to revise the Directive?

The Shareholders’ Rights Directive was adopted to facilitate investor participation in the governance of public companies and to enhance the transparency of corporate decisions. Its provisions were subsequently expanded under SRD II. The new rules strengthened oversight of related-party transactions, raised disclosure requirements and established additional mechanisms for interaction between companies and institutional investors. However, practical experience has shown that uniform standards do not always operate in the same way across all EU Member States. National differences persist. These are particularly noticeable in the case of cross-border shareholdings, where several banks, depositaries and other intermediaries act between the investor and the issuer.

In some cases, the transfer of information takes longer than provided for in the corporate timetable. Difficulties arise in verifying shareholder status and transmitting voting instructions. An investor may formally have the right to participate, but in practice face technical or administrative obstacles. The European Commission is considering a revision of the Directive as part of a broader policy to develop the Union’s savings and investment sector.

How to prepare for a possible update to the rules

Preparations should begin with an analysis of the current corporate governance structure. It is important to determine how engagement with shareholders is organised, through which intermediaries information is communicated, and what procedures are used when holding general meetings. Separately, the procedures for identifying shareholders and transmitting voting instructions should be reviewed. If the company works with investors from different countries, differences in national requirements must be taken into account. Such differences may become critical following the introduction of new uniform standards. A legal review of corporate documents is also important. The articles of association, internal regulations and procedures for engaging with investors must comply with current regulations. ELI Swiss provides legal and advisory services in the areas of corporate governance, international business and corporate support. Our specialists help analyse corporate structures, assess the impact of legislative changes and prepare businesses for new requirements. If you would like more detailed information on potential amendments to the Shareholders’ Rights Directive or require professional support, please contact ELI Swiss for a personalised consultation.

FAQ

What amendments to the Shareholders’ Rights Directive are under discussion?

The European Commission is considering a possible update to the rules on cross-border voting, the transmission of information through chains of intermediaries, and digital interaction between companies and investors. It is also assessing the effectiveness of the current corporate governance transparency requirements. The final text of the amendments has not yet been approved.

When might the new rules come into force?

At present, no specific date has been set for the new requirements to come into force. Once the legislative proposal has been published, it must undergo a review and approval process at European Union level. Member States may then need to amend their national legislation.