ESBG Comment: Shareholder Rights Directive – how will it work?
Image of shareholder word cloud
ESBG Legal Adviser Nadine Lilienthal outlines in the News & Views the savings and retail banks trade body's stance on specific points around proposed EU Shareholder Rights Directive revison.​





 ​​Published: BRUSSELS, 22 January 2016​





​​​​​​​​​​​​​​It’s been more than a year since the European Commission presented its proposal for the revision of the Shareholder Rights Directive. The move was foreseen to, once and for all, prevent shareholders from supporting managers’ excessive short-term risk-taking, and obliging them to closely monitor the companies in which they invest. While the European Council already reached its compromise in March​ on the revised Shareholder Rights Directive (SHRD), the European Parliament reached a final position in July. The trialogue is pending and will likely start after the summer break.

ESBG and its members are not completely "miserable" with the proposals, apart from with Article 3d – slightly preferring the more reasonable and practical council proposal. We would like, however, to take the opportunity to comment on three points that are still giving ESBG members a headache:
  • Threshold (Article 3a) – Why should intermediaries provide information on each and every minor shareholder to companies, when share portfolios are changing rapidly and natural persons continue to be concerned about their privacy?

  • Costs (Article 3d) – Why should banks (let us name the intermediary) not be allowed to charge non-discriminatory and proportionate fees for a service that they perform in the interest of another party? And if it is left to Member States to decide whether intermediaries should be allowed to charge fees, which Member State law, for goodness sake, will be decisive if a bank from Belgium provides a German citizen resident in London with information about a company seated in Spain?

  • Votes (Article 9a) – If Member States are obliged to establish a binding vote of the general meeting on remuneration policy, how will Member States with dualistic organisational structures keep their well-known, tried-and-tested systems? Would it not be rather unfair to force a law onto Member States that would weaken the dualistic organisational structures of their stock corporations?

Three possible solutions would work best:
  • ​​Threshold (Article 3a) – ESBG would have favoured an even further-reaching approach, but the council’s threshold proposal of 0.5% is a step in the right direction. This would only require identification of shareholders that hold more than 0.5% of shares in a company registered in the member state.

  • Costs (Article 3d) – The commission’s smart proposal confers the costs of identifying shareholders onto the parties that may in the end profit from the service. These parties are shareholders, who will profit from exerting rights and knowing more about the company in which they invest, and companies, which will gain further resources and advice. Ultimately, the commission proposal acknowledges the usual practice in a market economy: the party that profits from a service should bear its costs.

  • Votes (Article 9a) – The council has fulfilled its important role of protecting established national characteristics, suggesting that member states may – under certain circumstances – take the general meeting’s vote on remuneration policy as advisory rather than binding.



Policy and regulatory advice; Supervision