Van:                 Heck, Corrie
Verzonden:         donderdag 14 juli 2005 10:17
Aan:                 'Markt-COMPLAW@cec.eu.int'
Onderwerp:           second consultation "fostering an appropriate regime for shareholders' rights"
 
To: the European Commission, Internal Market Directorate General
 

Please find the following document herewith: REPLY SECOND CONSULTATION DOCUMENT “FOSTERING AN APPROPRIATE REGIME FOR SHAREHOLDERS’ RIGHTS”
by THE COMBINED COMMITTEE ON COMPANY LAW instituted by The Royal Dutch Notarial Society (Koninklijke Notariële Beroepsorganisatie) and
The Netherlands Bar Association (Nederlandse Orde van Advocaten).

With kind regards,
Corrie Heck
Secretary of the Combined Committee

Mr. C. Heck-Vink
Koninklijke Notariële Beroepsorganisatie
Postbus 16020
2500 BA ’s-Gravenhage
Tel. 31 (0)70 3307153
Fax 31 (0)70 3624568

Preliminary remarks

Before going into the specific questions raised in the Second Consultation Document (the "SCD") the Dutch Combined Committee on Company Law (the "CC") remarks that certain issues raised in the SCD were dealt with by the CC in the previous consultation. Therefore, in reply to certain questions the CC will repeat again the previously given considerations.

On the other hand, the CC further considered the practicalities regarding a uniform European system that would facilitate cross border voting. Fundamental issues should be resolved in order to achieve that all the various objectives are met. The CC further elaborates on these principal issues under 9. Many of our considerations on the questions asked should be reviewed in light of the remarks under 9.

1. SCOPE

Question: Do you agree with the proposed scope for any future measure at EU level, if any, establishing minimum standards for shareholders' rights?

Any potential measure at EU level establishing minimum standards for shareholders' rights should apply solely to companies formed under the laws of a Member State and whose securities are admitted to trading on a regulated market in one or more Member States within the meaning of Council Directive 2004/39/EC.

UCITS (of the corporate type) falling within the scope of Art. 1(2) of Directive 85/611/EEC, and equivalent funds, should be excluded from the scope of any such measure.

Answer:

The CC agrees with the proposed scope. The CC notes that Member States should allow companies to be able to accommodate rules of markets outside the EU.

2. THE “ULTIMATE INVESTOR” OR “ULTIMATE ACCOUNTHOLDER”

Questions:
1. Do you consider, contrary to the views expressed above, that granting ‘ultimate investors’ at EU level a legal enforceable right to direct how votes attached to shares credited to their accounts are cast, is a pre-requisite to facilitating cross-border voting?
2. If so, do you agree with the following proposal, based on the works of UNIDROIT: “the legal or natural person that holds a securities account for its own account shall have the right to determine how votes attached to shares credited to its securities account are to be cast”?

Answers:

Ad 1. The CC considers that a legal enforceable right is necessary but agrees to the principle that in order to achieve a useful system facilitating cross-border voting, the concept "ultimate investors" somehow must be further defined in order to determine who would have the voting rights. As many of the relationships between intermediaries and beneficiaries are governed by contract and not by the lex societatis, it seems that the regulation regarding the rights to direct votes would only cover up the chain until a non EU part of the chain. A non EU intermediary in the chain (having neither the accounts nor the residency in the EU) would stop the effectiveness of the regulation.

Ad 2. The CC agrees to the proposal.

3. STOCK LENDING AND DEPOSITARY RECEIPTS

3.1. Stock lending

Question: Do you agree with the following minimum standard?

1. Agreements providing for the temporary transfer for consideration of shares shall contain provisions informing the relevant parties to the agreement of the effect of the agreement with regard to the voting rights attaching to the transferred shares.

2. Where an intermediary enters into such an agreement in relation to shares which the intermediary holds on behalf of another person, or which are held in a securities account in the name of another person, the intermediary shall, prior to entering into the agreement, duly inform that person or its representatives of its  intention to enter into such an agreement and the effects of the agreement with regard to the voting rights attaching to the relevant shares.

Answers:

Ad 1. The CC agrees but notes that an agreement lacking this information should not be void or unvalid. It should be up to the supervisory authority to take appropriate measures if the concept is not followed properly.

Ad 2. The CC believes that as long as the standard under 1. is met, it can be left to the intermediary and the person on behalf whom the shares are held what details need to be included in the agreement.

3.2. Depositary receipts

Question: Do you agree with the following minimum standard? Holders of depositary receipts shall alone have the right to determine how the voting rights attached to underlying shares represented by depositary receipts are exercised.

Answer:

The CC repeats its previous reply regarding this issue. Holders of depositary receipts shall have the right to determine how voting rights are exercised, provided however that Member States should be able to provide for an opt-out for non professional depositaries, such as ad hoc depositaries incorporated for another purpose than facilitating the trade of securities. A typical example of such ad hoc depositary in Dutch practice is a legal entity that holds the shares cum amico ("ten title van beheer") for the holders of depositary receipts. In such situation it should be possible that the holder(s) of depositary receipts under certain circumstances are not recognised as holding such right.

4. PRE GENERAL MEETING COMMUNICATIONS

 Notice periods for convening a General Meeting

Question: Do you agree with the following minimum standards?

1. Annual General Meetings of listed companies shall be convened on a first call with no less than 21 business days notice.

2. Other Shareholders’ Meetings shall be convened on a first call with no less that 10 business days notice.

Answer:

The CC does not see a valid reason to make a distinction between the Annual General Meeting and other meetings. For every meeting, the shareholders/investors should be given sufficient time to consider the information rendered by an issuer and enable him to take a position regarding the resolutions tabled. This information may also induce certain shareholders/investors authorised to do so (see below under 6.3) to table other resolutions.

Furthermore, since the idea of the EU measure would be to (also) facilitate cross-border situations, the CC considers it more appropriate to use calendar days instead of working days. This in order to avoid any confusion on (bank) holidays in one EC country, being a working day in another EC country.

Taking into account these considerations, the CC suggests a convocation of at least 21 calendar days for all meetings.

In addition, the CC considers it an obligation for issuers to maintain a website with a corporate agenda, indicating as early as possible the date of a meeting.

 Content of the notice

Question: Do you agree with the following minimum standards?

Any notice convening a General Meeting shall at least:

- indicate precisely the place, time and agenda of the meeting and give a clear and precise description of participation and voting procedures and requirements for voting at the General Meeting. Alternatively, it may indicate where such information may be obtained.

- indicate where the full, unabridged text of the resolutions and the documents intended to be submitted to the General Meeting may be obtained.

Answer:

The CC agrees with the content of the notice but would advise to include in the indication of the resolutions and documents to be submitted the indication about the time when the documents may be obtained.

 Information relevant to the General Meeting

Question: Do you agree with the following minimum standard with regard to the time at which GM-related documents should be made available?

The full text of the resolutions and documents related to the agenda items and intended to be submitted to the General Meeting shall be made available at the latest 15 business days before any Annual General Meeting, and at latest 10 business days before any other General Meeting.

Answer:

Again, the CC does not see a valid reason to make a distinction between the Annual General Meeting and other meetings. The CC refers to its remark regarding business days above. The meeting-related documents should be made available at such a moment prior to the GM that shareholders have sufficient time to obtain the information and give notice of their intention to participate in the GM or to render a power of attorney.

The CC suggests a period of 21 calendar days, having as a result that the relevant information will be available as from the date that the meeting is convened.

 Dissemination, and language, of the meeting notice and materials

Question: Do you agree with the following minimum standard?

Any notice convening a General Meeting and any document intended to be submitted to the General Meeting shall be made available in a language customary in the sphere of international finance, unless the General Meeting decides to the contrary.

Answer:

The CC agrees.

 Specific section of the issuer’s website dedicated to the General Meeting

Question: Do you agree with the following minimum standards?

1. Member States shall ensure that issuers post on their websites the information relevant to General Meetings at the same time as such notices are published and/or sent to the issuers’ shareholders.

2. Such information shall include at least: the notice of the meeting, the full text of the resolutions intended to be submitted to the General Meeting and other documents relevant to the General Meeting, a precise description of the means given to shareholders to participate in the General Meeting and cast their vote and the forms to be used to vote by correspondence and/or by proxy.

Answer:

The CC agrees.

5. ADMISSION TO THE GENERAL MEETING - SHARE BLOCKING

Question: Do you agree with the following minimum standards?

1. Provisions making the right to vote in a General Meeting conditional, or allowing the right to vote to be made conditional, on the immobilisation of the corresponding shares for any period prior to the Meeting shall be abolished.

2. The right to vote at the General Meeting of a listed company shall be made conditional upon qualifying as a shareholder of that listed company on a given date prior to the relevant General Meeting.

Answer:

The CC agrees and considers the use of a Registration Date of particular importance when accommodating and facilitating the exercise of shareholders' rights. Please see under 9.

6. SHAREHOLDERS RIGHTS IN RELATION TO THE GENERAL MEETING

6.1. Electronic participation in General Meetings

Question: Do you agree with the following minimum standard?

Member States shall remove existing requirements, and shall not impose new requirements, that act or would act as a barrier to the development of the participation of shareholders to the general meeting via electronic means.

Answer:

The CC agrees, provided however that Member States should not be obliged to allow for a participation to a discussion through electronic means.

6.2. Right to ask questions

Question: Do you agree with the following minimum standard?

Shareholders shall have the right to ask questions at least in writing ahead of the General Meeting and obtain responses to their questions. Responses to shareholders questions in General Meetings shall be made available to all shareholders. The above principles are without prejudice to the measures which Member States may take, or allow issuers to take, to ensure the good order of General Meetings and the protection of confidentiality and strategic interests of issuers.

Answers:

The CC agrees. The question is which shareholder shall have that right. It would seem logical to allow only shareholders who directly or indirectly hold shares on the Registration Date to ask questions as those shareholders would have the right to participate at the GM.

6.3. Rights to add items to the agenda and table resolutions

Question: Do you agree with the following minimum standard?

1. Shareholders, acting individually or collectively, shall have the right to add items on the agenda of General Meetings and table resolutions at General Meetings. Such rights may be subject to the condition precedent that the relevant shareholder or shareholders hold a minimum stake in the share capital of the issuer.

2. Such minimum stake shall not exceed 5% of the share capital of the issuer or a value of € 10 million, whichever is the lower.

3. Such rights must be exercised sufficiently in advance of the date of the General Meeting, to enable other shareholders to receive or have access to the revised agenda or the proposed resolutions ahead of the General Meeting.

Answer:

The CC agrees, but considers it necessary to determine when this threshold should be met. If any moment prior to the GM would suffice, then the issue arises whether the issuer must table the resolution if the requesting shareholder is no longer shareholder on the Registration Date or the date of the GM.

6.4. Voting

 Voting by correspondence

Question: Do you agree with the following minimum standard?

1. Member States shall ensure that shareholders of listed companies have the possibility to vote by correspondence.

2. Member States shall remove existing requirements, and shall not impose new requirements, on companies which hinder or prohibit voting by electronic means at General Meetings.

Answer:

The CC agrees, provided that listed companies could provide for certain conditions regarding the authentification. This policy then has to be posted on their websites and published by the listed company in question well in advance.

 Proxy voting

Question: Do you agree with any, each, all, or the following minimum standards? 1. Every shareholder shall have the right to appoint any other natural or legal person as a proxy to attend any General Meeting on his behalf.

2. No constraint or limitations shall be imposed other than provisions relating to the legal capacity of the person. In particular, there shall be no limitations on the persons who can be appointed as proxies and on the number of proxies any such person may hold.

3. Shareholders shall not be prevented from appointing their representatives by electronic means.

4. Persons appointed as proxies shall enjoy the same rights to speak and ask question in General Meetings as those to which the shareholders they represent are entitled.

5. Issuers shall not themselves collect proxies in advance of General Meetings but shall entrust independent third parties with such collection.

6. All votes cast on each resolution submitted to a General Meeting shall be taken into account, irrespective of the means by which the votes are cast.

Do interested parties consider that it would be appropriate to set up an EU proxy form that would have to be accepted by all issuers in all Member States while not excluding the use of other formats allowed for under Member States’ laws?

Answer:

The CC in principle agrees with the minimum standards - except for standard 5 - provided that standard 3 only concerns certain electronic means (i.e. for instance powers of attorney sms would not be admissible) and standard 6 would only concern votes that are validly cast.

The CC does not agree with the standard referred to under 5. If appropriate care is taken, the issuers themselves may collect proxies.

7. POSITION OF INTERMEDIARIES IN THE CROSS-BORDER VOTING PROCESS

 Definition of intermediary

Question: Do you agree with the following definition?

A legal or natural person who, as part of a regular activity, maintains securities accounts for the account of other legal or natural persons shall be considered as an intermediary. An intermediary may also maintain securities accounts for its own account.

Answer:

The CC agrees.

 Registration as nominees

Questions: Do you agree with the following minimum standards?

Whenever an intermediary is registered as a shareholder in respect of shares which he/she/it actually holds for the account of another legal or natural person, a mention should be added in the relevant companies’ shareholders registers that such intermediary hold the shares for the account of another person.

Answers:

The CC does not consider these minimum standards very practical. Not all of the issuers maintain a shareholders' register. If an issuer does maintain such a register, the registration should only concern the first level. For further registration the issuer should not be involved.

Obligations to disseminate information should be addressed to the intermediaries.

 Being granted a power of attorney

Question: Do you agree with the following minimum standard?

Where an intermediary is a shareholder in relation to shares which the intermediary holds for the account of another legal or natural person, that other legal of natural person shall have the right to be given a power of attorney by the intermediary to attend the General Meeting and act at the General Meeting as if he/she/it were a shareholder.

Answer:

Again, the CC is of the opinion that this issue should be addressed in the relationship between the intermediary and its account holder, up to the ultimate beneficiary until the first non EU level occurs within the chain. This should not concern the issuer.

 Voting upon instructions

Questions: Do you agree with the following minimum standards? 1. Member States shall allow intermediaries to hold shares on behalf of their clients in collective or individual accounts.

2. Intermediaries shall have the right to cast votes upon their clients express instructions.

3. Where intermediaries hold on behalf of their clients shares in collective accounts, they shall be able to cast split votes.

Answers:

The CC agrees.

8. COMMUNICATIONS FOLLOWING THE GENERAL MEETING

Dissemination of the voting results

Question: Do you agree with the following minimum standard?

1. Within a reasonable period of time which shall not exceed one month following the General Meeting, the issuer shall make available to all shareholders information on the results of the votes on each resolution tabled at the General Meeting.

2. Such information, which shall include for each resolution, the number of voters, the number of voted shares, the percentages and numbers of votes in favour and against of each resolution and the percentages and numbers of abstentions, shall be posted on the issuer’s website.

Answer:

The CC agrees.

9. OTHER SUGGESTIONS?

Answer:

The CC suggests to introduce one uniform standard in the EU regarding the exercise of voting rights. In order to facilitate proper identification of ultimate beneficiaries, the CC suggests to introduce an automatic Registration Date. Any holder, either shareholder or beneficiary (up the chain to the final EU level) will have the rights envisaged by this European regulation if registered as accountholder at the closing of the business day of the Registration Date. This Registration Date should be well in advance of the General Meeting, for instance 30 calendar days. By using this longer period, the persons authorised to exercise rights could easily be established, the agenda can be published and shareholders / investors authorised thereto may add items. It can be considered whether the Registration Date is also the appropriate date to determine which shareholders have the right to table resolutions.

Den Haag, 14 July 2005