Digital Business Communications

Shareholder Rights Directive Revised: Objectives and Implementation

By Anastasia Malyavko

On 3 September 2020, the revised Shareholder Rights Directive (“SRD II”) entered into force. The revision of the first Shareholder Rights Directive was proposed by the European Commission in April 2014 as a response to the global financial crisis of 2007-2008. SRD II is supposed to strengthen shareholder rights and engagement as well as encourage shareholders to monitor issuers’ performance. Find out more in this scientific poster.

Key requirements of SRD II

The core objectives of SRD II are enhanced transparency and better engagement between issuers and shareholders. New requirements of SRD II apply primarily to issuers, intermediaries, institutional investors & asset management, and proxy advisors.

The main requirements of SRD II:

  • Shareholder identification
  •  Vote confirmation
  •  Shareholder vote on remuneration
  •  Remuneration reporting
  •  Engagement policy & voting reporting
  •  Proxy advisor code of conduct
Shareholder identification

Shareholders can request electronic confirmation of the receipt of their votes as well as confirmation of how their votes were recorded and counted. Issuers are required to prepare an extensive and explicit remuneration report, and shareholders must have the right to vote on the remuneration report annually and on executive remuneration policies at least once in four years. Proxy advisors must apply a code of conduct and disclose information explaining why their recommendations are reliable.

In line with SRD II, intermediaries are required to provide issuers with shareholder identification upon request. Member states could set an ownership threshold – of maximum 0.5% of issuers’ shares – above which shareholder identification has to be provided.

Although local regulators were allowed to preserve the threshold for shareholder identification of 0.5% of shares or less, most EU member states have not adopted a threshold. Remarkably, only 4 out of 27 EU countries have applied the threshold for shareholder identification set in SRD II, i. e. the threshold of 0.5% of shares. These countries are Austria, Italy, Netherlands and Slovakia.

Key facts about the SRD II in have been summarised this scientific poster.