New voting rights for cross-border shareholders

The Commission is to legislate to improve shareholder participation in the running of European companies in which they invest outside their own member state.

New voting rules

The new rules will set down minimum time-limits for advance warning of shareholder meetings and availability of documents. Also, voting by post, by proxy and via e-mail or other electronic means will be allowed.

The right to ask questions of managers will also be guaranteed to shareholders and voting results must be posted on company websites.

The proposed directive will also prohibit  ‘share-blocking’, a practice which restricts the selling of shares for a period before a company meeting. Such restrictions are seen as being a major obstacle to shareholder participation.

Financial Services Single Market Progress Report

The proposal coincides with the publication of a progress report on the single market in financial services, which shows, says the Commission that “significant strides” have been made since 2004. 98% of the financial services action plan measures have been achieved together with considerable progress in the areas of corporate governance (to which the shareholders rights proposal will contribute), accountancy, auditing and company law.

Internal Market Commissioner Charlie McCreevy said: "Shareholders need to be able to get relevant information on time and vote without encountering unnecessary obstacles, wherever they are in the EU. Our proposals will introduce a range of key minimum standards to make this happen – using modern, reliable technology."

The European Group for Investor Protection welcomed the move saying that it would improve shareholder democracy but called for further measures to guarantee cross-border means of redress.

A new Commission proposal released on 10 January 2006 is aimed at encouraging cross-border shareholder involvement by increasing safeguards on voting rights and making voting easier.

Investment in companies based outside the shareholder's home nation is increasing in the EU and, as it promotes the single market ethos, this is a development to be fostered. At present, however, passive shareholding is a problem as difficulties arise for such shareholders in getting information about and attending company meetings to cast their votes.

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