Implementation of the directive on shareholder rights

Comments from ACCA to the European Commission, January 2009.

ACCA is pleased to comment on the consultation document on the above. ACCA is a professional body representing over 120,000 qualified accountants who work in business, public practice and the public sector. These comments have been put together after consultation with members of ACCA working in the listed company environment.

Overall, we view the Directive in a positive light in that it stands to improve the position of cross-border investors through more harmonisation and greater clarity in respect of their participation rights. The improvements made to the Directive during the negotiation process mean also that those companies that are listed on the main market or AIM in the UK will for the most part have little difficulty in complying with the resulting new legislation. In particular, UK companies are not likely to have any problems coping with the measures on electronic voting. In a few respects, however, the Directive risks imposing additional administrative burdens on traded companies, and the provisions relating to the shareholder rights to ask questions and to receive answers need to ensure that that aspect of the general meeting is able to be kept under reasonable control.

Our comments on the specific consultation questions are set out below:


Do you agree that this is an effective way of enabling the splitting of votes under the CA 2006



Do you agree that these changes permit corporate representatives for the same corporate shareholder to vote in different ways at company meetings?



Do you agree that the right to demand a poll should also be available by correspondence in advance?

We consider that the proposed amendments to sections 282 and 283, in authorising the right to demand a poll by correspondence, go further than the UK is required to go under article 12. We believe that those draft amendments would add an unnecessary burden for companies and should not be adopted.


Do you think that the obligations of proxies should be stated in this way?

The proposed new clause would not mean anything new for the obligations of proxies in the UK but it may have the virtue of adding clarity and certainty for shareholders.


How to define 'electronic means accessible to all shareholders'?

We take the reference to accessibility to all shareholders to mean only that the point of access to the company's voting system should be available to all shareholders on the same basis, regardless of where they are based geographically. It cannot mean that all shareholders should have the same capacity to access the system since that would be outside the company's power to control – it can only mean that the company provides an entry point which is accessible by all those who have the constitutional right to do so (and should they have the technological resources). We do not think that the intention of the Directive is to be any more specific about, e.g. the CREST system. Further, the wording of the draft clause, following as it does the wording in the Directive itself, refers only to the offer of a facility to vote electronically and does nothing, in our view, to conflict with the member's right under the Companies Act to communicate with the company by other means.

Thus in our view the draft sub-section (2) is sufficient.


Do you agree that resolutions to permit companies to continue holding EGMs at 14 days' notice should be passed on the basis of two thirds of the voting rights of those who vote at the meeting or should it be 75% as for other special resolutions?

In the interests of consistency with the rest of the Companies Act, we consider that the threshold should be set at 75%.

In referring to voting rights in the new clause (3), the text must also address the shareholder right to vote by correspondence (as well as in person and by proxy).


Do you agree that the posing and answering of questions at meetings of traded companies requires implementation in this way?

All companies covered by the Directive are likely already to offer attendees at general meetings the opportunity to ask questions and to invite responses to those questions from the board. This is widely seen by companies as a good practice issue and the arrangements they put in place appear to operate effectively on this non-legal basis. The risk in setting out rights and obligations in legislation is that shareholders may seek to assert their statutory rights in an intentionally confrontational way and hold boards to their responsibility to answer to an extent which could have adverse implications for the good order of meetings and for relations between board and members. Therefore, the provision on this matter needs to be implemented carefully to minimise the risk of those consequences.

We agree that the relevant provisions of the Directive need to be inserted into our company law. But we feel that the Department's draft clause 319A is not sufficient to meet the Directive's requirements. In particular, the express wording of article 9.1 - it says that 'every shareholder shall have the right' to ask relevant questions and also that 'the company shall answer' those questions – needs to be reflected. We consider that there is scope for the statutory provisions on this matter to be kept as brief as possible and for supplementary guidance to be developed to expand on them, but it would not be sufficient, in our view, for the UK legislation to say only that the company must respond to 'any question' which may be raised by a member. We believe also that there needs to be provision in legislation to allow the number of questions posed to be curtailed.

We suggest below an alternative formulation for the implementation of article 9.


  1. Subject to sub-section (3) below, at a general meeting of a traded company, every shareholder who is entitled to attend the meeting, or his proxy or representative acting on his behalf, shall have the right to ask a question relating to the business being dealt with at that meeting.
  2. The directors must cause each question asked under sub-section (1) to be answered, but they need not answer to the extent that to do so would involve the disclosure of information that is confidential or, in their opinion, would be detrimental to the interests of the company.
  3. In the interests of ensuring good order, the chairman of the meeting shall be entitled to regulate the asking of questions under sub-section (1).
  4. In causing questions to be answered, the directors may

i. provide one overall answer to questions that are considered to have similar content, or

ii. make reference to an answer provided to a similar question on the company's web site.

We consider that the third sub-section above would allow the chairman/the company to decide, inter alia, whether particular individuals are entitled to ask a question, whether the question is relevant to the agenda, whether enough questions have already been asked, and whether the same member should be allowed to ask more than one question.

QUESTION 8: Do you agree that the members of a traded company who exercise article 6 rights should not have to pay the expenses of circulation?


Additional points

Draft regulation 20

This seeks to implement article 6.4 of the Directive, regarding members' rights to add items to the meeting agenda already circulated. We consider that it is potentially extremely burdensome to oblige companies to circulate an additional, revised agenda to all recipients following the notification by members that they want extra items to be added. It would have been better if the Directive had been framed so that it were possible for such additional items to be placed on the website along with the information required by article 5.4. This notwithstanding, the amendment to the Companies Act needs to make sure that, when the revised agenda is circulated, this does not have the effect of initiating another 21-day notice period.

The company secretary

The adoption of the concept of 'traded company' means that many provisions of the Companies Act which previously were aimed at public companies only are now to be extended to private companies which happen to meet the definition of 'traded company'. One example concerns the holding of an AGM. Given the extensive administrative consequences of being such a company, we suggest it would be appropriate to extend the statutory requirement to appoint a company secretary to companies in this situation.