|Belgium E-democracy for Shareholders in Listed Companies|
On December 20 2010 a new act was ratified on the exercise of certain rights of shareholders in listed companies, transposing the EU Shareholders' Rights Directive (2007/36/EC) into Belgian law. The Listed Companies' Shareholders' Rights Act was published in the Official Gazette on April 18 2011.
Belgian listed companies must amend their articles of association in order to comply with the act before January 1 2012. Like the directive, the act creates obligations with respect to the convocation of, and attendance at, a general shareholders' meeting. The new rules aim to strengthen shareholders' rights and solve problems relating to cross-border voting. They also remove some of the obstacles that have deterred shareholders from participating in general meetings in the past (e.g., geographical distance and short notice periods) by encouraging the use of new technologies.
The act faithfully implements the directive, but has a broader scope. Whereas the directive applies only to listed companies, the act introduces provisions for non-listed companies, although these are optional in many cases. This update describes three significant new requirements for listed companies.
More efficient dissemination of information
Earlier convocations and wider notification
The act extends the deadline for issuing convocations for general meetings from 24 to 30 days before the meeting is held. The former system, whereby the convocation was published in the Official Gazette and national newspapers, is extended to include:
"such media from which one can reasonably expect an efficient dissemination of the information to the public throughout the European Economic Area in a manner ensuring fast access to it on a non-discriminatory basis."
Posting information on company websites
The act requires a listed company to make all relevant information available on its website at least 30 days before the general meeting is held. This information includes the convocation, the agenda, the draft resolutions, the proxy form, the postal vote form and the question form.
Right to submit agenda items and propose draft resolutions
One of the act's main innovations is that it empowers shareholders that individually or jointly hold at least 3% of the company's share capital to add items for discussion to the agenda of the general meeting. Each agenda item must be accompanied by a draft resolution, which is to be put to the vote after discussion at the general meeting. The same category of shareholder may also submit draft resolutions for existing agenda items. Such requests must be sent by letter or email to arrive no later than the 22nd day before the meeting. The company must acknowledge receipt within 48 hours.
This new provision aims to give minority shareholders a greater opportunity to influence the company's decision-making process. Companies may amend their articles of association to set an even lower shareholding threshold for these rights. However, it is unclear whether minority shareholders may use their powers to alter the nature of the general meeting - for example, to change it from an ordinary general meeting to an extraordinary general meeting.
Right to ask questions
The act confirms the principle that directors and statutory auditors must answer shareholders' questions at general meetings, but further limits the circumstances in which they are entitled to refuse to do so. Whereas previously they were entitled to refuse to answer questions if providing the requested information was likely to cause severe damage to the company or its shareholders or employees, the act now provides that they may refuse only if an answer could damage the company's business interests or breach confidentiality undertakings of the company, its directors or its statutory auditors. The act also clarifies the procedure that enables shareholders to put questions to the board. For instance, questions may now be addressed to the company by post or by electronic means in advance of a general meeting.
Enhanced participation in general meetings
Mandatory record date
Under the act, the previously optional record date system becomes compulsory for listed companies. The system provides that a shareholder's attendance and voting rights at a general meeting are conditional on the registration of its shareholding in the company's register of shareholders (or registration of such shares in the account of an accredited account holder or a liquidation institution) by no later than midnight 14 days before the general meeting.
Shareholders registered at the record date are entitled to attend and vote at the general meeting, even if they no longer hold the shares in question on the day of the meeting. Shareholders that plan to attend a general meeting must inform the company at least six days in advance.
Participation by electronic means
The act permits listed and non-listed public limited liability companies, private limited liability companies and cooperative limited companies to allow their shareholders to attend general meetings by electronic means (e.g., using video or telephone conferencing or internet chatrooms). Such companies must amend their articles of association to provide for this right.
The technology used must transmit the proceedings of the general meeting in real time, so that shareholders accessing the meeting remotely can follow the discussions and cast their votes at the same time as those who are physically present. Although this will lend a 'virtual' element to general meetings, members of the board and the statutory auditors are still required to be physically present. Shareholders that can vote electronically must be counted when calculating whether a quorum has been reached.
The company must be able to check the identity and the shareholding of a shareholder that votes electronically (e.g., using an electronic signature or password). The use of electronic voting may be limited only in order to ensure the security of electronic communications. In practice, companies will need to be alert to the possibility of 'vote hacking'.
A company's articles of association may allow shareholders to participate in discussions and submit questions electronically; this right may also be extended to bondholders' meetings.
The act allows public limited liability companies, whether listed or not, to allow shareholders to vote in advance of a general meeting by post or by electronic means.
For the past few years, best practice in the field of corporate governance has advocated equal treatment for all shareholders (whether foreign or local), greater transparency in the preparation of general meetings and an enhanced role for minority shareholders in decision-making processes. The act has crystallised soft law and recommendations into hard law, not least by providing legal recognition of new means of communication. Time will tell how much the implementation of these new measures will improve corporate democracy in listed and non-listed companies.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on May 4, 2011