McCreevy introduces new rules for cross-border shareholders

Investors owning shares in companies outside their home countries will find it easier to vote, ask questions at general meetings and exercise all other shareholder rights under a new draft European law.

The new rules are designed to address growing concerns among the rising number of institutional shareholders with cross-border holdings over their ability to influence companies in which they invest.

However, the new regime could also spark some concerns in European countries with corporate cultures that are unused to high levels of shareholder activism.

Investors with holdings in companies outside their home country should no longer be held back from exercising their shareholder rights, according to a new draft European Union law.

The draft law proposed by EU internal market commissioner Charlie McCreevy was approved by the European Commission last week. It will be formally presented in Brussels tomorrow.

It seeks to break down many of the barriers currently faced by cross-border shareholders in the EU by allowing investors to cast their votes by proxy, by post or by electronic means such as email.

The draft directive will also outlaw "share-blocking" requirements, which prohibit trading ahead of a general meeting and are widely seen as one of the biggest disincentives to investors wishing to make their views felt to management.

To participate in a general meeting, investors will simply have to prove their share ownership at a certain date prior to the assembly.

Brussels has long supported moves to boost the rights of cross-border shareholders, pointing out that a rapidly growing proportion of European stock is now held by foreign investors.

In a memorandum attached to the draft directive, the Commission states: "Shareholder participation is an essential precondition for effective corporate governance. However, EU citizens holding shares in a listed company situated in another member state often face severe problems when they wish to exercise their voting rights."

It adds: "The growing proportion of share ownership by foreign investors is already posing the threat of EU-listed companies being owned by a passive shareholder base."

To stave off that threat, the Commission proposal also introduces pan-European standards governing general meetings. - (Financial Times Service)