The second Shareholders’ Rights Directive (EU) 2017/828 (SRD II) was due to be implemented into Irish law by 10 June 2019, but that has not yet happened. Implementing legislation in the form of a Statutory Instrument is expected.
SRD II in brief
Shareholders’ Rights Directive (SRD I)
SRD I, which came into force in 2009, aimed to enhance the rights of shareholders by imposing certain minimum standards on the exercise of voting rights attaching to shares in companies that have a registered office in the EU and are listed on an EU regulated market (EU investee companies). SRD II amends SRD I. It is likely that SRD II will allow some exemptions for listed UCITS and AIFs.
Who falls to be regulated under SRD II?
New duty for asset managers to implement engagement policy or explain non-compliance
Asset managers and institutional investors are required to adopt on a “comply or explain basis” an “engagement policy”. The policy should describe how they integrate shareholder engagement into their investment strategy when they or the fund they manage are shareholders in EU investee companies (including listed UCITS and AIFs).
The policy should address how the asset manager:
This policy must be made available free of charge on the asset manager’s website. The asset manager must also disclose on an annual basis how it has:
Asset managers don’t have to put this policy in place, as it is a “comply or explain” obligation.
However, if it is decided not to have a policy, then there should be an explanation on its website setting out why the decision not to have such a policy is appropriate. Relevant factors might include:
To be clear: an explanation for non-compliance with this requirement will have to be made available on the asset manager’s website.
Arrangements with “institutional investors”
Where asset managers invest on behalf of institutional investors, whether through separately-managed accounts or through funds, there will be obligations imposed on institutional investors that will oblige the institutional investor to disclose on its website certain aspects of its arrangements with asset managers including:
If the arrangement with the asset manager does not contain one or more of the features listed above, the institutional investor must explain why not.
As a result of the requirements imposed on institutional investors, asset managers will be required to disclose to them how the asset manager:
This disclosure must focus on:
If the above information is already publicly available, there won’t be a requirement to provide the information to the institutional investor directly.
Due to equal treatment concerns the Irish legislation may require that this information be made available to all investors and not just institutional investors.
We regularly publish useful content on a wide range of legal and business topics. Please click the button below if you would like to receive these by email.Subscribe