As regards the encouragement of long-term shareholder engagement, remarkable change was made. Purpose of the amendment is to simplify communication between shareholders and issuers or companies who have registered office in an EU Member State and the shares admitted to trading on the regulated market situated or operating within an EU Member State.
Shares of such companies are often held through complex chains of intermediaries (e.g. different investment institutions, securities central depositories and their participants), what makes exercise of shareholders rights complicated and means impediment to the shareholders engagement in relation to the issuer. In order to eliminate these obstacles the new legislation lies down obligations for so called intermediaries aiming to establish a „communication line” between an issuer and its shareholders. Status of an intermediary in such cases has for example securities central depository, participants of securities central depository, as well as stock brokers and other similar foreign financial institutions.
Shareholder identification
The principal prerequisite to direct communication between the shareholders and the issuer is to facilitate shareholders identification process for the issuer. The intermediaries, thus also Centrálny depozitár cenných papierov SR, a.s., shall be obliged, in compliance with issuer’s request, to provide the issuer with identification data of all his shareholders, complemented with share on registered capital or voting rights of the issuer exceeding limit 0.5 %. If the intermediary, with whom the issuer placed request for identification of the shareholders finds out that not the ultimate shareholder but only the holder of respective shares, who is another intermediary, is recorded in its register, than it will have to forward without delay the issuer’s request to respective intermediary for processing. This method should ensure that request of the issuer shall be transmitted through the chain of intermediaries up to the intermediary who keeps identification data of the ultimate shareholder in its register. As a result the issuer shall receive the identification data of its shareholders from all domestic, eventually from foreign intermediaries, based on one submitted request.
Facilitated access to information
New legal regulation further facilitates transmission of information required for exercise of rights resulting from held shares from the issuer to shareholders and vice versa. The central securities depository shall forward without delay, to the shareholder administered in its register, information from the issuer which the issuer is obliged to provide to the shareholder in order to exercise the shareholder rights resulting from its shares and which is addressed to all shareholders owning the same type of shares, or a notice in which the central securities depository shall identify location on the issuer’s web site where the mentioned information can be found in case the information is available to the shareholders on the issuer’s web site. The intermediaries shall also, in accordance with instruction from the shareholder, forward information received from the shareholder, related to exercise of rights resulting from owned shares, to the issuer without delay. In connection with this new obligation pursuant to Commission Implementing Regulation (EU) 2018/1212 of 3 September 2018 lying down minimum requirements implementing the provisions of Directive 2007/36/EC of the European Parliament and of the Council as regards shareholder identification, the transmission of information and the facilitation of the exercise of shareholders rights, CDCP and other intermediaries will have to ensure:
- Transmission of issuer’s notice on convocation of a general meeting to a shareholder.
- Issuance of confirmation on entitlement to exercise shareholder’s rights in a general meeting for a shareholder or third party specified by the shareholder.
- Transmission of notice on shareholders participation in a general meeting if required by an issuer or requested by a shareholder.
- Transmission of confirmation on receiving, recording and counting of votes of a shareholder in a general meeting from an issuer to a shareholder.
- Transmission of other information specific to corporate action events other than a general meeting between an issuer and a shareholder.
As regards transmission of information between an issuer and a shareholder, or shareholders, a case when respective intermediary does not records in its register the ultimate shareholder but only a holder of relevant shares who is another intermediary is also envisaged. In such case the intermediary is liable to immediately forward the above mentioned information to next intermediary to ensure transmission of information to a shareholder. This way the above mentioned information needed to exercise shareholder’s rights should be transmitted through the chain of intermediaries directly to a shareholder, or the other way from a shareholder directly to the issuer.
International dimension
As the chain of intermediaries may cross border of the Slovak Republic in specific case, transmission of shareholders identification and information required to exercise shareholders rights shall be carried out in the English language and in standardised formats laid down by the Commission Implementation Regulation (EU) 2018/1212 and formats established by the internationally applied industry standards (ISO).
Author: Michal Ninis
