Introduction
The EU Shareholders’ Rights Directive (2007/36/EC) (“the Directive”) facilitates the exercise of voting rights by shareholders of listed companies in the EU. Articles 13 of the Directive deals with the particular issues caused by the system of shareholdings through chains of intermediaries.
Nowadays, shares are typically held through securities accounts with intermediaries such as banks and brokers who offer professional brokerage and custodial services. Typically, the intermediaries in the chain do not keep separate accounts with other intermediaries to register the shares held for each individual client. They combine their holdings on behalf of all of their clients into one or more accounts. As a result it is impossible to track individual chains of securities accounts through which the shares of a specific investor are being held. Such a cross – border chain of intermediaries does not only create communication problems as well as practical difficulties such as time delays, but also legal uncertainty as to who actually is entitled to determine how the votes of the shares are cast. The investor who has paid for the shares and runs the economic risk of the shares, should be able to determine how the shares are held on his behalf will be voted.
In July 2010, Cyprus has implemented the Directive by virtue of the Amendment Companies Law, CAP 113, 60(I)/2010 (“the Law”). The amendment law introduced, amongst other, new rights for shareholders of publicly listed companies to attend and vote at general meetings remotely, raise questions and gain access to relevant information. Further, it facilitates shareholder participation in general meetings of publicly listed companies and ensures that shareholders are effectively provided full information in respect to such meetings in a timely and efficient manner.
The Law applies to companies whose registered office is situated in Cyprus and whose shares are admitted to trading on a regulated market that is located or operates within an EU member state. However, it does not apply to the following:
(a) Companies dealing with collective investment schemes as defined in the Open-Ended Undertakings for Collective Investments in Transferable Securities Law;
(b) Legal entities whose sole purpose is to invest collective capital collected from the public and whose operation is based on spreading risk without undertaking any legal or administrative control, provided that they are regulated by the relevant authorities and have a custodian who exercises similar powers to those defined by the Open-Ended Undertakings for Collective Investments in Transferable Securities Law.
Equal Treatment
The Law provides that publicly traded companies are obliged to ensure that members in the same position are treated equally in respect to the exercise of voting rights and participation in general meetings. Irrespective of the Articles of Association of a company, the directors of a publicly traded company are obliged to convene an extraordinary general meeting following an application of the members holding at least 20% of the issued paid up share capital of the company.
Notice of General Meetings & Agenda
The statutory notice period for convening general meetings may be varied, irrespective of the Articles of Association of the company, depending on whether the members can have access and vote by electronic means and whether a special resolution was made at the previous general meeting approving a 14-day notification period. However, the notice period for an annual general meeting is still 21 days.
A further requirement laid down by the Law is that at least 21 days before the date of the general meeting, the company must have uploaded on its website (in addition to the said date and time of the meeting) the following:
(a) The total number of shares and their voting rights;
(b) The documents that will be submitted to the meeting;
(c) Copies of the proposed resolutions or, where no resolutions are proposed, comments from the directors on any of the proposed agenda items; and
(d) Copies of the documentation required to appoint a proxy as well as copies of the documents which will be used for voting via mail, unless these have been sent to members by directly.
Furthermore, the company must upload onto its website, as early as possible upon receipt, the proposed resolutions submitted by its members. If, for technical reasons, these resolutions cannot be uploaded, the company must include a notification on its website informing members that they will be sent by mail.
Electronic Attendance & Voting
Members of a publicly traded company may now participate in general meetings and exercise their voting rights electronically. Thus, publicly listed companies are obliged to implement the necessary electronic mechanisms for such voting online and establish real time transmission of the meeting. The standard and quality of these electronic mechanisms are laid down by the Law.
Additional Agenda Items & Questions
Members holding at least 5% of the issued share capital of the company and represent at least 5% of the voting rights of all members that are entitled to vote at general meetings may add an item on the agenda of the meeting, provided that such a request for an additional item on the agenda is accompanied by a valid reason justifying such an addition. A written or electronic format of such an application must be received by the company at least 42 days prior to the meeting.
A further provision of the Law is the right of members to raise questions in respect to items on the agenda of the meeting. An answer to the questions raised is not obligatory where:
(a) It would be necessary to safeguard the preparation of the meeting and protect the confidentiality and business interests of the publicly traded company;
(b) The answer has already been given in the website of the company;
(c) According to the judgment of the Chairman of meeting, it is proper that the question not be answered to keep the order at the meeting.
Proxies
The Law also provides that a proxy (physical or legal person) can be appointed or revoked by a member in writing or electronically. A member can appoint more than one proxy for attendance and voting at a general meeting in relation to shares held in different operation accounts.