Shareholder Rights Directive II: Effective From 10 June 2019

The Shareholder Rights Directive II (SRD II) came into force on 9 June 2017 and must be transposed in EEA Member States by 10 June 2019. Unless a "no-deal" Brexit occurs before that date (in which case there is no commitment to transpose), the Government is set to transpose SRD II into UK legislation.

SRD II amends the original 2007 Shareholder Rights Directive primarily with the objective of increasing long term shareholder engagement and transparency between traded companies and investors. It applies only to companies which have their registered office in a Member State and whose shares are admitted to trading on a regulated market situated or operating within a Member State but the FCA proposes a broader application. If a company has its registered office in one Member State and is admitted to trading on an EU regulated market in another Member State, it is the law of the Member State of the company's registered office that regulates it in matters covered in SRD II.

While much of SRD II focuses on transparency requirements for institutional investors, asset managers and proxy advisers and requirements for intermediaries to facilitate the exercise of shareholder rights, there are two areas which affect companies admitted to listing on the Official List (standard as well as premium segments) or to the Specialist Fund Segment or High Growth Segment of the London Stock Exchange.

Related Party Transactions

The FCA has not yet published final rules and feedback on CP19/7. On the basis that the proposals in the CP are unchanged, the FCA will implement SRD II in a way that leaves the existing listing regime intact, but with some limited additional disclosure requirements for premium listed companies, as there are a small number of instances in which the existing premium listing requirements will not cover SRD II requirements. This is because SRD II uses the definition of related party in International Accounting Standards (IAS 24).

Although SRD II only applies to issuers incorporated in an EEA Member State, the FCA propose to apply the rules to all companies with a listing on the Official List on the basis that the Listing Rules should apply in the same way to all companies in the same listing category, irrespective of the jurisdiction in which they are incorporated. The new requirements will apply from the start of an issuer's financial year beginning on or after 10 June 2019. A new DTR 7.3 is proposed, which copies out so far as practicable...