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Shareholder Rights Directive (SHRD): The Impact on Securities Processing

by Christian Trnka, Product Manager, Software Daten Service

The new EU Shareholder Rights Directive, internationally also referred to as Shareholder Rights Directive II (SHRD), will come into effect on 3 September 2020. The attempt of an alliance of European financial associations to postpone the implementation again by one year has failed. What effects can be expected on European securities settlement in the future?

On 17 May 2017, the Directive (EU) 2017/828 of the European Parliament and of the Council amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement of exchange-listed companies in the European Union was issued (“Shareholder Rights Directive II”).

The minimum requirements for its implementation were laid down in the Commission Implementing Regulation (EU) 2018/1212. In Austria, the provisions regarding European law were mainly incorporated in the Stock Exchange Act 2018 and in the Austrian Stock Corporation Act, in Germany they were incorporated in the German Stock Corporation Law as part of the implementation act ARUG II. Therefore, different abbreviations can often be found in the industry’s language use, such as SHRD, SRD II, ARRL or ARUG II, but basically they all refer to the same thing or its national implementation.

The declared objective of the Shareholder Rights Directive II is to create an attractive environment for shareholders of exchange-listed companies in the European Union and to further improve the corporate governance of these companies. As opposed to the previous directive, the Shareholder Rights Directive II also contains provisions for certain financial market actors such as intermediaries and institutional investors, who assume an important role in the identification of shareholders as well as in securing and dispatching information.

The national law at the issuer’s place of business defines which specific obligations the intermediaries must fulfil in order to facilitate exercising the shareholder rights. The identification of shareholders and the transmission of information between the shareholders and the company shall be facilitated, the monitoring of the remuneration of individual directors shall be improved, business transactions with affiliated companies or persons shall be regulated more effectively and thus, transparency shall be enhanced.

In the context of securities processing and thus our product SDS GEOS, this particularly concerns the area of shareholder identification and the transfer of information about company events between exchange-listed companies and their shareholders.

For more information about the effects on European securities processing, see the full SDS Report here.

This article was originally published by Software Daten Service.

© 2020 Software Daten Service Gesellschaft m.b.H.

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