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Comments from ACCA
January 2007

ACCA is pleased to comment on the consultation document of the above title. We are grateful to the DTI for the opportunity to contribute to the development of the DTI's position on this matter.

We support the overall aims of the proposed directive, viz to improve levels of shareholder engagement, especially in the context of cross-border investment, and to remove unnecessary obstacles to the active involvement by shareholders

in the affairs of the companies in which they invest. Many of the individual provisions in the draft mirror developments in UK law so will not in our view present too many difficulties for UK companies.

Q.4 – re article 3 – more stringent national requirements

We agree that individual member states should be allowed to introduce higher standards than those required by the draft Directive.

Q.6&7 – on article 5 - the notice of general meeting

Article 5 would require companies to send out meeting notices at least 30 days before the scheduled date of a general meeting. We accept the argument that, in the interests of encouraging, in particular, cross-border involvement, a longer period of notice may sometimes be appropriate. But if this period is to be applied to both AGMs and other types of general meeting, we consider that 30 days is too long – for a company that needs to pass a members' resolution at an EGM in order to secure an urgent injection of finance, 30 days may be too long.

With regard to the contents of the notice, we consider also that it would be inconsistent with the legal formality of article 5 for the company to be required to send out a ‘draft' agenda and for that to be subject to change prior to the meeting itself. In our view, this would be impractical. We believe that the purpose of the notice should be to provide certainty as to the business that will be transacted at the meeting. If there is not certainty on this matter, then shareholders will not be able to make a properly informed decision as to whether they should attend (or otherwise participate in) the meeting. This would be a recipe for confusion and would not be consistent with the aim of enhancing levels of shareholder engagement.

We have no issue in principle with shareholders being entitled to table resolutions at company meetings, but we believe that the timing of the legal rules regarding the validity of such resolutions must make clear that they need to be deposited with the company at some time before the company sends out the meeting notice. Any rule to this effect might be accompanied by another rule to require companies to inform their shareholders of the date of the next AGM well in advance, perhaps via the company's web site.

Q.10 – re article 7 – admission to the meeting

We consider that the maximum period for the record date should be much less than the 30 days suggested. The UK 's 48-hour rule is much more appropriate.

Q.11 – on Article 9 – right to ask questions

We agree that it should be seen as a desirable element of company general meetings that shareholders be given a reasonable opportunity to question the directors of their company on their stewardship of the company. This should form part of directors' responsibility to account to shareholders for their actions. But, by giving each individual shareholder in a listed company legal rights in this matter, it could raise false expectations on their part and, potentially, could open up the possibility that companies would be presented with a substantial and unmanageable compliance burden. In this connection we note that the EC is currently engaged in a wide-ranging exercise to identify and cut back on existing compliance burdens – we do not see the sense in introducing fresh burdens of this nature.

If this issue is to be regulated by law, our preference would be for companies to be required to allocate reasonable time at their general meetings for members to ask questions and for directors to reply to those questions, subject to measures which may be taken by member states to ensure that directors do not have to deal with frivolous, vexatious or defamatory questions or those which breach or invite breaches of issues of confidentiality. Such measures might also be used to ensure that, to be valid, questions must relate to the company's activities or the business scheduled to be transacted at the meeting. We would not oppose the proposals in respect of written questions.

If this alternative approach is not favoured, then we consider the proposed provision for measures related to the maintenance of good order must be sufficient for companies to be able to ensure that questions posed under the new right should be subject to the sort of criteria mentioned above, viz they must not be frivolous, vexatious, defamatory or threaten confidentiality.

It should also be borne in mind that what are currently termed in the UK ‘extraordinary general meetings' are very often single-issue events, convened in order to transact one specific item of business only. For shareholders to be given a legal right to ask questions, both orally and in writing, on an unrestricted range of issues, and to receive answers to those questions, could constitute a significant diversion of time and effort. To counter this threat, we would suggest either that the scope of article 9 be restricted to annual general meetings, or that there be some additional general provision which would allow member states to restrict members' right to ask questions to matters which are relevant to the business being transacted at the meeting.

Q.14 – re article 12 – voting in absentia

We support the recognition of rights to vote by alternative means, in particular the ending of restrictions on voting by electronic means.

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