Update on the Shareholders' Rights Bill

Implementation of the Shareholders' Rights Directive in Belgium seems to be a never-ending process. We summarised the implementing legislation (the "Shareholders' Rights Bill") in a previous issue (see BttP of 9 December 2010, "Shareholders' Rights Directive Finally Implemented in Belgium"). In the meantime, however, a new bill has been submitted amending the date of entry into force of the Shareholders' Rights Bill. The most important new rules are briefly summarised below, together with the main practical consequences for listed companies.

On 25 November 2010, the Belgian House of Representatives passed a bill on the exercise of certain rights of shareholders in listed companies (the "Shareholders' Rights Bill" or the "Bill"). The Bill introduces a number of new rules on the calling of shareholder meetings as well as new possibilities for remote and electronic participation and voting, with respect to listed companies (i.e. Belgian companies whose shares are listed on a regulated market). Some of the new provisions are also applicable to unlisted companies, however.

Since the Senate did not exercise its right to examine it, the Shareholders' Rights Bill was adopted and should have been published shortly after being approved by the House. This was not the case, however. Moreover, on 10 February 2011, a new bill amending the date of entry into force of the Shareholders' Right Bill was submitted.

Entry into force

The Shareholders' Rights Bill indicates that it shall enter into force 10 days after its publication in the Belgian State Gazette and that companies should amend their articles of association by 1 January 2012 to ensure compliance with mandatory provisions of the Bill.

This clause proved to be problematic in practice, however, and many listed companies submitted comments to the Ministry of Economic Affairs. Consequently, as mentioned above, a new bill amending the date of entry into force of the Shareholders' Rights Bill was submitted.

The new bill changes the date of entry into force of the Shareholders' Rights Bill to 1 January 2012. In the meantime, listed companies can already amend their articles of association in order to ensure compliance with mandatory provisions of the Bill (subject, of course, to the Bill's entry into force). The amendments will enter into force on 1 January 2012. Provisions of a company's articles of association that violate mandatory provisions of the Bill will no longer be effective as from 1 January 2012.

In view of the foregoing, listed companies may wish to call an extraordinary general meeting, to be held at the same time as their 2011 annual general meeting, for the purpose of amending their articles of association in order to ensure that they reflect mandatory provisions of the Bill (in order to avoid the cost of calling an extraordinary general meeting later in the year).

Changes for listed companies 

Convocation formalities
The board of directors must now provide the company's auditor with all necessary documents at least 45 days before the date of the annual general meeting (rather than 30 days, as is currently the case) in order to ensure that the auditor has sufficient time to prepare the statutory audit report.

The convocation notice should be published at least 30 days (or 17 days for meetings at second call) before the meeting, instead of 24 days prior to the meeting or record date, if any, as is currently the case. The notice should be published in such a way as to ensure its fast and non-discriminatory distribution throughout the European Economic Area (e.g. on a website and in an international newspaper).

Further, certain documents and/or information should be made available on the company's website as from the convocation date of the shareholders' meeting and remain available for at least 5 years (e.g. the convocation notice, total number of outstanding shares and voting rights on the date of the notice, reports and documents to be presented to the meeting, proxy forms, remote voting forms, new items or draft resolutions added to the agenda by shareholders, etc.).

The holders of the company's securities are now entitled to request free of charge a copy of any document which should be made available to them at the company's registered office, from the time the notice of the meeting is published. Copies of such documents need no longer be sent automatically to securities holders that have fulfilled the necessary formalities at least 7 days before the meeting.

Convocation notice
Minimum information should be included in the notice calling a shareholders' meeting (e.g. the shareholders' right to add items to the agenda and propose resolutions, the record date, the postal address to request certain documents, the e-mail address to which questions can be submitted, the procedure to vote by proxy, remotely and electronic means, the website where relevant information and documents are available, etc.).

Right to add items to the agenda
Shareholders owning collectively at least 3% of a company's share capital have the right to propose the inclusion of new items on the agenda and to table draft resolutions, except with respect to meetings on second call. In this regard, a specific procedure must be strictly followed, which provides for the publication of a new agenda and the proposed draft resolutions.

Postponement of a shareholders' meeting
The board of directors can now postpone a shareholders' meeting by 5 weeks, rather than 3 weeks as is currently the case, if a transparency notification has been or will be made or should have been made during the 20-day period before the meeting. At a shareholders' meeting, the board of directors can now postpone the annual general meeting by 5 weeks rather than 3 weeks.

Admission to the general meeting
A record date system is now mandatory. The record date is always the 14th day prior to the meeting at 24.00 hours (CET). Shareholders of record should inform the company at least 6 days in advance whether they will attend the meeting.

The shareholders' right to ask questions at meetings has been extended to encompass the right to submit questions in writing before a meeting, as from the publication date of the convocation notice. In any case, questions should be submitted to the company at least six days before the meeting. Questions on the same subject can be consolidated and answered together.

New provisions have been introduced regarding the grant of proxies for shareholders' meetings, the content of proxies (e.g., the proxy must indicate if the proxy holder is authorised to vote on items added to the agenda at the request of shareholders owning at least 3% of the share capital), the exercise of proxies, conflicts of interest and the notification of proxies to the company.

A company's articles of association can allow remote participation in shareholders' meetings by electronic means. The articles should specify the procedure and conditions to exercise this right; the Bill stipulates a number of requirements (e.g. security holders should be able to take note of the discussions directly, simultaneously and uninterruptedly). The minutes should mention any technical problems that arose during the meeting which interrupted or prevented electronic participation.

The articles of association can also allow shareholders to vote remotely (either by correspondence or by electronic means). The Bill lists the minimum items of information which should be included in the voting form and contains mandatory provisions for remote voting.

Minutes of shareholders' meetings
The minutes of a shareholders' meeting should mention the number of shares for which votes were validly cast, the percentage of share capital represented by these shares, the total number of validly cast votes, the number of votes cast in favour of or against a resolution and the number of abstentions, if any. Furthermore the minutes must mention any technical problems or other incidents that prevented or disrupted electronic voting or participation in the meeting. The minutes must be posted on the company's website within 15 days from the date of the meeting.

Changes for unlisted companies 

The Bill introduces new rules applicable to unlisted companies regarding (i) participation in general meetings by electronic means, (ii) voting by correspondence or electronic means, (iii) the shareholders' right to submit questions in writing (rather than during the meeting), and (iv) voting by proxy.

Necessary amendments

Companies should check their articles of association to determine whether amendments are required. Likewise, companies may wish to allow their securities holders to vote or participate in meetings by electronic means. If so, the necessary measures should be taken and the required documents drafted.

In addition to the articles of association, the company's corporate governance charter will most likely have to be amended as well.

Furthermore, if necessary, the company's website should be updated to make the necessary documents available, such as standard proxy forms and/or remote voting forms.