The Shareholders' Rights Bill

On 25 November 2010, the Belgian House of Representatives adopted the Bill on the exercise of certain rights of shareholders in listed companies (the "Bill"). This Bill transposes the European Directive 2007/36/EG of the European Parliament and the Council of 11 July 2007 and implements in general a number of mandatory new rules regarding the convocation of and participation to the shareholders' meeting as well as some optional possibilities with respect to the participation and voting on distance, this with respect to listed companies (i.e. Belgian companies whose shares are listed on a regulated market). Some of the new provisions also apply to unlisted companies.  

Entry into force

Despite the fact that the European Directive had to be implemented in national law by 3 August 2009 at the latest, the Bill has yet to be published in the Belgian State Gazette. We have been indicated that on the specific request of the listed companies, the Bill will in any case not be published and therefore be applicable before the annual general shareholders' meeting to be held in the first semester of 2011.

However, the Bill indicates that it shall enter into force 10 days after its publication in the Belgian State Gazette and that existing companies should amend their articles of association by 1 January 2012 to ensure that they are conform with the mandatory provisions of the Bill. The provisions of the articles of association which would be in contradiction with the mandatory provisions of the Bill would remain effective until they are amended or until 1 January 2012 at the latest. Any other provisions of the Bill (to which the articles do not contradict) enter into force 10 days after the publication of the Bill in the Belgian State Gazette.

Different options with respect to the entry into force of the Bill are going around, such as the publication of the Bill as it is now in the second semester of 2011, so that it does not apply to an annual shareholders' meeting held in the first semester of 2011 or the adoption of an amendment to the Bill in which it would be decided that all provisions of the Bill only enter into force as from 1 January 2012 (and thus not 10 days after its publication in the Belgian State Gazette).

Irrespective of the option chosen, if listed companies wish to avoid the need of calling a second shareholders' meeting in 2011, they will need to call an extraordinary shareholders' meeting together with the annual shareholders' meeting taking place in a few weeks, in order to bring their articles of association in accordance with the coming-up mandatory provisions.

Changes for listed companies

Convocation formalities

•    The board of directors should hand over to the auditor all necessary documents to enable the auditor to issue its statutory audit report 45 days before the date of the annual shareholders' meeting, instead of 30 days.
•    The convocation notice to a shareholders' meeting should be published at least 30 days (and 17 days for meetings at second call) before the date of the shareholders' meeting instead of 24 days before the date of the shareholders' meeting or the registration date if such is applicable.
•    The convocation notice to a shareholders' meeting should also be published in media which ensures fast and non-discriminatory distribution in the European Economic Area (e.g. website and press notice to an international newspaper).
•    The company's website should contain as from the convocation date of a shareholders' meeting a number of documents which should be kept on the website for 5 years thereafter (e.g. convocation notice, number of shares and voting rights on the date of the convocation, reports and documents to be presented to the shareholders' meeting, proxy forms, forms to vote by correspondence, new items or draft resolutions added to the agenda by shareholders, etc.).
•    The holders of securities can receive a free copy of the documents which should be made available to them in respect of a shareholders' meeting, at the registered office of the company as from the moment the convocation notice is published; a copy should no longer be sent to holders of securities which fulfilled the formalities to attend the shareholders' meeting 7 days before that meeting.

Convening notice

•    Minimum information should be included in the convocation notice to a shareholders' meeting (e.g. right to add items on the agenda and propose resolutions, the record date, the address to obtain certain documents, e-mail address to ask questions, procedure to vote by proxy, by correspondence and by electronic means, the website where all information and documents are available, etc.).

Right to add items to the agenda

•    Shareholders owning at least 3% of the share capital of the company have the right to propose new items on the agenda and table draft resolutions for the shareholders' meeting (except for second called shareholders' meetings); a strict procedure has been implemented, including with respect to the publication of a new agenda of the meeting completed with a draft of the new proposed resolutions).

Postponement of the meeting

•    The board of directors can postpone the shareholders' meeting for 5 weeks instead of 3 weeks in case a transparency notification has been or will be made or should have been made within 20 days before the meeting.
•    The board of directors can also postpone, at the meeting, the annual shareholders' meeting with respect to the approval of the annual accounts for 5 weeks instead of 3 weeks.

Admission to and running of the general meeting

•    The record date system becomes mandatory; the record date will always be the 14th day prior to the meeting at 24.00 hours (CET); shareholders should notify their presence at least 6 days before the meeting.
•    The shareholders' right to ask questions at the shareholders' meeting has been extended to the right to ask questions in writing before the meeting as from the date of the publication of the convocation notice; the written question should be sent to the company at the latest on the 6th day before the meeting; answers to questions on the same subject can be centralized in one answer.
•    New provisions have been set forth on the granting of a proxy for a shareholders' meeting, the content of the proxy (for example, the proxy must indicate if the proxy holder is authorised to vote on the items that would be added to the agenda at the request of shareholders owning at least 3% of the share capital), the exercise of the rights by the proxy holder, conflicts of interest and notification of the proxy to the company.
•    The articles of association can give the possibility to their holders of securities to participate in the shareholders' meeting from a distance by electronic means; the procedure and conditions to exercise such right should be set forth in the articles of association; a number of requirements are set forth in the Bill (e.g. that security holders should be able to take note of the discussions directly, simultaneously and uninterruptedly); the minutes should contain any technical problems which arose during the meeting which interrupted or prevented the electronic participation.
•    The articles of association can give the possibility to their shareholders to vote from a distance by correspondence or by electronic means; the Bill lists the minimum items which should be included in the form used to vote; mandatory provisions are applicable on the procedure of voting from a distance. 

Minutes of general meetings

•    The minutes of the shareholders' meetings should contain the number of shares for which valid votes have been cast, the percentage of the share capital that these shares represent, the total number of validly cast votes and the number of votes cast in favour or against a resolution and the abstentions, if any.
•    The minutes must mention the technical problems and other incidents that have prevented or disturbed the electronic participation in the general meeting and/or the vote by electronic means.
•    The minutes must be published on the website within 15 days as from the shareholders' meeting.

Required amendments

•    Each company should verify its articles of association whether amendments will be required following the aforementioned new provisions. Sample statutory clauses are currently in preparation. 
•    At the same time, it might be worthwhile to consider whether the company wishes to give the opportunity to its security holders to participate to the shareholders' meeting by electronic means and/or vote by electronic means or by correspondence. If so, the necessary means will need to be putted in place and/or documents drafted.
•    Besides a possible amendment to the articles of association, the company's Corporate Governance Charter will most likely also need to be amended.
•    If necessary, the company's website should be updated to allow the publication of the necessary documents.
•    Standard proxy forms and/or forms to vote by correspondence will need to be updated.